With Home Health Revenue Up, Ensign ‘Getting Arms Around’ PDGM

Thanks to a relatively obstacle-free regulatory environment, Cornerstone Healthcare, Inc., the home health and hospice business of The Ensign Group (Nasdaq: ENSG), posted solid financial results in the second quarter of 2018.

Company leadership highlighted the results during a call with investors Friday.

Mission Viejo, California-based The Ensign Group and its independent subsidiaries provide skilled, assisted living, therapy, home health and assisted living services across hundreds of locations throughout more than a dozen states. Its overall portfolio includes 236 health care facilities, 22 hospice agencies, 21 home health branches and give home care business.


The Ensign Group’s total home health and hospice services segment revenue hit $41.8 million in 2018’s Q2, a nearly 21% increase compared to the previous year’s quarter. Segment income was also up to about $6.3 million in the second quarter, according to the company, a more than 27% spike compared to Q2 of 2017.

Total pro forma revenue for The Ensign Group was $505.5 million, according to the company. Consolidated GAAP net income for the quarter was $22 million.

The majority of Friday’s investor call focused on updates largely outside of the home health and hospice arena. Leadership briefly touched on the Patient-Driven Groupings Model (PDGM), recently proposed payment reform for the home health industry that would halve the traditional 60-day pay period to 30 days and change how therapy services are reimbursed.


The Ensign Group is still evaluating PDGM, according to leadership, though noting the company is generally encouraged by the payment model’s contents. The Ensign Group is actively providing guidance and feedback to policymakers, leadership said.

“It’s just [recently] out there,” CFO Suzanna Snapper said. “So, we’re still getting our arms around all of it.”

Also during the call, Christopher Christensen, CEO of and president of The Ensign Group, explained how the overall company was expecting stronger results from its various acquisitions the company had made in 2015 and 2016. When those acquisitions were made, The Ensign Group had largely decided to leave existing leadership in place and “teach culture.” That’s hasn’t worked out as planned, he said.

“We made a mistake thinking we could make it work,” Christensen said. “And it didn’t work.”

More recent acquisitions made in 2017 and 2018 have fared much better, he said. The Ensign Group plans to close on “a handful” of additional transactions by the end of the year.

The average daily 2018 Q2 census for The Ensign Group’s hospice service checked in at 1,290, according to the company. Home health census information was not provided.

Average Medicare revenue per completed episode was $3,064. As a payer source, Medicare accounted for about 28% of The Ensign Group’s Q2 revenue.

The Ensign Group’s quarterly earnings of $0.44 per share beat slightly the Zacks Consensus Estimate of $0.43 per share.

Even so, company stock was down by more than 4.5% to $35.36 per share as of midday Friday.

“ENSG posted another solid quarter, but expectations are high so we are not surprised by the share pullback on the results,” Stephens analyst Dana Hambly stated in a note on the earnings.

Written by Robert Holly

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