The Ensign Group (Nasdaq: ENSG) saw its share price decline sharply Thursday on disappointing quarterly earnings, but CEO Christopher Christensen said he has high hopes for 2017—and singled out assisted living and independent living as especially promising service lines.
Mission Viejo, California-based Ensign provides a broad range of post-acute care, with about 17,700 skilled nursing beds and 4,450 assisted living and independent living units across 210 facilities, along with 39 home health, hospice, and home care agencies.
The company’s $433.1 million in revenue for the fourth quarter of 2016, announced after market close on Wednesday, missed analyst expectations by $3.04 million. Its fourth quarter earnings per share of $0.30 missed by $0.07. Shares were down 12.65% at market close on Thursday.
A variety of factors are to blame, company leaders said in an earnings call on Thursday. These include a significant increase in health insurance costs for the fourth quarter and higher-than-usual bad debt.
Another big drag: Problems with a portfolio of 18 skilled nursing operations in Texas, formerly operated by Legend Healthcare, which Ensign acquired in a deal that closed in May 2016.
The census dipped at these facilities prior to Ensign taking them over, and Christensen said he believed—”perhaps foolishly”—that Ensign could right the ship more quickly than it has.
It could take another two or three quarters before the properties are performing at the level Ensign expected at the time of the transaction, he said.
Ensign is not alone in facing stiff challenges related to skilled nursing, as the whole sector has been taking a beating. In the meantime, assisted living and independent living are bright spots that Ensign is shining a brighter light on.
For the fourth quarter of 2016, Ensign changed its reporting practices, putting its Bridgestone Healthcare assisted living and independent living subsidiary into a separate bucket from skilled nursing and transitional care.
“We’re anxious to share more detail on our assisted living operations and believe that this increased visibility will demonstrate the expanded influence these service offerings are having on our entire organization,” Christensen said. “Even more important than the financial contribution, our assisted living operations continue to strengthen our skilled nursing, home health, and hospice operations in many ways that don’t show up in the financial statments, including helping us to seamlessly transition many of our residents into a homelike setting while improving our organization’s reputation of quality in the health care community.”
In the fourth quarter, Bridgestone grew segment revenue by $35.5 million, or 40.3%, year-over-year. Same-store skilled nursing revenue grew by 3.1% year-over-year, and same-store revenue for all segments grew by 3.7%.
Ensign is glad to put 2016 in the rear-view and is optimistic about 2017, as the company believes many of the troublesome issues have been resolved, according to Christensen.
“There are many lessons we learned throughout the course of 2016 that will allow us to start 2017 much stronger,” he said.
Written by Tim Mullaney