Ensign Group at RBC Conference: Expanding Post-Acute Care Horizons

On Tuesday, 20 May 2025, The Ensign Group (NASDAQ:ENSG) presented at the RBC Capital Markets Global Healthcare Conference 2025. The company reported a record-setting first quarter, driven by strategic acquisitions and organic growth. While optimistic about future prospects, Ensign faces challenges in maintaining its growth momentum amid regulatory complexities.

Key Takeaways

• Ensign Group achieved record first-quarter performance with strong occupancy rates.
• The company focuses on acquiring underperforming post-acute assets and driving organic growth.
• Expansion into new states like Alabama, Oregon, and Alaska is underway.
• Ensign is enhancing clinical capabilities to capture higher acuity patients.
• The company remains optimistic about regulatory support and reimbursement policies.

Financial Results

• Ensign reported all-time highs in same-store and transitioning occupancy.
• The skilled census continues robust growth, with consolidated occupancy at 81%.
• Since January of the previous year, Ensign acquired 47 new operations, evaluating around 500 acquisition opportunities.
• Priority is given to owning and operating properties, with leasing as an alternative under favorable conditions.

Operational Updates

• Key initiatives include acquiring underperforming skilled nursing facilities and driving organic growth through improved occupancy.
• Ensign is adding new clinical capabilities such as bedside dialysis and rehabilitation services.
• The company emphasizes a locally driven model, aligning with hospital needs and managed care networks.
• Continued M&A activity focuses on building density in existing clusters and entering new markets strategically.

Future Outlook

• Ensign plans to continue its strategy of mixed acquisitions and organic growth.
• The company aims to expand service offerings to cater to higher acuity patients.
• Building density in existing markets is a priority to strengthen relationships with hospital systems.
• Ensign is navigating the regulatory landscape to ensure favorable reimbursement policies and is expanding its real estate portfolio through Standard Bearer.

Q&A Highlights

• During the Q&A session, Ensign emphasized its selective acquisition strategy, aligning deals with operational and leadership criteria.
• The company prioritizes owning real estate but remains open to leasing arrangements under favorable terms.
• Ensign sees opportunities to partner with other quality operators, leveraging their REIT for growth.
• The company is prepared to enter its first union contracts and is optimistic about the regulatory environment.

For a deeper dive into The Ensign Group’s strategic direction and financial performance, please refer to the full transcript below.

Full transcript - RBC Capital Markets Global Healthcare Conference 2025:

Ben Hendrix, Analyst, RBC Capital Markets: Everyone, I’m Ben Hendrix, health care services and managed care analyst here at RBC Capital Markets. We’re very pleased today to have management from the Ensign Group. We are hosting Barry Port, chief executive officer, Chad Keetch, chief financial officer, and president Steve Farnsworth. So thank you guys very much for joining us today.

Barry Port, CEO, Ensign Group: Great to be here.

Ben Hendrix, Analyst, RBC Capital Markets: Yeah. So, Craig, congratulations on a record setting first quarter. Same store and transitioning occupancy at all time highs, you know, and and skilled census growth still growing at a strong clip. Maybe you can kinda talk about what you’re seeing in the market and the sustainability of the of the improvements y’all are seeing.

Barry Port, CEO, Ensign Group: Yeah. We feel really, really good about where we are. I mean, as most of you know, we make it our business to acquire underperforming post acute assets, primarily skilled nursing, and and enjoy the the organic growth that comes as a result of of of that. And we have seen really strong trends over the past couple of post COVID years, and that growth fortunately has been sustained and something that that obviously we feel excited about continuing. It it certainly helps that we’ve got really good maturity in a lot of key markets that we’ve been in for a long time where we have established relationships with both acute providers and managed care plans.

But also, you know, it’s we’ve we’ve got a fortunate tailwind of demographics. I think there are 11,000 folks a day that turn 65 years old, and and our our population is a little bit older than that, but that that trend has been one that has, I think, fueled what I I think are some really strong admission trends that we’ve seen over the past couple of years. So we we feel really good about where things are are headed for the future. We think that the the growth rate that we’ve seen over the last couple of years is certainly sustainable. We get we get excited about the upside that, you know, 81% consolidated occupancy means for us for the future.

Even if our our pace of acquisition growth slowed, we’ve got all that inherent organic growth opportunity ahead of us with with really strong trends.

Ben Hendrix, Analyst, RBC Capital Markets: And your same store occupancy has now surpassed pre COVID levels. You know, kinda how do you guys think about a target and where kind of that that sweet spot is in terms of of maintaining occupancy for the long term.

Barry Port, CEO, Ensign Group: Yeah. I mean, I I think and you two can correct me if if you feel like I’m off, but I I we don’t see really a a a cap, honestly. I mean, we certainly, when you look at individual markets, there’s a, I guess, a a maturity kind of standard that that seems to exist. You know, if you’re talking about buildings in in California, you can you can realistically get to a % occupancy. If you’re talking about mature buildings in certain markets in the in in Texas, you can you can get to high eighties, low nineties, but maybe not all the way to a hundred necessarily.

But but even there, what what we we find important to explain in our growth story is it’s not really just a function of getting to a, you know, kind of a maximum capacity for occupancy. We it is very common for us to see mature buildings that are fifteen, twenty years old consistently change their their patient profile mix, their skilled mix, and add service offerings to diversify that mix in a in a more margin positive way. And and so that’s that’s that’s a phenomenon we see over and over again. If you pay attention to our earnings calls, you’ll hear us cite examples of of buildings that are doing just that, buildings that we’ve had for twenty years that are still seeing continued performance improvement because while they may have reached a kind of an artificial threshold in terms of overall occupancy, they’re changing their patient mix and and diversifying their service offerings to better serve the needs of the acute hospitals and managed care plans.

Chad Keetch, CFO, Ensign Group: Yeah. And just to add to that, I think something that, you know, those that maybe haven’t been following us may not fully realize is, you know, we’re constantly diluting those occupancy numbers by acquiring these low occupancy buildings. If we were to just shut off our acquisition program, you would see that pattern sort of continue. But because we, you know, we’re constantly buying these immature buildings and folding them, you know, each year, we sort of reset those buckets and and dilute it again. Right?

And and but that’s okay with us. We’ve we’ve got, you know, this really great model that, you you know, you have your acquisitions, but then you also can drive organic growth. And both those those have have just allowed us to almost hedge in, you know, a year where maybe deals pricing is is irrational. We can take a step back from that and just focus on organic growth. But then, you know, when the buying opportunities are great, we we can focus on that.

And, you know, through the years, we you’ve seen sort of a pretty steady, you know, financial result, you know, outcomes even in kind of, you know, an environment where acquisitions aren’t necessarily always, you know, always steady, I guess, if that makes sense.

Ben Hendrix, Analyst, RBC Capital Markets: Yeah. One thing that’s always struck me is the growth potential within your same store portfolio, specifically through being able to add capabilities, whether that be bedside dialysis or other kind of, rehabilitation focused capabilities? Maybe you can kind of talk about the levers you have there. And when you think about increasing a transitioning, facility into the same store bucket and continuing to get enhanced skilled mix there? What the main levers you pull?

Barry Port, CEO, Ensign Group: Yeah. I mean, some are fairly simple and not too terribly novel. Know, specific cardiac programs or bariatric programs or or certain types of of speech and occupational therapy. But other others venture into kind of the more, I I’d say, world of care that’s that’s closer to maybe an LTAC or or something like that that you would see, like advanced respiratory programs for folks that are on ventilators or trachs that are impatient to us, and and maybe sometimes they’re long term ventilator patients. That that that requires a high degree of of of, you know, complex care, but it also commands, you know, much better rates to care for that complex patient.

So it it’s things like that. We also have a lot of facilities that are doing behavioral programs and dementia programs and and, you know, the list goes on and on and on. And and some are some of these programs are kind of on the cutting edge. They’re newer. Behavioral health has become a a kind of a bigger lever that we’ve we’ve we’ve looked at lately that that facilities that have the physical plant capability to add on a unit or to start start to more carve out a unit that is specific to behavioral health, that’s that’s been one that we’ve we’ve grown lately as well.

Steve Farnsworth, President, Ensign Group: Well, and I think it it speaks to the local leadership model. The the clinical leadership, it allows local leaders to clinically align with hospital needs through a continuum of care as well as managed care networks. And so it it it there’s a lot of efficiency to that and and speed. We do not have a master clinical plan, and every state has a standardized approach. It’s it’s very locally driven.

Ben Hendrix, Analyst, RBC Capital Markets: Speaks to that. And just wanna think about you you mentioned that you maybe get higher rates for some of these clinical capabilities, but it still seems like it would be a pretty big cost advantage over an inpatient rehab or an LTAC, for example, on that side. Just to to what extent do you believe you’re disintermediating some of that volume in your markets?

Barry Port, CEO, Ensign Group: Yeah. I mean, I believe we are. I mean, I I I certainly think that there’s there’s always going to be room for us to move up the acuity chain, and and we’ve seen that happen over the you know, certainly the twenty years that that I’ve been with the organization. Patients that that I would see come into a facility that I was running are are some of those still exist, but but if I look today and see the difference, it’s just a it’s a much sicker patient with, you know, more comorbidities, with more complex needs, and and that require more clinical capability too. And, again, to Steve’s point, with our our locally driven model where we have clinicians and and facility leaders that align with what the needs are of the hospital and add the necessary talent, equipment services at a local level, you can achieve what’s what’s needed by our our acute partners and make sure you deliver that.

Ben Hendrix, Analyst, RBC Capital Markets: Moving over on the, M and A side, you’ve added 47 new operations since January, last year. New states like Alabama and Oregon, and you are also Tennessee is fairly new, but you’re actually building some pretty significant scale there. So, maybe you can discuss, you know, your acquisition strategy, how you balance entering new markets versus, you know, building that density in your clusters in existing markets.

Chad Keetch, CFO, Ensign Group: Yeah. Great question. So and and there’s really opportunity everywhere. I you know, you mentioned the 47 acquisitions, you know, kind of the last year or so. And, you know, we probably looked at more like 500, like Mhmm.

Seriously evaluated and and, you know, took a lot of time to to work through that process, but that just gives you a sense for how selective we’re we’re able to be. And in terms of priority, I mean, you know, the lowest hanging fruit is to grow in the markets we know really well. And you’ve seen us do some some acquisitions in California and Arizona and Texas. And, really, every market we’re in, there’s significant opportunity to continue to to add scale, and and there really is a lot of benefit. Steve mentioned how, you know, we’ve got this really strong local approach.

But when you can approach a hospital system like Arizona, for example, Banner Health is a is a is a major player in that market. And, you know, when we we can approach Banner as as a as a sort of a network and say, have all these different services in these different buildings and these geographies and, you know, work together with them, it really does provide a lot of of of benefit. So so that’s our our first priority is to grow in markets we’re in and and and lots of opportunity to continue to do that. And and we could just focus in those markets and still, you know, do forty, fifty, sixty deals a year. However, you know, there there is a lot of opportunity in new states as well, and that’s that’s driven primarily by our our leaders that have an itch to go do something entrepreneurial and and enter a market that they probably have some kind of connection in.

And, really, every new state we go into sort of starts with someone within our organization that wants to go there. So you mentioned Tennessee, you know, one of our longtime leaders, been with the organization twenty years, you know, moved his family to to Nashville. He he started to look for acquisitions, you know, a couple years before we actually acquired our first building, and, you know, we fired we acquired one or two. And then, you know, we like you said, we started to build a cluster there of now we have a dozen operations. And so similar thing in Alabama.

You know, we have one building there, but one of our leaders moved there. And Oregon was very leader driven. We’re in Alaska now. And so, you know, it’s kind of funny when we go into a new state, it sort of opens the floodgates to new deals that maybe sellers didn’t think of Ensign before, and now they do. And so you mentioned, you know, Alabama, you know, we probably didn’t see many acquisition opportunities there before, but now we have a single building.

And, you know, in the last four or five months, we’ve seen more in Alabama than we probably have in our entire history. So so there there is an effect there that we start to see additional opportunities as we go into new states, and I’m really excited to do that. So, yeah, I would tell you in terms of priority, you know, certainly markets we’re in and know well, but then, you know, I would say markets that are adjacent to markets we’re in is probably the next priority. And then, you know, over time, we we can continue to expand into additional regions, but really excited about kind of the Southeast, you know, South Carolina, Tennessee, Alabama. You know, Georgia will be sort of a next logical step.

Oregon’s been a a state we haven’t been in for a long time. That’s in Steve’s area, and really excited about about what we can do there. And Alaska. Alaska’s not a ton of facilities in Alaska, but still really excited about, you know, what what what we’re seeing in those markets. So

Ben Hendrix, Analyst, RBC Capital Markets: Gotcha. And as you get into deeper into the Southeast and into Oregon and potentially Alaska, what what do you generally see in terms of the the different dynamics, whether it be labor dynamics, whether it be regulatory differences, you know, kinda how how do we navigate those, and and what has been your experience?

Chad Keetch, CFO, Ensign Group: Yeah. Steve’s perfect. You can add that.

Steve Farnsworth, President, Ensign Group: I I I think the big part of it is is how methodical we are before we go into a new state. For it to be an intelligent risk, there’s a lot of homework that goes into that. As as Chad mentioned, we’ve had our eye on Oregon for probably five to ten years and passed up on a number of deals. We didn’t have the right leadership. We didn’t have the right support at the time.

And so doing our homework on rate methodology, regulatory environment, without that, there’s a lot of inherent risk going into a new state without having all of that in place. And so I’ve I’ve always appreciated the methodical approach to the intelligent risk to growing into a new new state. As far as the labor market goes, for example, in in Oregon, with the Medicaid rate methodologies, there’s some nuance there with staffing ratios, etcetera. And so a standardized approach of, well, this is what we average in the Northwest. It should be the same in Oregon doesn’t apply.

And so there’s a lot of detail that goes into entering a new state to do it the right way with the right leader to ensure the long term

Barry Port, CEO, Ensign Group: success of that. I mean, it’s why we are are so selective and picky about making the acquisition be about the leadership instead of just the deal. If we let the deals lead us to new states, it would it would kind of defeat what we feel like is part of our playbook for success. When we have a leader that’s committed to the success of a deal in a new state, we know they’re going to integrate into the the health care association. They’re gonna they’re gonna really understand the the the landscape for labor and and forge the right relationships.

They’re gonna dive into partnerships with hospitals and managed care plans and and and learn the reimbursement and regulatory environment really well. And so that’s been really key to us entering new states is the, you know, kind of the first two approach of how are we going to do this successfully with the right leader in place.

Ben Hendrix, Analyst, RBC Capital Markets: I guess in tangential to the regulatory environment, you know, we’ve you guys have provided some great color on your thoughts on the on the policy backdrop, and I know you guys have some exposure to supplemental payments in some states. But, you know, with with the latest house activity, just wanted to get your latest thoughts, anything changing your view of the policy backdrop?

Barry Port, CEO, Ensign Group: No. I I you know, I’m really grateful for all the support we’ve had from both our industry association and and other leaders in our space that have joined in in the effort to educate members of congress and make sure they understand the issues and how they affect reimbursement and at both a federal and a state level. A lot of members of congress are well intended and trying to be fiscally prudent, but sometimes there’s a lack of understanding about the ripple effect that certain changes to certain programs have. We’ve been fortunate to have a great deal of receptivity in our efforts to to to really just educate members of congress. We’ve we’ve been able to appeal to, you know, moderate Republicans and and as you know, it’s a reconciliation effort.

So they’re kind of controlling the the the process. And so as we’ve been able to sit down and meet with them, there’s there’s been a really solid, you know, kind of receptivity and understanding of of how and why and where it makes sense. So, luckily, where where where the bill sits currently, it’s made its way into the senate, and and, all of our biggest concerns have been addressed, and we feel like we’re in a pretty good position. Of course, we’re not at the finish line yet. We’ve got work to do to make sure it makes its way through the senate.

And if it becomes a bill that passes at all. But we feel we feel really good about where we’re at. We’ve we’ve had lots of meetings with lots of of of senators and and members of the house, including leadership in both both both both the house and the senate, and feel like we’re in a good place.

Ben Hendrix, Analyst, RBC Capital Markets: Gotcha. I wanna move on to talk a little bit about standard bearer and the real estate side a little bit. I know that with typically typically with your m and a, you you know, maybe step into an underperforming asset. Sometimes it’s a fairly capital light transaction, but now that we’re looking at a pickup in real estate in the first quarter, it seems there’s more of a capital outlay. Maybe maybe you can kinda talk about how you target your real estate assets and your real estate investing and and what we can expect for the future.

Chad Keetch, CFO, Ensign Group: Sure. Yeah. So I before I was kinda talking about just sort of, you know, geography and our priorities there, but, you know, more generally, you know, our if we were to prioritize, you know, how we look at an acquisition, number one would be we wanna we wanna own it and operate it ourselves. Right? So anytime we see an acquisition opportunity, we try and and seek to own the real estate.

That’s not always an opportunity. Sometimes it’s a REIT or someone else that owns it, and, you know, we’re we’re so our second priority would be to operate it and lease it in a really attractive lease, and and that speaks to sort of our operator focused strategy. But then the third one would be to to own it and lease to someone else.

Barry Port, CEO, Ensign Group: Mhmm.

Chad Keetch, CFO, Ensign Group: And and so the standard bearer continues to to to grow and and gain some steam. I think that third category is something that we’re excited about. You know? But at the same time, you know, again, our we we if we can operate it, we feel like we’re a pretty quality operator that, you know, if you’re a real estate investor, you know, the quality of the tenant is the most important factor, right, to to having value in your real estate. So so that that will be our our focus.

But, you know, the I think the thing that’s exciting, and and we’ve had a couple deals like this recently. In the past, because we were so operator focused, we’d be presented with a portfolio of, say, you know, 10 buildings. And, usually, you know, the seller wants to deal with just one buyer. And, you know, we’re so picky as operators, we would say, well, gosh, we only want, you know, eight of those 10, and then we would lose the deal to someone else that was willing to buy all of it. But with with Standard Bear, you know, we just did this in the Northwest where we we we said, okay.

We’d some of these aren’t a fit for us operationally, but we really like the real estate. So we bought the whole portfolio and operated the portion that we wanted and then found a really high quality third party tenant to lease to. And so that that’s an acquisition we just announced and closed, and and we’re we’re starting to see more of those. And I think I think it does open opportunities that maybe in the past we didn’t have, and so that that’s really exciting. But, look, our our mission as an organization is to dignify post acute care in in the eyes of the world, and, you know, we we represent, you know, barely, you know, I think just under two percent of the industry, and I think we’re one of the larger operators out there.

We can’t possibly you know, I I mentioned before we saw 490 deals in the last year, and we’re only able to do 47 of them. So we we feel like there’s a lot that we can offer to the industry by partnering with really quality tenants and and and other operators that see the world the way we do, and and, you know, we have a really strong balance sheet. And if we can use that to, you know, yes, to generate a nice return on on kind of capital, but but also impact the industry in a positive way, that that gets really exciting to us. And and we think there’s a lot of operators out there that are, I mean, there are that that are really excited about working with us as as as partners and not just, you know, a pocketbook or money or a landlord, but but someone that’s, you know, in the, you know, in the weeds and operating ourselves and and can offer a whole bunch more than just capital. So we’re excited about it.

Ben Hendrix, Analyst, RBC Capital Markets: Great. We’re always trying to peer under the hood and get an idea of y’all’s secret sauce in terms of how you how you make your operating decisions. You know, when we think about, you know, as such a strong operator with such demonstrated strong results, when you think about the turning your real estate over to a third party rather than run it yourselves. Is that decision made more on the leadership basis, or how do you how do you think about, you know, turning it over to a qualified third party versus managing it yourself?

Chad Keetch, CFO, Ensign Group: Yeah. It’s a great question. Steve could speak to this too. But, you know, a lot of it’s geography. You know, sometimes there’s, you know, just leadership availability in certain areas is just not as not as present at the at the moment, and deals have to happen pretty fast.

So sometimes it’s a matter of we’re not quite ready to be in that particular geography. Other other factors could be labor unions. You know, we we don’t have you know, we’re about to enter into our our first union contracts in our whole organization, but, you know, the this deal we just announced, there there was a building right across the street from one of our existing properties. We don’t have a union. This building did.

And, you know, sometimes, you know, we have staff that will, you know, move between buildings and having it that union comp complexity, you know, was was something that we didn’t wanna, you know, enter into. And so that that was an example. But Mhmm. There’s probably others.

Barry Port, CEO, Ensign Group: Oh, I I would I would just say too that I mean, make make no mistake. I mean, we we we we like the way we do things. We we feel like we’re, you know, good good operators. There are a lot of good operators out there in our space and and ones that are either constrained to grow because of capital resources or infrastructure or, you know, what whatever the reasons might be. And and we do see it as part of our mission to to partner with those those organizations and and help where we can.

Not to say that they all need us to to do that, but we we we see that both as an opportunity and an an obligation. Having a vehicle like our our REIT can allow us to do that. And but also just our our passion for the space also drives us to get to know some of these other operators and understand some of their unique capabilities, and we don’t have to do it all. And we we think there’s ways we can be partners with some of these where it’s beneficial for us, but also beneficial for them and the industry.

Ben Hendrix, Analyst, RBC Capital Markets: Great. Thanks, guys. I think that brings us to time. I appreciate appreciate you all being here with us today.

Chad Keetch, CFO, Ensign Group: You bet. Thanks, Ben. Thanks. You bet.

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