In a blog post, the financial facets of a company like The Ensign Group (“Ensign”) in the LTC/SKN business, must, of necessity, be distilled into and summarized through information from reports submitted to the Securities & Exchange Commission, cost reports submitted to state agencies, and CMS data. From a scientific perspective, all of that of data should be triangulated with other data related to capital markets, the state of the economy, Bureau of Labor Statistics wage/salary data, and so forth.
Furthermore, given the financial information available to advocates and researchers, we should be able to consider the congruence between return on investment (shareholder interests) and the quality of care provided to patients. LeadingAge and the American Healthcare Association/National Center on Independent Living (AHCA/NCAL) will invariably claim that businesses in LTC/SKN are operating “on a slim margin,” a “low net,” or some such term implying that it’s really a tough business in which providers are merely trying to stay solvent.
Those claims by industry representatives are based on cost reports submitted by each facility to state agencies – not on the financial metrics of parent corporations, e.g., income statement, balance sheet, and cash flow statement. In the previous post on this blog, I discussed the robust earnings reported by Ensign for the 2022 3rd quarter. In this post, I juxtapose cost reports submitted by the following five Ensign facilities on the Kansas side of the Kansas City metroplex to reports submitted to the SEC: (1) Riverbend Post-Acute Rehabilitation, (2) Shawnee Post-Acute & Rehabilitation Center, (3) The Healthcare Resort of Kansas City, (4) The Healthcare Resort of Leawood, and (5) The Healthcare Resort of Olathe.
These five facilities reported a combined net loss of $3,678,304 on a combined revenue of $46,801,526 – an 7.9% net loss overall. In the previous post, I noted that the company reported +7.3% net for all operations. But all Kansas facilities but one – Riverbend Post-Acute – reported a net loss. Riverbend had a small net gain of $3,345 on revenue of $9,753,360 – a miniscule 3 tenths of 1%.
CEO Barry Port stated the following in his 3rd Quarter press conference: “We are grateful for the efforts and commitment of our teams, caregivers, and leaders who work endlessly to love and support one another, which allows for the high-quality outcomes they consistently achieve.” I have no doubt that the employees work hard, are dedicated, and try to provide loving care. However, if the five-star, CMS Nursing Home Compare rating system is meaningful at all the outcomes for the five facilities at issue in this post belie Mr. Port’s claim of high-quality outcomes.
There is not a 4- or 5-star rating among the five facilities. Two have a 1-star rating, two have a 2-star rating, and one has a 3-star rating. The Riverbend facility’s 1-star rating is accompanied by a red hand, which indicates that some serious abuse and neglect has been identified in the facility. This facility was also an early media “poster child” for COVID deaths. The Kansas City Star and other local media outlets were on the large number of Riverbend COVID deaths early in the pandemic. I was interviewed by the local FOX affiliate. It was not lost on perceptive journalists that the facility had received a 1-star rating not long before the COVID outbreak. Lack of infection control was a major issue in the inspection leading to the low CMS-NHC rating.
Message for Advocates
A publicly listed company like Ensign provides advocates with an opportunity to consider consolidated financial statements of parent corporations in conjunction with financial data reported to state agencies. The importance of this cannot be underestimated. LeadingAge and the AHCA/NCAL have a political narrative based on a false impression that the industry is comprised of struggling businesses barely avoiding bankruptcy. Industry media such Skilled Nursing News and McKnight’s Senior Living reinforce this narrative, which is based on the pervasively faulty and misleading cost reports – not consolidated financial statements.
My colleagues and I at Tallgrass Economics have embarked on a project to compile cost reports for all Ensign facilities. We are interested in the combined payouts to their own ancillary businesses such real estate, insurance, management services, etc. that are expensed on cost reports which affect each facility’s net income but funnels cash to Ensign Corporate. LeadingAge and AHCA/NCAL are relying on a report compiled by the accounting firm Clifton-Larson-Allen (CLA), which is based solely on cost reports. CRs are a ludicrous source of financial data. This post is an initial effort to spread that truth.