Dave Kingsley

Centene Corporation’s Business & 3rd Quarter Results

Centene Corporation contracts with states to manage Medicaid programs.  Two-thirds of the company’s revenue flows from means-tested, welfare, programs.  The other one-third of its revenue is derived from Medicare, Tri-Care, and their prison contracting subsidiary Centurion.  Basically, the bulk of this corporation’s business is poverty medicine. 

Centene purchased a non-profit organization in the 1990s and took it private.  In 2001, the company issued an IPO.  In a mere two decades, Centene increased its revenue to $111 billion (2021 revenue).  In 2021, Fortune magazine placed it at 24th in the “Fortune 500.”  Ahead of Centene was Anthem at 23rd with revenues of $122 billion, at 22nd was General Motors with revenue of $122.5 billion. As an illustration of the rapid growth of this poverty-medicine company, in 2018, it was ranked 63rd in the “Fortune 500,” with revenue of $48.6 billion.

Centene’s 3rd quarter revenue of $35.9 billion was a 11% increase over their 2021 3rd quarter revenue of $32.4 billion.  The company is on track to increase its 2022 revenue to $135 billion.  According to the 3rd quarter report, “The increase was driven by organic Medicaid growth, primarily due to the ongoing suspension of eligibility redetermination, 22% membership growth in the Medicare business, and [our] acquisition of Magellan Health, Inc. (Magellan), partially offset by the PANTHERx divestiture.”

Centene is predicting (called guidance in finance lingo) an increase in 2022 earnings per share of $5.65 to $5.75.  The company’s stock which is trading above $81 per share as I write this, has been outperforming the DOW & S&P since the equities market moved lower at a rapid rate in late November of 2021.  On November 29, 2021, Centene closed at $73.77 and has been incrementally moving up while the overall market has been moving down.

Executives, Board Members, & Shareholders

The recently retired Centene CEO/Chairman John Neidorff is one of the highest paid corporate executives in the United States.  Over the past 3 years his compensation has totaled $72,033,192.  He owns 1.5% of 560 million outstanding shares of Centene stock – today worth over $80 per share.  Hence, his wealth in stock alone is worth approximately $680 million.

Sarah London – Neidorff replacement as CEO – earned $15 million in 2021 before her promotion to CEO.  The eleven 2021 board members earned from $335,000 to $426,000.  In 2021, two powerful former congressmen on the board, Richard Gephardt and Tommy Thompson, were paid $426,923 and $403,046 respectively. 

An activist investor (Quinten Koffey of Politan Capital Management) acquired 2 percent of the stock and made a successful move to oust Neidorff.  London, his successor, was most likely in on the move.  The board has been restructured as part of the company’s long-term plan to improve its profit margin (https://www.healthcaredive.com/news/neidorff-retire-centene-activist-investor-board-shakeup/611465/).

In the Nursing Home Business, Medical Care Versus Financial Performance Is an Important Dimension


Dave Kingsley

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.

Nursing Home Corporations are Beginning to Release Fourth Quarter Earnings. Are their Hardship Pleas Merited? Or is it Propaganda?

The Ensign Group, Inc. (Nasdaq: ENSG) has Reported Robust Fourth Quarter Earnings – Now We Need to Discuss How Well They Protected Patients in Their Care from COVID

The information in this post is based on a conference call and webcast on February 4, 2021 at 10:00 A.M. PT (https://markets.businessinsider.com/news/stocks/the-ensign-group-reports-fourth-quarter-and-fiscal-year-2020-results-1030040511).  When Ensign’s annual 10-K report is available, we will analyze all quarterly reports and their annual results to determine their overall 2020 performance.  We are interested in the amount of revenue the corporation received in the form of CARES Act grants/loans and other subsidization from various federal departments (e.g., HHS, IRS, etc.).

During the 4th quarter (Oct, Nov, Dec), the COVID pandemic spiked to levels unseen prior to that time.  Here are a few highlights from the Ensign release of 4th quarter results, which includes annual results:

  1. Earnings per share of $0.82 represent an increase of 67.3% over the prior year quarter.

  2. Earnings per share of $3.06 represent an increase of 86.6% over the prior year.

  3. Revenue of $2.4 billion for the year is an increase of 18.3% over the prior year.

  4. Medicare days increased by 22.1% over the prior year; hence, skilled revenue increased by 14.7% over the prior year.

  5. Real estate segment income of $31.3 million is an increase of 79.2% from the prior year.

  6. 2020 net income of 174.6 million is an increase of 74.8% over 2019. Fourth quarter earnings of $44.9 million represents an increase of 33.9% over the 4th quarter of 2019.

Although Ensign stock crashed with the rest of the market in mid-March 2020, it has recovered and has been trading in the low $80s.  It closed on Friday, February 5, 2021 at $83.82.  Analysts have rated it as “strong buy” (https://www.msn.com/en-us/money/stockdetails/analysis/fi-a1rzsm).

CEO Barry Port had the following to say about 2020 operating results: “In spite of the continued challenges brought on as the result of the ongoing global pandemic, we are very happy to report another record quarter as we achieved our highest earnings per share in our history.”  He went on to praise the performance of “local teams” in protecting patients from COVID-19.

Whether The Ensign Group Deserves Praise for its Protection of Patients from COVID Remains to be Seen.  What Happened in Kansas City is not Strong Evidence that the Company Placed Care Over Extraction of Cash.

I must say that reading Port’s glowing report of Ensign’s infection and disease control effectiveness, I’m experiencing cognitive dissonance.  Last April, The Ensign Group’s Riverbend facility in Kansas City, KS began to appear in the local media as something of a poster child for COVID-19 deaths in nursing homes (e.g., Laura Bauer, “Two more COVID-19 deaths at Riverbend nursing facility in KCK reported Sunday,” https://www.kansascity.com/news/coronavirus/article241959296.html).

In January of 202 – prior to public awareness of the severity of the pandemic – the Riverbend facility received the lowest rating of 1 out of 5 stars on the CMS Nursing Home Compare website.  The facility was cited for lack of infectious disease control.  Apparently, fixing that problem was not a high priority for the company. As early as January, the world was becoming aware of a novel virus that could become a deadly pandemic outside of China’s borders.

I was interviewed by Fox4 News regarding the Riverbend situation and the nursing home industry in general. My words were reduced to rather meaningless soundbites.  Unfortunately, local and national media are not geared these days to in-depth research and analysis.  After focusing on the scandalous Riverbend deaths for a short period of time, the media jumped to the next scandal and then to the next scandal and on and on – from scandal to scandal.  No adequate analysis of the overall industry has been forthcoming.  Hence, Mark Parkinson and the AHCA can get away with claiming that the industry couldn’t afford to do any better than they have done.

Will the industry escape accountability for the deaths of people entrusted to its care?  Will our government, media, and the public just move on with no serious inquest into how corporations could remain profitable while they allowed perhaps 200,000 people in their facilities needlessly suffer and die? I’m horrified by the thought that the answer to these questions will be yes.  I’m not hearing much interest in pulling back the curtain on the opaque finances of the closely held corporations paid with Medicare and Medicaid dollars to determine what they could have and should have done to protect their patients.

By Dave Kingsley


   By Dave Kingsley

Don’t worry about the financial impact of COVID-19 on the nursing home industry.  Corporations paid to provide long-term care appear to be doing well financially.  In this post, I want to begin a discussion of the industry’s and regulators’ failure to protect patients from a scourge they should have known was coming.  Unfortunately, nursing home owners are not being held accountable.  Quite to the contrary, they are being financially rewarded as victims of the pandemic.

    My purpose in this post is to highlight the subsidization of the industry through immediate cash infusions while nursing home personnel have been forced to work in the same low paid jobs without adequate personal protective equipment.  This is an initial post in a series of posts in which I will provide information gleaned from the 2nd quarterly reports of three different types of publicly listed nursing home corporations – privately held corporations’ financial information isn’t available because they are not required to file reports with the SEC.

    If the public thinks providers of nursing home corporations are financially strapped due to the COVID pandemic, they will be dissuaded from that perspective by the 2nd quarterly 10-Q reports filed by a sample of publicly listed corporations. Consider the financial reports of the following representative corporations:

The Ensign Group

    The Ensign Group, a holding company, owns the fifth largest nursing home chain in the United States.  The company was formed in 1999 and, based on SEC filings, has demonstrated a robust growth and strong financial performance.  According to its 2020 2nd Quarter report (10-Q)[1], its earnings of $.78 per share was a 100% increase over the prior year quarter.  Revenues for the quarter were $584.7 million and increase of 18.6% over the prior year quarter.  Net income for the quarter was $43.1 million, an increase of 99% over the prior year quarter.

   Apparently TEG was doing so well, the corporation decided to return $110 million it received from the federal government under the CARES Act[2], which was basically a handout to America’s corporations for keeping them solvent even though nursing home companies had a guaranteed price and ongoing revenue.  Furthermore, they benefitted from the Payroll Protection Program and the HEROES’ Act intended to help companies keep employees paid and enough capital to maintain solvency.  Although, the TEG balance sheet indicates that the company has $210 million in cash and $302 million in accounts receivables, it still took perhaps a 100 million dollars of PPP money and a host of other CMS supplemental payments.

Ventas Real Estate Investment Trust

    Ventas Real Estate Investment Trust (REIT) is illustrative of one of various types of corporations dependent on revenue from skilled nursing facilities.  REIT’s in the nursing home business are a special type of commercial real estate, but they are also a special type of skilled nursing home corporation.  Although they buy and lease facilities, they actually lease to contractors such as Brookdale from whom they often buy facilities and lease them back while also maintaining an interest in and control over operations. Furthermore, REITs have an operational interest in skilled nursing facilities.  Ventas describes its business this way: “We primarily invest in senior housing, research and innovation, and healthcare properties through acquisitions and lease our properties to unaffiliated tenants or operate them through independent third-party managers.”

    According to Ventas’s 10-Q[3], the COVID pandemic has not been financially disastrous due to the injection of funds from the CARES, PPP, and HERO’S acts.

    “In our healthcare triple-net leased properties portfolio, we collected substantially all rent due in the first and second quarters. This cohort of tenants has benefitted from significant government financial support to partially offset the direct financial impact of the COVID-19 pandemic on healthcare providers. Nationally, hospital inpatient admissions and surgeries have rebounded, although still below pre-COVID-19 levels, depending on the particular market.”

Brookdale Senior Living

Brookdale Senior living is the largest operator of senior living properties.  The company has sold most of its real estate. 

During months ended June 30, accepted $33.5 million of cash from CARES Act.  During July 2020 company applied for additional grants Emergency Funds based on 2% of portion of 2018 gross revenue from patient care

Under the CARES Act, the Company has elected to defer payment of the employer portion of social security payroll taxes incurred from March 27, 2020 to December 31, 2020. One-half of such deferral amount will become due on each of December 31, 2021 and December 31, 2022. As of June 30, 2020, the Company has deferred payment of $26.5 million of payroll taxes and presented such amount within other liabilities within the Company’s condensed consolidated balance sheet.[4]

As of June 30, 2020, total liquidity was $600.2 million, consisting of $452.4 million of unrestricted cash and cash equivalents, $109.9 million of marketable securities, and $37.9 million of additional availability on revolving credit facility.

Eric Carlson of Justice in Agency statement

    Eric Carlson, of Justice in Aging served on the so-called “Independent Nursing Home COVID-19 Commission,” and was the only member who refused to endorse the commission report resulting from a series of secret meetings between July and September.  I say good for him!  I say shame on those other members who either fully or partially endorsed a report that allowed the Trump Administration and nursing home corporations escape responsibility for dereliction of their duty to protect nursing home patients during the COVID-19 pandemic.

    Mr. Carlson gave the following reason for his refusal to endorse the report: “With limited exceptions, these recommendations … do not address accountability of nursing homes and their operators.” Having spent a considerable amount of time analyzing the report thus far, I would say that he is correct.

    Not only did CMS use the report to excuse its own inept and failed response to the COVID-19 pandemic, it also ignored failure of the industry and expectations from nursing home corporations in the future.  The Trump Administration failed to hold corporations accountable.  Furthermore, they have been providing generous subsidies through the CARES, PPP, and HEROES Acts passed by congress in March to keep employees paid and businesses from bankruptcy.

[1] https://investor.ensigngroup.net/sec-filings/sec-filing/10-q/0001125376-20-000134

[2] Two major pieces of legislation, the CARES Act, and the HEROES Act, which include cash grants, support for employees, and deferred payroll taxes are responsible for injecting hundreds of millions of dollars into the three corporations featured in this post alone.  The text of the acts can be found at:  https://www.congress.gov/bill/116th-congress/senate-bill/3548/text?q=product+actualizaci%C3%B3n; https://www.congress.gov/bill/116th-congress/house-bill/6800/text.  Detailed information from the income, balance sheet, and cash flow statements of major publicly listed nursing home corporations’ cash and equivalents, earnings, and liquidity indicate a rather strong financial position after several months of a nationwide pandemic.

[3] https://ventasreit.gcs-web.com/static-files/5ea1570e-14fd-45f6-8e31-15237eb49016

[4] https://brookdaleseniorlivinginc.gcs-web.com/static-files/0213cc1d-9228-4f8c-a7d4-273a1943197c