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What changed in ENSIGN GROUP, INC's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of ENSIGN GROUP, INC's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+685 added−686 removedSource: 10-K (2025-02-05) vs 10-K (2024-02-01)

Top changes in ENSIGN GROUP, INC's 2024 10-K

685 paragraphs added · 686 removed · 492 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

165 edited+101 added−72 removed227 unchanged
Biggest changeThe final rule requires disclosures to include the identity of any person or legal entity that: (1) exercises financial, operational, or managerial control over any facility or part of a facility, or provides services to a facility that include its policies and procedures or cash management services; (2) leases or subleases real property to the facility, or owns 5% or more of the real property’s total value; and (3) provides any management or administrative services (or consults regarding the same), or provides accounting or financial services to the SNF.
Biggest changeThe individuals anticipated to be nominated to serve as the Secretary of HHS and Director of CMS, respectively, have not yet provided any indication what their priorities of anticipated future actions would be in this area. 15 Table of Contents Ownership Transparency Final Rule — CMS' final rule published in November 2023 requires SNFs to publicly disclose certain additional information regarding their ownership and managerial relationships, including the identity of any person or legal entity that: (1) exercises financial, operational, or managerial control over any facility or part of a facility, or provides services to a facility that include its policies and procedures or cash management services; (2) leases or subleases real property to the facility, or owns 5% or more of the real property’s total value; and (3) provides any management or administrative services (or consults regarding the same), or provides accounting or financial services to SNFs.
It starts with a baseline quarter and the first two quarters of the performance period to identify eligible employees. Then, it uses the next four quarters to find the number of employment cycles that ended in turnover.
It starts with a baseline quarter and the first two quarters of the performance period to identify eligible employees. Then, uses the next four quarters to find the number of employment cycles that ended in turnover.
The recalibrated parity adjustment is being phased in at a rate of 2.3% per year on both the SNF PPS FY 2024 and FY 2023 Final Rules. Sequestration of Medicare Rates The Budget Control Act of 2011 requires a mandatory, across the board reduction in federal spending, called a sequestration.
The recalibrated parity adjustment is being phased in at a rate of 2.3% per year on both the SNF PPS FY 2024 and FY 2023 Final Rules. Sequestration of Medicare Rates —The Budget Control Act of 2011 requires a mandatory, across the board reduction in federal spending, called sequestration.
For a discussion of historic adjustments and recent changes to the Medicare program and other reimbursement rates, see Part I, Item 1A Risk Factors under the headings Risks Related to Our Business and Industry. Patient Protection and Affordable Care Act Various healthcare reform provisions became law upon enactment of the ACA.
For a discussion of historic adjustments and recent changes to the Medicare program and other reimbursement rates, see Part I, Item 1A Risk Factors under the headings Risks Related to Our Business and Industry. Patient Protection and Affordable Care Act Various healthcare reform provisions became law upon enactment of the Patient Protection and Affordable Care Act (ACA).
In wrongful death cases that arise from claims of medical malpractice and professional negligence, the cap on non-economic damages increased from $0.25 million to $0.50 million on January 1, 2023, and increase every year thereafter for ten years until the cap on non-economic damages in such cases is $1.0 million; thereafter, this cap will also be subject to an annual 2% increase.
In wrongful death cases that arise from claims of medical malpractice and professional negligence, the cap on non-economic damages increased from $0.25 million to $0.50 million on January 1, 2023, and increase every year thereafter for ten years until the cap on non-economic damages in such cases is $1.0 million; thereafter, this cap will also be subject to an annual 2.0% increase.
Risk Management and Strategy We identify and assess environmental risk to the organization by: • Conducting assessments of transition risks, which are risks related to the transition to a lower-carbon economy, and physical risks, which are risks related to the physical impacts of climate change. • Identifying climate-related opportunities, which includes programs to reduce electricity usage and carbon emissions at our independent subsidiaries. • Identifying the potential financial impact of transition risks, physical risks and climate-related opportunities. • Developing and implementing our strategy, which focuses on monitoring environmental policy and on-going developments, ensuring community resiliency, evaluating usage of energy management systems and tools, building operational and emergency response systems, performing hazard vulnerability assessments and tracking and responding to developing natural disasters.
Risk Management and Strategy We identify and assess environmental risk to the organization by: • Conducting assessments of transition risks, which are risks related to the transition to a lower-carbon economy, and physical risks, which are risks related to the physical impacts of climate change. • Identifying climate-related opportunities, which includes programs to reduce electricity usage and carbon emissions at our independent subsidiaries. • Identifying the potential financial impact of transition risks, physical risks and climate-related opportunities. • Developing and implementing our strategy, which focuses on monitoring environmental policy and on-going developments, ensuring community resiliency, evaluating usage of energy management systems, building operational and emergency response systems, performing hazard vulnerability assessments and tracking and responding to developing natural disasters.
Monitoring Compliance in Our Facilities Governmental agencies and other authorities periodically inspect our independent subsidiaries to assess compliance with various standards, rules and regulations, with potential fines, sanctions and other penalties for noncompliance. Unannounced surveys or inspections generally occur at least annually and may also follow a government agency's receipt of a complaint about a facility.
Monitoring Compliance in Our Independent Subsidiaries Governmental agencies and other authorities periodically inspect our independent subsidiaries to assess compliance with various standards, rules and regulations, with potential fines, sanctions and other penalties for noncompliance. Unannounced surveys or inspections generally occur at least annually and may also follow a government agency's receipt of a complaint about a facility.
Under the CAA 2023, a further 4% cut to Medicare spending that would have been required under the Statutory Pay-As-You-Go Act of 2010 (PAYGO) was waived for fiscal years 2023 and 2024. Instead, the CAA 2023 deferred any further Medicare sequestration under PAYGO until fiscal year 2025.
Under the CAA 2023, a further 4.0% cut to Medicare spending that would have been required under the Statutory Pay-As-You-Go Act of 2010 (PAYGO) was waived for fiscal years 2023 and 2024. Instead, the CAA 2023 deferred any further Medicare sequestration under PAYGO until fiscal year 2025.
Additionally, in April of 2022, the Nursing Home Compare website began publishing the ownership information for Medicare-enrolled nursing facilities based on disclosures made to CMS from 2016 through 2022 due to mergers, acquisitions, or other changes in ownership, to allow for the identification of common ownership of nursing facilities.
Additionally, in 2022, the Nursing Home Compare website began publishing the ownership information for Medicare-enrolled nursing facilities based on disclosures made to CMS from 2016 through 2022 due to mergers, acquisitions, or other changes in ownership, to allow for the identification of common ownership of nursing facilities.
Managed Care and Private Insurance — Managed care patients consist of individuals who are insured by certain third-party entities, or who are Medicare beneficiaries who have assigned their Medicare benefits to a senior managed care organization plan.
Managed Care and Private Insurance — Managed care patients consist of individuals who are insured by certain third-party entities, or who are Medicare beneficiaries who have assigned their Medicare benefits to a managed care organization plan.
Our employees are at the heart of our Company and we are committed to their health, professional development and workplace satisfaction. Our core values, which focuses on developing our employees, fostering an ownership mentality and allowing for intelligent risk taking, guide us in our decision making and inspire us to be better people, both professionally and personally.
Our employees are at the heart of our Company and we are committed to their health, professional development and workplace satisfaction. Our core values, which focus on developing our employees, fostering an ownership mentality and allowing for intelligent risk taking, guide us in our decision making and inspire us to be better people, both professionally and personally.
Under the qui tam or “whistleblower” provisions of the FCA, a private individual with knowledge of fraud may bring a claim on behalf of the federal government and receive a percentage of the federal government’s recovery. The Biden-Harris Administration has also signaled an increasing focus on nursing home performance and the reimbursement nursing homes receive from federal healthcare payment programs.
Under the qui tam or “whistleblower” provisions of the FCA, a private individual with knowledge of fraud may bring a claim on behalf of the federal government and receive a percentage of the federal government’s recovery. The Biden-Harris Administration had also signaled an increasing focus on nursing home performance and the reimbursement nursing homes receive from federal healthcare payment programs.
In addition, CMS has increased its focus on facilities with a history of serious or sustained quality of care problems through the special focus facility (SFF) initiative. SFFs receive heightened scrutiny and more frequent regulatory surveys. Failure to improve the quality of care can result in fines and termination from participation in Medicare and Medicaid.
In addition, CMS has increased its focus on facilities with a history of serious or sustained quality of care problems through the Special Focus Facility (SFF) program. SFFs receive heightened scrutiny and more frequent regulatory surveys. Failure to improve the quality of care can result in fines and termination from participation in Medicare and Medicaid.
Such filings are placed on our website as soon as reasonably possible after they are filed with the SEC. All such filings are available free of charge. The information contained in, or that can be accessed through, our website does not constitute a part of this Annual Report on Form 10-K. 30 Table of Contents
Such filings are placed on our website as soon as reasonably possible after they are filed with the SEC. All such filings are available free of charge. The information contained in, or that can be accessed through, our website does not constitute a part of this Annual Report on Form 10-K. 32 Table of Contents
Innovative Service Center Approach — We do not maintain a corporate headquarters; rather, we operate a Service Center to support the efforts of each operation.
Innovative Service Center Approach — We do not maintain a corporate headquarters; rather, we operate service centers to support the efforts of each operation.
Under this new calculation, points are assigned to a SNF based on its performance across six measures: (1) case-mix adjusted total nurse staffing levels (including registered nurses, licensed practical nurses, and nursing aides), measured by hours per resident per day; (2) case-mix adjusted registered nurse staffing levels, measured by hours per resident per day; (3) case-mix adjusted total nurse staffing levels (including registered nurses, licensed practical nurses, and nursing aides), measured by hours per resident day on the weekend; (4) total nurse turnover, defined as the percentage of nursing staff that left the nursing home over a 12-month period; (5) registered nurse turnover, defined as the percentage of registered nursing staff that left the nursing home over a 12-month period; and (6) administrator turnover, defined as the percentage of administrators that left the nursing home over a 12-month period.
Under this methodology, points are assigned to a SNF based on its performance across six measures: (1) case-mix adjusted total nurse staffing levels (including registered nurses, licensed practical nurses, and nursing aides), measured by hours per resident per day; (2) case-mix adjusted registered nurse staffing levels, measured by hours per resident per day; (3) case-mix adjusted total nurse staffing levels (including registered nurses, licensed practical nurses, and nursing aides), measured by hours per resident day on the weekend; (4) total nurse turnover, defined as the percentage of nursing staff that left the nursing home over a 12-month period; (5) registered nurse turnover, defined as the percentage of registered nursing staff that left the nursing home over a 12-month period; and (6) administrator turnover, defined as the percentage of administrators that left the nursing home over a 12-month period.
The increase includes a 6.4% net market basket update to the payment rates of 3.0%, plus a 3.6% market basket forecast error adjustment, less a 0.2% productivity adjustment, as well as a negative 2.3% in the FY 2024 SNF PPS rates due to the second phase of the Patient Driven Payment Model (PDPM) parity adjustment recalibration.
The increase included a 6.4% net market basket update to the payment rates of 3.0%, plus a 3.6% market basket forecast error adjustment, less a 0.2% productivity adjustment, as well as a negative 2.3% in the FY 2024 SNF PPS rates due to the second phase of the Patient Driven Payment Model (PDPM) parity adjustment recalibration.
ITEM 1. BUSINESS Founded in 1999, The Ensign Group, Inc. ("Ensign") is a holding company with independent subsidiaries that provide skilled nursing, senior living and rehabilitative services, as well as other ancillary businesses (including mobile diagnostics and medical transportation), in 13 states.
ITEM 1. BUSINESS Founded in 1999, The Ensign Group, Inc. (Ensign) is a holding company with independent subsidiaries that provide skilled nursing, senior living and rehabilitative services, as well as other ancillary businesses (including mobile diagnostics and medical transportation), in 15 states.
Additionally, we encourage and provide ongoing education classes for our clinical staff to maintain licensing and increase the breadth of their knowledge and expertise. We believe that our commitment to, and substantial investment in, ongoing education will further strengthen the quality of our operational leaders and staff, and the quality of the care they provide to our patients and residents.
We also encourage and provide ongoing education classes for our clinical staff to maintain licensing and increase the breadth of their knowledge and expertise. We believe that our commitment to, and substantial investment in, ongoing education will further strengthen the quality of our operational leaders and staff, and the quality of the care they provide to our patients and residents.
For the year ended December 31, 2023, approximately 60.0% of our total expenses were payroll related. Periodically, market forces, which vary by region, require that we increase wages in excess of general inflation or in excess of increases in reimbursement rates we receive.
For the year ended December 31, 2024, approximately 60.0% of our total expenses were payroll related. Periodically, market forces, which vary by region, require that we increase wages in excess of general inflation or in excess of increases in reimbursement rates we receive.
Part B Rehabilitation Requirements Some of our revenue is paid by the Medicare Part B program under a fee schedule. Part B services are limited with a payment cap by combined speech-language pathology services (SLP), physical therapy (PT) services and a separate annual cap for occupational therapy (OT) services.
Part B Rehabilitation Requirements — A portion of our revenue is paid by the Medicare Part B program under a fee schedule. Part B services are limited with a payment cap by combined speech-language pathology services (SLP), physical therapy (PT) services and a separate annual cap for occupational therapy (OT) services.
Proposed, Anticipated and Recently Issued Rulemaking and Administrative Actions The federal government, through CMS rulemaking, Presidential executive actions or Congressional legislation, and state and local governments have recently released the following proposed rulemaking or administrative actions that may have an impact on our independent Skilled Nursing Facilities (SNFs) or assisted living facilities: Biden-Harris Administration's Nursing Home Care Priorities — The Biden-Harris Administration is seeking reform around reimbursement, staffing levels, standards of care, increased transparency and public disclosure of ownership, and enhanced civil remedies as a means of enforcement against those facilities that do not satisfy CMS’s standards.
Proposed, Anticipated and Recently Issued Rulemaking and Administrative Actions The federal government, through CMS rulemaking, Presidential executive actions or Congressional legislation, and state and local governments have recently released the following proposed rulemaking or administrative actions that may have an impact on our independent Skilled Nursing Facilities (SNFs) or Assisted Living Facilities (ALFs): Biden-Harris Administration's Nursing Home Care Priorities — The Biden-Harris Administration sought reform around reimbursement, staffing levels, standards of care, increased transparency and public disclosure of ownership, and enhanced civil remedies as a means of enforcement against those facilities that do not satisfy CMS’s standards.
Sanctions such as denial of payment for new admissions often are scheduled to go into effect before surveyors return to verify compliance. Generally, if the surveyors confirm that the facility is in compliance upon their return, the sanctions never take effect.
Sanctions such as denial of payment for new admissions often are scheduled to go into effect before surveyors return to verify compliance. Generally, if the surveyors confirm that the facility is in compliance upon their re-evaluation, the sanctions never take effect.
The NST measure uses facility-reported, electronic data from CMS’ Payroll-Based Journal (PBJ) system to calculate annual turnover rates for nursing staff, including RNs, LPNs, and nurse assistants. Facilities would begin reporting this measure in FY 2024, with payment effects beginning in FY 2026. 16 Table of Contents The NST measure looks at six consecutive quarters of data.
The NST measure uses facility-reported, electronic data from CMS’ Payroll-Based Journal (PBJ) system to calculate annual turnover rates for nursing staff, including RNs, LPNs, and nurse assistants. Facilities would begin reporting this measure in FY 2024, with payment effects beginning in FY 2026. The NST measure looks at six consecutive quarters of data.
The caps are separate as to each claim, meaning that there is one cap for negligence and one cap for wrongful death. The new limits on non-economic damages apply prospectively to lawsuits filed on and after January 1, 2023. On September 27, 2022, California’s Governor signed into law the Skilled Nursing Facility Ownership and Management Reform Act of 2022.
The caps are separate as to each claim, meaning that there is one cap for negligence and one cap for wrongful death. The new limits on non-economic damages apply prospectively to lawsuits filed on and after January 1, 2023. In 2022, California’s Governor signed into law the Skilled Nursing Facility Ownership and Management Reform Act of 2022.
Many of our operations already participate in value-based initiatives and models. With our focus on quality care and strong clinical outcomes, Ensign is well-positioned to benefit from these outcome-based payment models. We believe the post-acute industry has been and will continue to be impacted by several other trends.
Many of our operations already participate in value-based initiatives and models. With our focus on quality care and strong clinical outcomes, we are well-positioned to benefit from these outcome-based payment models. We believe the post-acute industry has been and will continue to be impacted by several other trends.
CMS annually adjusts its payment rules for SNFs using the SNF-VBP Program. The program also introduced quality measures to assess how health information is shared and adopted a number of standardized patient assessment data elements that assess factors such as cognitive function and mental status, special services and social determinants of health.
CMS annually adjusts its payment rules for SNFs using the SNF-VBP Program. The program also introduced quality measures to assess how health information is shared and adopted several standardized patient assessment data elements that assess factors such as cognitive function and mental status, special services and social determinants of health.
These bills reason that the proposed minimum staffing standard would endanger rural nursing facilities, subjecting them to potential fines and closures for failure to comply and might require them to discharge residents or limit the number of residents they accept in an effort to meeting the requirements of the bill.
These bills reason that the minimum staffing standard would endanger rural nursing facilities, subjecting them to potential fines and closures for failure to comply and might require them to discharge residents or limit the number of residents they accept in an effort to meet the requirements of the bill.
During the PHE, CMS added certain PT and OT services to the list of Medicare-covered telehealth services on a temporary basis, some of which were made permanent for use and new codes were added for PT, OT, or SLP telehealth services—including some “sometimes therapy” codes that were not subject to MPPR.
During the Public Health Emergency (PHE), CMS added certain PT and OT services to the list of Medicare-covered telehealth services on a temporary basis, some of which were made permanent for use and new codes were added for PT, OT, or SLP telehealth services—including some “sometimes therapy” codes that were not subject to MPPR.
We continually monitor these developments so we can respond to the changing regulatory environment impacting our business. Requirements of Participation CMS has requirements that providers, including SNFs, must meet in order to participate in the Medicare and Medicaid Programs. Some of these requirements can be burdensome and costly.
We continually monitor these developments so we can respond to the changing regulatory environment impacting our business. 23 Table of Contents Requirements of Participation CMS has requirements that providers, including SNFs, must meet in order to participate in the Medicare and Medicaid Programs. Some of these requirements can be burdensome and costly.
CMS can recover overpayments from health care providers up to six years following the year in which payment was made. In 2021, the OIG released the result of an audit finding that Medicare overpaid millions of dollars for chronic care management (CCM) services.
CMS can recover overpayments from health care providers up to six years following the year in which payment was made. 24 Table of Contents In 2021, the OIG released the result of an audit finding that Medicare overpaid millions of dollars for chronic care management (CCM) services.
We have many training programs at all levels such as our CEO in Training, Director of Nursing in Training, Director of Rehab in Training, nursing certified assistant schools, weekly culture trainings, boot camps and annual meetings, where we focus on both career and professional development.
Training and Development — We provide training and development to all employees. We have many training programs at all levels such as our CEO in Training, Director of Nursing in Training, Director of Rehab in Training, nursing certified assistant schools, weekly culture trainings, boot camps and annual meetings, where we focus on both career and professional development.
Elevate Charities is a non-profit organization that is dedicated to elevating the condition and quality of life for members of the senior healthcare community - employees, caregivers, family members, patients and residents. Elevate Charities has three unique funds: Heritage Fund, Heritage Scholarship Fund and the Emergency Fund.
We partner with Elevate Charities, a non-profit organization that is dedicated to elevating the condition and quality of life for members of the senior healthcare community, employees, caregivers, family members, patients and residents. Elevate Charities has three unique funds: Heritage Fund, Heritage Scholarship Fund and the Emergency Fund.
The Bipartisan Budget Act of 2018 (BBA) establishes coding modifier requirements to obtain payments beyond certain payment thresholds, discussed below and reaffirms the specific $3,000 claim audit threshold requirements for Medicare Administrative Contractors. For PT and SLP combined the threshold for coding modifier requirements was $2,230 for CY 2023 with the same threshold for OT services.
The Bipartisan Budget Act of 2018 (BBA) establishes coding modifier requirements to obtain payments beyond certain payment thresholds, discussed below and reaffirms the specific $3,000 claim audit threshold requirements for Medicare Administrative Contractors. For PT and SLP combined the threshold for coding modifier requirements was $2,330 for CY 2024 with the same threshold for OT services.
Once administrators are licensed and assigned to an operation, they continue to learn and develop in our operational Chief Executive Officer Program (CEO Program), which facilitates the continued development of these talented business leaders into outstanding operational chief executive officers, through regular peer review, our Ensign University and on-the-job training.
Once administrators are licensed and assigned to an operation, they continue to learn and develop in our operational Chief Executive Officer Program (CEO Program), which facilitates the continued development of these talented business leaders into outstanding operational chief executive officers, through regular peer review, our leadership development tools and on-the-job training.
The following charts sets forth our total service revenue by payor source generated by our consolidated operations and skilled services segment as a percentage of total revenue for the year ended December 31, 2023 and 2022, respectively: 7 Table of Contents CONSOLIDATED SERVICE REVENUE BY PAYOR SKILLED SERVICES REVENUE BY PAYOR Payor Sources as a Percentage of Skilled Services — The following table sets forth our percentage of skilled nursing patient days by payor source: Year Ended December 31, 2023 2022 Percentage of Skilled Nursing Days: Medicare 12.3 % 13.5 % Managed care 13.0 13.1 Other skilled 5.1 5.2 SKILLED MIX 30.4 31.8 Private and other payors 11.0 10.3 Medicaid 58.6 57.9 TOTAL SKILLED NURSING 100.0 % 100.0 % 8 Table of Contents REIMBURSEMENT FOR SPECIFIC SERVICES Reimbursement for Skilled Services — Skilled nursing facility revenue is primarily derived from Medicaid, Medicare, managed care and private payors.
The following charts sets forth our total service revenue by payor source generated by our consolidated operations and skilled services segment as a percentage of total revenue for the years ended December 31, 2024 and 2023, respectively: 7 Table of Contents CONSOLIDATED SERVICE REVENUE BY PAYOR SKILLED SERVICES REVENUE BY PAYOR Payor Sources as a Percentage of Skilled Services — The following table sets forth our percentage of skilled nursing patient days by payor source: Year Ended December 31, 2024 2023 Percentage of Skilled Nursing Days: Medicare 11.4 % 12.3 % Managed care 13.4 13.0 Other skilled 5.1 5.1 SKILLED MIX 29.9 30.4 Private and other payors 10.7 11.0 Medicaid 59.4 58.6 TOTAL SKILLED NURSING 100.0 % 100.0 % 8 Table of Contents REIMBURSEMENT FOR SPECIFIC SERVICES Reimbursement for Skilled Services — Skilled nursing facility revenue is primarily derived from Medicaid, Medicare, managed care and private payors.
We generally have between 25 and 30 prospective administrators progressing through the various stages of this training program, which is generally much more rigorous, hands-on and intensive than the minimum 1,000 hours of training mandated by the licensing requirements of most states where we do business.
We generally have between 55 and 65 prospective administrators progressing through the various stages of this training program, which is generally much more rigorous, hands-on and intensive than the minimum 1,000 hours of training mandated by the licensing requirements of most states where we do business.
The Inflation Reduction Act of 2022 (IRA), which continued and expanded certain provisions of the ACA, extended the premium subsidies paid by the federal government, until the end of 2024, resulting in subsidies being available to offset or reduce the costs of private health insurance policies for qualifying individuals.
The IRA, which continued and expanded certain provisions of the ACA, extended the premium subsidies paid by the federal government, until the end of 2024, resulting in subsidies being available to offset or reduce the costs of private health insurance policies for qualifying individuals.
On October 1, 2023, a significant change impacting the QM category was a shift in focus from a resident's functional status to their functional abilities and goals, commonly referred to as the Minimum Data Set (MDS) Section G to Section GG. The transition will result in numerous QM modifications and changes which will impact the Five-Star rating.
On October 1, 2023, a significant change impacting the QM category was a shift in focus from a resident's functional status to their functional abilities and goals, commonly referred to as the Minimum Data Set (MDS) Section G to Section GG. The transition resulted in numerous QM modifications and changes which impacted the Five-Star rating.
The remainder of our revenue is primarily generated from our real estate properties, senior living services and other ancillary services. OPERATIONS Overview As of December 31, 2023, we offered skilled nursing, senior living and rehabilitative care services through 297 skilled nursing and senior living facilities.
The remainder of our revenue is primarily generated from our real estate properties, senior living services and other ancillary services. OPERATIONS Overview As of December 31, 2024, we offered skilled nursing, senior living and rehabilitative care services through 327 skilled nursing and senior living facilities.
As part of this change, starting in April 2024, CMS will freeze the associated new and modified quality measures as part of the transition on the Nursing Home Compare website. Starting in October 2024, CMS will replace the short-stay functionality QM with the new cross-setting functionality QM, which is used in the SNF Quality Reporting Program (QRP).
As part of this change, in April 2024, CMS froze the associated new and modified quality measures as part of the transition on the Nursing Home Compare website. Starting in October 2024, CMS replaced the short-stay functionality QM with the new cross-setting functionality QM, which is used in the SNF Quality Reporting Program (QRP).
Furthermore, our leaders are motivated to help local operations within a defined “cluster” and "market," which is a group of geographically proximate operations that share clinical best practices, real-time financial data and other resources and information. 10 Table of Contents Staff and Leadership Development — We have a company-wide commitment to ongoing education, training and professional development.
Furthermore, our leaders are motivated to help local operations within a defined “cluster” and "market," which is a group of geographically proximate operations that share clinical best practices, real-time financial data and other resources and information. 10 Table of Contents Staff and Leadership Development — We have a culture that believes ongoing education, training and professional development is essential.
Through the end of coverage year 2024, certain of our Part B services provided through telehealth will still qualify for Medicare reimbursement based on flexibility first provided under the Emergency Waivers, which added physical therapy, occupational therapy and speech-language pathology to the list of approved telehealth Providers for the Medicare Part B programs provided by a SNF.
Through the end of CY 2024, certain of our Part B services provided through telehealth would qualify for Medicare reimbursement based on flexibility first provided under the Emergency Waivers, which added physical therapy, occupational therapy and speech-language pathology to the list of approved telehealth Providers for the Medicare Part B programs provided by a SNF.
During the year ended December 31, 2023, approximately 46.9% and 27.5% of our skilled services revenue was derived from Medicaid and Medicare programs, respectively. Standard Bearer We engage in the acquisition and leasing of skilled nursing and senior living properties.
During the year ended December 31, 2024, approximately 46.9% and 25.9% of our skilled services revenue was derived from Medicaid and Medicare programs, respectively. Standard Bearer We engage in the acquisition and leasing of skilled nursing and senior living properties.
As part of our investment strategy, we also acquire, lease and own healthcare real estate to service the post-acute care continuum through acquisition and investment opportunities in healthcare properties. For the year ended December 31, 2023, we generated approximately 96.0% of our revenue from our skilled nursing facilities.
As part of our investment strategy, we also acquire, lease and own healthcare real estate to service the post-acute care continuum through acquisition and investment opportunities in healthcare properties. For the year ended December 31, 2024, we generated approximately 95.7% of our revenue from our skilled nursing facilities.
Our average cycle 1 health inspections for all of our facilities, which is based on the latest inspections, is 7.9% better than the national average.
Our average cycle 1 health inspections for all of our facilities, which is based on the latest inspections, is 8.1% better than the national average.
The SNF QRP applies to freestanding SNFs, SNFs affiliated with acute care facilities and all non-critical access hospital swing-bed rural hospitals. These data elements are the subject of frequent change and adjustment. CMS's rulemaking often identifies new data elements to be reported. In July of 2022, CMS announced revisions to calculating its five-star ratings for the Nursing Home Compare website.
The SNF QRP applies to freestanding SNFs, SNFs affiliated with acute care facilities and all non-critical access hospital swing-bed rural hospitals. These data elements are the subject of frequent change and adjustment. CMS's rulemaking often identifies new data elements to be reported. CMS revised the calculation of its five-star ratings for the Nursing Home Compare website.
On February 17, 2023, CMS revised the survey resources that CMS and state surveyors use in evaluating SNFs’ compliance with federal Requirements for Participation. This revision incorporated the recent changes to CMS’ focused infection control survey item, which CMS had removed in favor of standard infection control survey measures.
In 2023, CMS revised the survey resources that CMS and state surveyors use in evaluating SNFs’ compliance with federal Requirements for Participation. This revision incorporated changes to CMS’s focused infection control survey item, which CMS had removed in favor of standard infection control survey measures.
Our independent living units are non-licensed independent living apartments in which residents are independent and require no support with the activities of daily living. Our senior living operations comprise approximately 2.0% of our annual revenue. We generate revenue at these units primarily from private pay sources, with a small portion derived from Medicaid or other state-specific programs.
Our independent living units are non-licensed independent living apartments in which residents are independent and require no support with the activities of daily living. Our senior living operations comprise approximately 2.1% of our annual revenue. We generate revenue at these operations primarily from private pay sources, Medicaid and other state-specific programs.
As of December 31, 2023, our real estate portfolio consists of 113 owned facilities, which include properties leased to and operated by third parties and properties we managed and operated.
As of December 31, 2024, our real estate portfolio consists of 129 owned facilities, which include properties leased to and operated by third parties and properties we managed and operated.
We expect that our REIT structure will allow us to expand our real estate footprint while bringing the best operational practices to our own and other operators in the industry. HUMAN CAPITAL At December 31, 2023, we had approximately 35,300 full-time equivalent employees who were employed by our Service Center and our independent subsidiaries.
We expect that our REIT structure will allow us to expand our real estate footprint while bringing the best operational practices to our own and other operators in the industry. 13 Table of Contents HUMAN CAPITAL At December 31, 2024, we had approximately 39,300 full-time equivalent employees who were employed by our Service Center and our independent subsidiaries.
During the year ended December 31, 2023, we generated rental revenues of $82.5 million, of which $66.7 million was derived from our independent subsidiaries, and therefore eliminated in consolidation. 2 Table of Contents Other Revenue from our senior living operations, mobile diagnostics, transportation, other real estate and other ancillary operations comprise approximately 4.2% of our annual revenue.
During the year ended December 31, 2024, we generated rental revenues of $95.1 million, of which $78.1 million was derived from our independent subsidiaries, and therefore eliminated in consolidation. 2 Table of Contents Other Revenue from our senior living operations, mobile diagnostics, transportation, other real estate and other ancillary operations comprise approximately 4.5% of our annual revenue.
Skilled Services As of December 31, 2023, our skilled nursing companies provided skilled nursing care at 286 operations, with 30,602 operational beds, in Arizona, California, Colorado, Idaho, Iowa, Kansas, Nebraska, Nevada, South Carolina, Texas, Utah, Washington and Wisconsin. We provide short and long-term nursing care services for patients with chronic conditions, prolonged illness, and the elderly.
Skilled Services As of December 31, 2024, our skilled nursing companies provided skilled nursing care at 316 operations, with 33,547 operational beds, in Arizona, California, Colorado, Idaho, Iowa, Kansas, Nebraska, Nevada, South Carolina, Tennessee, Texas, Utah, Washington and Wisconsin. We provide short and long-term nursing care services for patients with chronic conditions, prolonged illness, and the elderly.
As of December 31, 2023, we have expanded to 297 facilities with an aggregate of 30,602 operational skilled nursing beds and 3,121 senior living units, through both long-term leases and real estate purchases. We believe our experience in acquiring these operations and our demonstrated success in significantly improving their operations enables us to consider a broad range of acquisition targets.
As of December 31, 2024, we have expanded to 327 facilities with an aggregate of 33,547 operational skilled nursing beds and 3,088 senior living units, through both long-term leases and real estate purchases. We believe our experience in acquiring these operations and our demonstrated success in significantly improving their operations enables us to consider a broad range of acquisition targets.
Therefore, depending on the changes, we may experience periods of time where the number of facilities with 4 or 5-Star ratings decline. 4 Table of Contents The table below summarizes the number of our facilities with 4 and 5-Star ratings since 2019: As of December 31, 2019 2020 2021 2022 2023 4 and 5-Star Quality Rated skilled nursing facilities 102 116 114 113 134 Above-Average Ratings — Additionally, despite the fact that Ensign’s acquisition of facilities with 1 or 2-Star ratings skews our company-wide ratings, our mean score on the Five-Star Quality Rating System is 65.4%, which exceeds the national average score of 57.2%.
Therefore, depending on the changes, we may experience periods of time where the number of facilities with 4 or 5-Star ratings decline. 4 Table of Contents The table below summarizes the number of our facilities with 4 and 5-Star ratings since 2020: As of December 31, 2020 2021 2022 2023 2024 4 and 5-Star Quality Rated skilled nursing facilities 116 114 113 130 129 Above-Average Ratings — As of October 2024, despite the fact that Ensign’s acquisition of facilities with 1 or 2-Star ratings skews our company-wide ratings, our mean score on the Five-Star Quality Rating System is 62.5%, which exceeds the national average score of 56.9%.
OPERATION EXPANSIONS During the year ended December 31, 2023, we expanded through a combination of long-term leases and real estate purchases, with the addition of 25 stand-alone skilled nursing operations and one campus operation.
OPERATION EXPANSIONS During the year ended December 31, 2024, we expanded through a combination of long-term leases and real estate purchases, with the addition of 28 stand-alone skilled nursing operations and three campus operations.
Further, non-physician primary care providers can provide certain services in place of primary care physicians. On February 1, 2023, CMS issued its final rule, which takes effect on April 3, 2023, requiring the collection of data by Medicare Advantage organizations and their service providers and the submission of data to CMS for risk adjustment data validation (RADV) audits.
Further, non-physician primary care providers can provide certain services in place of primary care physicians. The final rule, which went into effect on April 3, 2023, requires the collection of data by Medicare Advantage organizations and their service providers and the submission of data to CMS for risk adjustment data validation (RADV) audits.
State Medicaid programs are required to enact an anti-kickback statute. Many states in which our independent subsidiaries operate have adopted or are considering similar legislative proposals, some of which extend beyond that state's Medicaid program, to prohibit the payment or receipt of remuneration for the referral of patients regardless of the source of payment for the care.
Many states in which our independent subsidiaries operate have adopted or are considering similar legislative proposals, some of which extend beyond that state's Medicaid program, to prohibit the payment or receipt of remuneration for the referral of patients regardless of the source of payment for the care.
On October 24, 2023, the HCBS Relief Act was introduced to provide additional funds to states to stabilize their HCBS service delivery networks, recruit and retain HCBS direct care workers, and meet long-term service and support needs of people eligible for Medicaid home and community-based services.
In addition, the HCBS Relief Act introduced in 2023, provides additional funds to states to stabilize their HCBS service delivery networks, recruit and retain HCBS direct care workers, and meet long-term service and support needs of people eligible for Medicaid home and community-based services.
Of these additions, Standard Bearer acquired the real estate of three of the stand-alone skilled nursing operations and one campus operation, which were leased back to Ensign's independent subsidiaries. These new operations added a total of 2,483 operational skilled nursing beds and 94 operational senior living units to be operated by our independent subsidiaries.
Of these additions, Standard Bearer acquired the real estate of 11 of the stand-alone skilled nursing operations and three campus operations, which were leased back to Ensign's independent subsidiaries. These new operations added a total of 3,030 operational skilled nursing beds and 218 operational senior living units to be operated by our independent subsidiaries.
The information contained in, or that can be accessed through, either of the foregoing websites does not constitute a part of this Annual Report on Form 10-K. GOVERNMENT REGULATION General Healthcare is an area of extensive and frequent regulatory change.
For additional information on Elevate Charities, please visit www.elevatecharities.org. The information contained in, or that can be accessed through, either of the foregoing websites does not constitute a part of this Annual Report on Form 10-K. GOVERNMENT REGULATION General Healthcare is an area of extensive and frequent regulatory change.
Of the 30 real estate operations leased to third-party operators, one senior living operation is located on the same real estate property as a skilled nursing facility that we own and operate.
Of the 33 third-party operations, one senior living operation is located on the same real estate property as a skilled nursing operation that we own and operate.
We believe that our ability to attract and retain qualified professional clinical staff stems from our ability to offer attractive wage and benefits packages, a high level of employee training, an empowered culture that provides incentives for individual efforts and a quality work environment. Diversity and Inclusion — We value diversity in our recruiting, hiring and career development practices.
We believe that our ability to attract and retain qualified professional clinical staff stems from our ability to offer attractive wage and benefits packages, a high level of employee training, an empowered culture that provides incentives for individual efforts and a quality work environment.
Specifically, this final rule adopts four new measures: the nursing staff turnover measure, the discharge function score measure, the long stay hospitalization measure per 1,000 resident days and the percent of residents experiencing one or more falls with a major injury (long stay); the existing SNF 30-day all-cause readmission measure (SNFRM) is replaced with the SNF within stay potentially preventable readmissions (SNF WS PPR) measure beginning in FY 2028.
Additionally, the SNF PPS FY 2024 Final Rule made changes to the SNF VBP Program, specifically adopting four new measures: the nursing staff turnover measure, the discharge function score measure, the long stay hospitalization measure per 1,000 resident days and the percent of residents experiencing one or more falls with a major injury (long stay); the existing SNF 30-day all-cause readmission measure (SNFRM) is replaced with the SNF within stay potentially preventable readmissions measure beginning in FY 2028.
As of December 31, 2023, our real estate portfolio within Standard Bearer is comprised of 108 real estate properties located in Arizona, California, Colorado, Idaho, Kansas, Nevada, South Carolina, Texas, Utah, Washington and Wisconsin. Of these properties, 79 are leased to our independent subsidiaries and 30 are leased to operations wholly-owned and managed by third-party operators.
As of December 31, 2024, our real estate portfolio within Standard Bearer is comprised of 124 real estate properties located in Arizona, California, Colorado, Idaho, Iowa, Kansas, Nebraska, Nevada, South Carolina, Tennessee, Texas, Utah, Washington and Wisconsin. Of these properties, 92 are leased to our independent subsidiaries and 33 are leased to operations wholly-owned and managed by third-party operators.
This final rule also updates the SNF QRP for FY 2024 and future years, including the adoption of two new quality reporting measures, modification of one measure and removal of three measures resulting in public reporting of four QRP measures. Additionally, the SNF PPS FY 2024 Final Rule makes changes to the SNF VBP Program.
In addition, this final rule also updates the SNF QRP for FY 2024 and future years, including the adoption of two new quality reporting measures, modification of one measure and removal of three measures resulting in public reporting of four QRP measures.
These inquiries may originate from HHS, Office of the Inspector General (OIG), state Medicaid agencies, state Attorney Generals, local and state ombudsman offices and CMS Recovery Audit Contractors, among other agencies.
These inquiries may originate from the Department of Health and Human Services (HHS), Office of the Inspector General (OIG), state Medicaid agencies, state Attorney Generals, local and state ombudsman offices and Centers for Medicare and Medicaid Services (CMS) Recovery Audit Contractors, among other agencies.
The final rule for the fiscal year 2023 SNF PPS also provided for SNF-VBP program expansion beyond the use of its single, all-cause hospital readmission measure to determine payment, with the inclusion of measures in fiscal year 2026 for SNF healthcare associated infections requiring hospitalization (SNF HAI) and total nursing hours per resident day measures and in fiscal year 2027, the discharge to community post-acute care measure for SNFs, which assess the rate of successful discharges to the community from a SNF setting. 20 Table of Contents The SNF PPS FY 2024 Final Rule elected to replace the SNFRM measure with the SNF within-stay (WS) potentially preventable readmission (PPR) measure beginning in the FY 2028 program year.
The final rule for the fiscal year 2023 SNF PPS also provided for SNF-VBP program expansion beyond the use of its single, all-cause hospital readmission measure to determine payment, with the inclusion of measures in fiscal year 2026 for SNF healthcare associated infections requiring hospitalization (SNF HAI) and total nursing hours per resident day measures and in fiscal year 2027, the discharge to community post-acute care measure for SNFs, which assess the rate of successful discharges to the community from a SNF setting.
CMS also revised the nursing-home level exclusion criteria used on the administrator turnover measure, adding information regarding its calculation of the staff turnover measure and publishing an updated ratings table, which identifies the points needed for each nursing facility to obtain certain star ratings within its state.
In 2023, CMS revised the nursing-home level exclusion criteria used on the administrator turnover measure, adding information regarding the staff turnover measure and an updated ratings table, which identifies the points needed for each nursing facility to obtain certain star ratings.
Reimbursement for Senior Living — Senior living facility revenue is primarily derived from private pay patients at rates we established, with only a small portion of such revenue derived from state-specific programs such as Medicaid.
Reimbursement for Senior Living — Senior living facility revenue is primarily derived from private pay patients at rates we established, with the secondary source of revenue derived from state-specific programs such as Medicaid.
For the facilities that we acquired from 2002 through 2023, the aggregate EBITDAR as a percentage of revenue improved from 15.9% during the first full three months of operations to 17.6% during the thirteenth through fifteenth months of operation and to 18.9% during the 45th quarter of operation.
For the facilities that we acquired from 2002 through 2024, the aggregate EBITDAR as a percentage of revenue improved from 13.3% during the first full three months of operations to 16.5% during the thirteenth through fifteenth months of operation and to 18.6% during the 45th quarter of operation.
Of the 30 real estate operations leased to third-party operators, one senior living facility is located on the same real estate property as a skilled nursing facility that we own and operate.
Of the 33 third-party operations, one senior living operation is located on the same real estate property as a skilled nursing operation that we own and operate.
The team advises our local field operators on best practices and identifies opportunities for them to assess priorities of projects that may be chosen to be executed. • Overseeing environmental programs which include the evaluation and installation of LED lighting, solar panel, improved doors and insulation, automated HVAC controls and thermal efficiency projects related to micro-turbine, demand control ventilation. • Development of target goals for reduction of carbon emissions, savings and ENERGY STAR scores. • Tracking and monitoring of currently available environmental metrics such as utility usage and development of an energy management system that tracks greenhouse gas emissions and more. • Preparing for applicable environmental audits in the future. 29 Table of Contents Our business is subject to a variety of federal, state and local environmental laws and regulations.
The team advises our local field operators on best practices and identifies opportunities for them to assess priorities of projects. • Overseeing environmental programs which include the evaluation and installation of LED lighting, solar panel, improved doors and insulation, automated HVAC controls and thermal efficiency projects related to micro-turbine, and demand control ventilation to name a few. • Development of targets for reduction of carbon emissions, and increase ENERGY STAR scores. • Tracking and monitoring of currently available environmental metrics such as utility usage and development of an energy management system that tracks greenhouse gas emissions and more. • Preparing for applicable environmental audits in the future.
REGULATIONS SPECIFIC TO SENIOR LIVING COMMUNITIES AND ANCILLARY SERVICES As previously mentioned, senior living services revenue (approximately 2.0% of total revenue) is primarily derived from private pay residents, with a small portion of senior living revenue derived from Medicaid funds. Thus, some of the regulations discussed above applicable to Medicaid providers, also apply to senior living.
REGULATIONS SPECIFIC TO SENIOR LIVING COMMUNITIES AND ANCILLARY SERVICES As previously mentioned, senior living services revenue, which accounted for 2.1% of total revenue, is primarily derived from private pay residents and senior living revenue derived from Medicaid funds. Thus, some of the regulations discussed above applicable to Medicaid providers, also apply to senior living.
The following table summarizes cumulative skilled nursing and senior living operations, operational skilled nursing beds and senior living unit counts at the end of 2013 and each of the last five years to reflect our growth over a ten-year period and five-year period as a result of the acquisition of these facilities: December 31, 2013 (2) 2019 (1) 2020 2021 2022 2023 Cumulative number of skilled nursing and senior living operations 119 223 228 245 271 297 Cumulative number of operational skilled nursing beds 10,949 22,625 23,172 25,032 28,130 30,602 Cumulative number of senior living units 1,968 2,154 2,254 2,237 3,021 3,121 (1) Number of operational beds and number of operations for 2019 include operational beds and operations that we no longer operated.
The following table summarizes cumulative skilled nursing and senior living operations, operational skilled nursing beds and senior living unit counts for each of the last five years to reflect our growth over a five-year period as a result of the acquisition of these facilities: December 31, 2020 (1) 2021 (1) 2022 (1) 2023 (1) 2024 Cumulative number of skilled nursing and senior living operations 228 245 271 297 327 Cumulative number of operational skilled nursing beds 23,172 25,032 28,130 30,602 33,547 Cumulative number of senior living units 2,254 2,237 3,021 3,121 3,088 (1) Number of operational beds and number of operations for 2020-2023 include operational beds and operations that we no longer operate.
Senior Living — As of December 31, 2023, we had an aggregate of 3,121 senior living units across 38 operations, of which 27 were located on the same site location as our skilled nursing care operations.
Senior Living — As of December 31, 2024, we had an aggregate of 3,088 senior living units across 41 operations, of which 30 were located on the same site location as our skilled nursing care operations.
Many states also have a false claim prohibition that mirrors or closely tracks the federal FCA. 23 Table of Contents Federal law also provides that the OIG has the authority to exclude individuals and entities from federally funded health care programs on a number of grounds, including, but not limited to, certain types of criminal offenses, licensure revocations or suspensions and exclusion from state or other federal healthcare programs.
Federal law also provides that the OIG has the authority to exclude individuals and entities from federally funded health care programs on a number of grounds, including, but not limited to, certain types of criminal offenses, licensure revocations or suspensions and exclusion from state or other federal healthcare programs.
These provisions incentivize the training of caregivers and provide additional funds to offset the costs of training these caregivers through participation in licensed healthcare providers’ course of care for patients and residents. For PT and SLP combined, the threshold for coding modifier requirements increases to $2,330 for CY 2024 with the same threshold for OT services.
These provisions incentivize the training of caregivers and provide additional funds to offset the costs of training these caregivers. For PT and SLP combined, the threshold for coding modifier requirements increases to $2,330 for CY 2024 with the same threshold for OT services.
On July 29, 2022, CMS updated the Medicare Requirements of Participation for SNFs, which includes the modification of requirements associated with a facility's physical environment to minimize unnecessary renovation expenses in order to avoid closure of SNFs due to the related expense.
In 2022, CMS updated the Medicare Requirements of Participation for SNFs, to modify the requirements associated with a facility's physical environment to minimize unnecessary renovation expenses and avoid closure of SNFs due to the related expense.
We are committed to growing our real estate portfolio, which we believe will further enhance our earnings and maximize long-term shareholder value. 1 Table of Contents To continue with our growth strategy on our real estate portfolio, in January 2022, we formed Standard Bearer. Standard Bearer owns and manages our real estate business.
We manage and operate the remaining real estate properties, including the Service Center's California location. We are committed to growing our real estate portfolio, which we believe will further enhance our earnings and maximize long-term shareholder value. 1 Table of Contents To continue with our growth strategy on our real estate portfolio, in January 2022, we formed Standard Bearer.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeChanges to the Medicare program that could adversely affect our business could include, but are not limited to the following: • administrative or legislative changes to base rates or the bases for payment; • limits on the services or types of providers for which Medicare will provide reimbursement; • changes in methodology for patient assessment and/or determination of payment levels; • changes in staff requirements (i.e., requiring all workers to be vaccinated against COVID-19 and receive booster injections for those vaccinations) as a condition of payment or eligibility for Medicare reimbursement (See also, Item 1., under Government Regulation ); • the reduction or elimination of annual rate increases, or the end of the reduced payments deferment (See also, Item 1., under Government Regulation ); and • an increase in co-payments or deductibles payable by beneficiaries.
Biggest changeChanges to the Medicare program that could adversely affect our business could include, but are not limited to the following: • administrative or legislative changes to base rates or the bases for payment, including changes to the rates at which Medicare will reimburse services; • limits on the services or types of providers for which Medicare will provide reimbursement; • changes in methodology for patient assessment and/or determination of payment levels; • changes in staff requirements as a condition of payment or eligibility for Medicare reimbursement (See also, Item 1., under Government Regulation ); • the reduction or elimination of annual rate increases, implementation of reimbursement decreases, or the end of the reduced payments deferment (See also, Item 1., under Government Regulation ); and • an increase in co-payments or deductibles payable by beneficiaries. 35 Table of Contents Among the changes being implemented by CMS are provisions of the IMPACT Act, which imposes a stringent timeline for implementing benchmark quality measures and data metrics across facilities that include SNFs.
Similarly, a change in the enforceability of arbitration provisions between SNFs and senior living facilities and residents and patients may affect the risks we face from claims and potential litigation. 31 Table of Contents • If our regular internal investigations into the care delivery, recordkeeping and billing processes of our independent subsidiaries detect instances of noncompliance, efforts to correct such non-compliance could materially decrease our revenue. • We may be unable to complete future facility or business acquisitions at attractive prices or at all, or may elect to dispose of underperforming or non-strategic independent subsidiaries, either of which could decrease our revenue. • We may not be able to successfully integrate acquired facilities and businesses into our operations, or we may be exposed to costs, liabilities and regulatory issues that may adversely affect our operations. • In undertaking acquisitions, we may be adversely impacted by costs, liabilities and regulatory issues that may adversely affect our operations. • If we do not achieve or maintain competitive quality of care ratings from CMS or private organizations engaged in similar monitoring activities, our business may be negatively affected. • If we are unable to obtain insurance, or if insurance becomes more costly for us to obtain, our business may be adversely affected, and our self-insurance programs may expose us to significant and unexpected costs and losses. • The geographic concentration of our independent subsidiaries could leave us vulnerable to economic downturn, regulatory changes or acts of nature in those areas. • The actions of a national labor union that has pursued a negative publicity campaign criticizing our business in the past may adversely affect our revenue and our profitability. • The risks associated with leased property where our independent subsidiaries operate could adversely affect our business, financial position or results of operations. • Failure to generate sufficient cash flow to cover required payments or meet operating covenants under our long-term debt, mortgages and long-term operating leases could result in defaults under such agreements and cross-defaults under other debt, mortgage or operating lease arrangements, which could harm our independent subsidiaries and cause us to lose facilities or experience foreclosures. • A continued housing slowdown or housing downturn could decrease demand for senior living services. • As we continue to acquire and lease real estate assets, we may not be successful in identifying and consummating these transactions. • As we expand our presence in other relevant healthcare industries, we would become subject to risks in a market in which we have limited experience. • If our referral sources fail to view us as an attractive skilled nursing provider, or if our referral sources otherwise refer fewer patients, our patient base may decrease. • We may need additional capital to fund our independent subsidiaries and finance our growth, and we may not be able to obtain it on terms acceptable to us, or at all, which may limit our ability to grow. • The condition of the financial markets could limit the availability of debt and equity financing sources to fund the capital and liquidity requirements of our business. • Delays in reimbursement may cause liquidity problems. • The utilization and expansion of managed care organizations may contribute to delays or reductions in our reimbursement, including Managed Medicaid. • Compliance with the regulations of the Department of Housing and Urban Development may require us to make unanticipated expenditures which could increase our costs. • Failure to safeguard our patient trust funds may subject us to citations, fines and penalties. • We are a holding company with no operations and rely upon our multiple independent subsidiaries. • Certain directors who serve on our Board of Directors also serve as directors of Pennant, and ownership of shares of Pennant common stock by our directors and executive officers may create, or appear to create, conflicts of interest. • Standard Bearer's failure to qualify as a REIT may cause it to be subject to U.S. federal income tax.
Similarly, a change in the enforceability of arbitration provisions between SNFs and senior living facilities and residents and patients may affect the risks we face from claims and potential litigation. 33 Table of Contents • If our regular internal investigations into the care delivery, recordkeeping and billing processes of our independent subsidiaries detect instances of noncompliance, efforts to correct such non-compliance could materially decrease our revenue. • We may be unable to complete future facility or business acquisitions at attractive prices or at all, or may elect to dispose of underperforming or non-strategic independent subsidiaries, either of which could decrease our revenue. • We may not be able to successfully integrate acquired facilities and businesses into our operations, or we may be exposed to costs, liabilities and regulatory issues that may adversely affect our operations. • In undertaking acquisitions, we may be adversely impacted by costs, liabilities and regulatory issues that may adversely affect our operations. • If we do not achieve or maintain competitive quality of care ratings from CMS or private organizations engaged in similar monitoring activities, our business may be negatively affected. • If we are unable to obtain insurance, or if insurance becomes more costly for us to obtain, our business may be adversely affected, and our self-insurance programs may expose us to significant and unexpected costs and losses. • The geographic concentration of our independent subsidiaries could leave us vulnerable to economic downturn, regulatory changes or acts of nature in those areas. • The actions of a national labor union that has pursued a negative publicity campaign criticizing our business in the past may adversely affect our revenue and our profitability. • The risks associated with leased property where our independent subsidiaries operate could adversely affect our business, financial position or results of operations. • Failure to generate sufficient cash flow to cover required payments or meet operating covenants under our long-term debt, mortgages and long-term operating leases could result in defaults under such agreements and cross-defaults under other debt, mortgage or operating lease arrangements, which could harm our independent subsidiaries and cause us to lose facilities or experience foreclosures. • A continued housing slowdown or housing downturn could decrease demand for senior living services. • As we continue to acquire and lease real estate assets, we may not be successful in identifying and consummating these transactions. • As we expand our presence in other relevant healthcare industries, we would become subject to risks in a market in which we have limited experience. • If our referral sources fail to view us as an attractive skilled nursing provider, or if our referral sources otherwise refer fewer patients, our patient base may decrease. • We may need additional capital to fund our independent subsidiaries and finance our growth, and we may not be able to obtain it on terms acceptable to us, or at all, which may limit our ability to grow. • The condition of the financial markets could limit the availability of debt and equity financing sources to fund the capital and liquidity requirements of our business. • Delays in reimbursement may cause liquidity problems. • The utilization and expansion of managed care organizations may contribute to delays or reductions in our reimbursement, including Managed Medicaid. • Compliance with the regulations of the Department of Housing and Urban Development may require us to make unanticipated expenditures which could increase our costs. • Failure to safeguard our patient trust funds may subject us to citations, fines and penalties. • We are a holding company with no operations and rely upon our multiple independent subsidiaries. • Certain directors who serve on our Board of Directors also serve as directors of Pennant, and ownership of shares of Pennant common stock by our directors and executive officers may create, or appear to create, conflicts of interest. • Standard Bearer's failure to qualify as a REIT may cause it to be subject to U.S. federal income tax.
These enhanced penalties and enforcement activities precedes greater focus by CMS in obtaining oversight over SFFs, and continuing that oversight even after those SFFs improve, and subjecting them to more exacting and routine oversight. The likely result may be more frequent surveys of our independent subsidiaries, with more substantial penalties, fines and consequences if they do not perform well.
These enhanced penalties and enforcement activities precedes greater focus by CMS in obtaining oversight over SFFs, and continuing that oversight even after those SFFs improve, and subjecting them to more exacting and routine oversight. The likely result may be more frequent surveys of our independent subsidiaries, with more substantial penalties, fines and other consequences if they do not perform well.
We are continuing our efforts to develop our non-Medicare and non-Medicaid sources of revenue and any changes in payment levels from current or future third-party payors could have a material adverse effect on our business and consolidated financial condition, results of operations and cash flows. Changes in Medicare reimbursements for physician and non-physician services could impact reimbursement for medical professionals.
We are continuing our efforts to develop our non-Medicare and non-Medicaid sources of revenue and any changes in payment levels from current or future third-party payors could have a material adverse effect on our business and consolidated financial condition, results of operations and cash flows. Reductions in Medicare reimbursements for physician and non-physician services could impact reimbursement for medical professionals.
Further, we may incur post-acquisition compliance risk due to the difficulty or impossibility of immediately or quickly bringing non-compliant facilities into full compliance. Diligence materials pertaining to acquisition targets, especially the underperforming facilities that often represent the greatest opportunity for return, are often inadequate, inaccurate or impossible to obtain, sometimes requiring us to make acquisition decisions with incomplete information.
Further, we may incur post-acquisition compliance risk due to the difficulty or impossibility of immediately or quickly bringing non-compliant operations into full compliance. Diligence materials pertaining to acquisition targets, especially the underperforming facilities that often represent the greatest opportunity for return, are often inadequate, inaccurate or impossible to obtain, sometimes requiring us to make acquisition decisions with incomplete information.
If employees decide to unionize, our cost of doing business could increase, and we could experience contract delays, difficulty in adapting to a changing regulatory and economic environment, cultural conflicts between unionized and non-unionized employees, strikes and work stoppages, and we may conclude that affected facilities or operations would be uneconomical to continue operating.
If employees successfully decide to unionize, our cost of doing business could increase, and we could experience contract delays, difficulty in adapting to a changing regulatory and economic environment, cultural conflicts between unionized and non-unionized employees, strikes and work stoppages, and we may conclude that affected facilities or operations would be uneconomical to continue operating.
Some states in which we operate are operating with budget deficits or could have budget deficit in the future, which may delay reimbursement in a manner that would adversely affect our liquidity. In addition, from time to time, procedural issues require us to resubmit or appeal claims before payment is remitted, which contributes to our aged receivables.
Some states in which we operate are operating with budget deficits or could have budget deficits in the future, which may delay reimbursement in a manner that would adversely affect our liquidity. In addition, from time to time, procedural issues require us to resubmit or appeal claims before payment is remitted, which contributes to our aged receivables.
Our independent SNFs are located in the states of Arizona, California, Colorado, Idaho, Iowa, Kansas, Nebraska, Nevada, South Carolina, Tennessee, Texas, Utah, Washington and Wisconsin. All states follow the current federal regulation relative to staffing, which establishes that SNFs are required to staff to meet the needs of the residents present in the facility.
Our independent SNFs are located in the states of Alabama, Arizona, California, Colorado, Idaho, Iowa, Kansas, Nebraska, Nevada, South Carolina, Tennessee, Texas, Utah, Washington and Wisconsin. All states follow the current federal regulation relative to staffing, which establishes that SNFs are required to staff to meet the needs of the residents present in the facility.
As discussed under Item 1., Government Regulation , the Biden-Harris Administration has requested HHS and CMS conduct studies to evaluate potential staffing, data reporting, employee compensation and retention, and resident experience regulations that may result in a reduction of our revenue from Medicare and Medicaid.
As discussed under Item 1., Government Regulation , the Biden-Harris Administration requested HHS and CMS conduct studies to evaluate potential staffing, data reporting, employee compensation and retention, and resident experience regulations that may result in a reduction of our revenue from Medicare and Medicaid.
As discussed in discussed in greater detail in Item 1., under Government Regulation , in October of 2022 CMS updated the SFF program with the intent to reduce the amount of time a SNF spends as an SFF and increase the number of nursing homes that progress through the SFF program.
As discussed in greater detail in Item 1., under Government Regulation , in 2022 CMS updated the SFF program with the intent to reduce the amount of time a SNF spends as an SFF and increase the number of nursing homes that progress through the SFF program.
In the past, we have experienced inspection deficiencies that have resulted in the imposition of a provisional license and could experience these results in the future. Furthermore, in some states, citation of one independent subsidiaries could negatively impact other independent subsidiaries in the same state.
In the past, we have experienced inspection deficiencies that have resulted in the imposition of a provisional license and could experience these results in the future. Furthermore, in some states, citation of one independent subsidiary could negatively impact other independent subsidiaries in the same state.
With the passage of the IRA in August of 2022, Congress continues to expand and supplement the ACA, including through the continuation of federally funded insurance premium subsidies. This modification of the ACA by the IRA indicates that Congress may continue to change and expand the ACA in the future.
With the passage of the IRA in 2022, Congress continues to expand and supplement the ACA, including through the continuation of federally funded insurance premium subsidies. This modification of the ACA by the IRA indicates that Congress may continue to change and expand the ACA in the future.
As noted above, the Biden-Harris Administration has called upon HHS and CMS to study and propose new rules regarding staffing requirements and reimbursement for the nursing home industry, including tying reimbursement to staffing levels, salary, benefits, and retention.
As noted above, the Biden-Harris Administration called upon HHS and CMS to study and propose new rules regarding staffing requirements and reimbursement for the nursing home industry, including tying reimbursement to staffing levels, salary, benefits, and retention.
If we fail to comply, even inadvertently, with any of these requirements, we could be required to alter our operations, refund payments to the government, enter into a corporate integrity agreement, deferred prosecution or similar agreements with state or federal government agencies, and become subject to significant civil and criminal penalties. 39 Table of Contents These anti-fraud and abuse laws and regulations are complex, and we do not always have the benefit of significant regulatory or judicial interpretation of these laws and regulations.
If we fail to comply, even inadvertently, with any of these requirements, we could be required to alter our operations, refund payments to the government, enter into a corporate integrity agreement, deferred prosecution or similar agreements with state or federal government agencies, and become subject to significant civil and criminal penalties. 40 Table of Contents These anti-fraud and abuse laws and regulations are complex, and we do not always have the benefit of significant regulatory or judicial interpretation of these laws and regulations.
Despite our due diligence procedures, facilities that we have acquired or may acquire in the future may generate unexpectedly low returns, may cause us to incur substantial losses, may require unexpected levels of management time, expenditures or other resources, or may otherwise not meet a risk profile that our investors find acceptable. 52 Table of Contents In addition, we might encounter unanticipated difficulties and expenditures relating to any of the acquired facilities, including contingent liabilities.
Despite our due diligence procedures, operations that we have acquired or may acquire in the future may generate unexpectedly low returns, may cause us to incur substantial losses, may require unexpected levels of management time, expenditures or other resources, or may otherwise not meet a risk profile that our investors find acceptable. 52 Table of Contents In addition, we might encounter unanticipated difficulties and expenditures relating to any of the acquired operations, including contingent liabilities.
If litigation is instituted against one or more of our subsidiaries, a successful plaintiff might attempt to hold us or another subsidiary liable for the alleged wrongdoing of the subsidiary principally targeted by the litigation.
If litigation is instituted against one or more of our subsidiaries, a plaintiff might attempt to hold us or another subsidiary liable for the alleged wrongdoing of the subsidiary principally targeted by the litigation.
These spending requirements could affect our operational results and place the Company at higher risk of suffering non-compliance consequences, such as penalties, pay-backs, restrict admissions and/or operational/financial penalties. 35 Table of Contents For example, Washington state incorporates the costs of direct care, indirect care, and capital expenditures for SNF services in computing the State’s Medicaid payments to nursing facilities.
These spending requirements could affect our operational results and place the Company at higher risk of suffering non-compliance consequences, such as penalties, pay-backs, restrict admissions and/or operational/financial penalties. 36 Table of Contents For example, Washington state incorporates the costs of direct care, indirect care, and capital expenditures for SNF services in computing the State’s Medicaid payments to nursing facilities.
In addition, we or some of the key personnel of our independent subsidiaries could be temporarily or permanently excluded from future participation in state and federal healthcare reimbursement programs such as Medicaid and Medicare. 38 Table of Contents If any of our independent subsidiaries is decertified or loses its licenses, our revenue, financial condition or results of operations would be adversely affected.
In addition, we or some of the key personnel of our independent subsidiaries could be temporarily or permanently excluded from future participation in state and federal healthcare reimbursement programs such as Medicaid and Medicare. 39 Table of Contents If any of our independent subsidiaries is decertified or loses its licenses, our revenue, financial condition or results of operations would be adversely affected.
From time to time our systems and controls highlight potential compliance issues, which we investigate as they arise. Historically, we have, and will continue to do so in the future, initiated internal inquiries into possible recordkeeping and related irregularities at our independent SNFs, which were detected by our internal compliance team in the course of its ongoing reviews.
From time to time our systems and controls highlight potential compliance issues, which we investigate as they arise. Historically, we have initiated, and will continue to do so in the future, internal inquiries into possible recordkeeping and related irregularities at our independent subsidiaries, which were detected by our internal compliance team in the course of its ongoing reviews.
We may not be able to successfully or efficiently integrate new acquisitions of facilities and businesses with our existing independent subsidiaries, culture and systems. The process of integrating acquisitions into our existing operations may result in unforeseen operating difficulties, divert management's attention from existing operations, or require an unexpected commitment of staff and financial resources, and may ultimately be unsuccessful.
We may not be able to successfully or efficiently integrate new acquisitions of assets and businesses with our existing independent subsidiaries, culture and systems. The process of integrating acquisitions into our existing operations may result in unforeseen operating difficulties, divert management's attention from existing operations, or require an unexpected commitment of staff and financial resources, and may ultimately be unsuccessful.
We may be unable to complete future facility or business acquisitions at attractive prices or at all, which may adversely affect our revenue; we may also elect to dispose of underperforming or non-strategic independent subsidiaries, which would also decrease our revenue. To date, our revenue growth has been significantly impacted by our acquisition of new facilities and businesses.
We may be unable to complete future asset or business acquisitions at attractive prices or at all, which may adversely affect our revenue; we may also elect to dispose of underperforming or non-strategic independent subsidiaries, which would also decrease our revenue. To date, our revenue growth has been significantly impacted by our acquisition of new facilities and businesses.
In addition, state laws regarding minimum wage increases, such as California’s minimum wage increases for both health care and fast-food workers, may intensify competition for unskilled labor in both skilled and unskilled settings. For skilled workers within the skilled care market where we operate, the costs of skilled labor, which are already greater than unskilled labor, could increase further.
In addition, state laws regarding minimum wage increases, such as California’s minimum wage increases for both healthcare and fast-food workers, may intensify competition for unskilled labor in both skilled and unskilled settings. For skilled workers within the skilled care market where we operate, the costs of skilled labor, which are already greater than unskilled labor, could increase further.
In addition to the uncertainty created by coming changes to CMS’s five-star ratings that currently are unknown, the potential negative consequences of freezing unfavorable data may adversely affect our star rating and negatively impact our ability to attract residents. Providing quality patient care is the cornerstone of our business.
In addition to the uncertainty created by future changes to CMS’s five-star ratings that currently are unknown, the potential negative consequences of freezing unfavorable data may adversely affect our star rating and negatively impact our ability to attract residents. Providing quality patient care is the cornerstone of our business.
Public and government calls for increased survey and enforcement efforts toward SNFs, and potential rulemaking that may result in enhanced enforcement and penalties, could result in increased scrutiny by state and federal survey agencies. In addition, potential sanctions and remedies based upon alleged regulatory deficiencies could negatively affect our financial condition and results of operations.
Public and government calls for increased survey and enforcement efforts toward SNFs, past and potential rulemaking that results in enhanced enforcement and penalties, could result in increased scrutiny by state and federal survey agencies. In addition, potential sanctions and remedies based upon alleged regulatory deficiencies could negatively affect our financial condition and results of operations.
We have also previously acquired a few facilities, which were or have proven to be non-strategic or less desirable, and we may consider disposing of such facilities or exchanging them for facilities that are more desirable, either because they were included in larger, indivisible groups of facilities or under other circumstances.
We have also previously acquired a few operations, which were or have proven to be non-strategic or less desirable, and we may consider disposing of such operations or exchanging them for operations that are more desirable, either because they were included in larger, indivisible groups of operations or under other circumstances.
This rule and the greater access to and use of data between and among payors transmitting funds for state and federal healthcare programs, may also trigger additional scrutiny or review of facilities such as ours, and may adversely affect our reimbursement paid through state and federal programs including Medicaid. 37 Table of Contents CMS announced a new nationwide audit the “SNF 5-Claim Probe & Educate Review” in which the Medicare Administrative Contractors will review five claims from each of the facilities to check for compliance with PDPM billings, which could result in individual claim payment denials if errors are identified.
This rule and the greater access to and use of data between and among payors transmitting funds for state and federal healthcare programs, may also trigger additional scrutiny or review of facilities such as ours, and may adversely affect our reimbursement paid through state and federal programs including Medicaid. 38 Table of Contents CMS announced a new nationwide audit the “SNF 5-Claim Probe & Educate Review,” in which the Medicare Administrative Contractors will review five claims from each of the facilities to check for compliance with PDPM billings, which could result in individual claim payment denials if errors are identified.
If there were a significant increase in the number of these claims against us or an increase in amounts owing should plaintiffs be successful in their claims, this could have a material adverse effect to our business, financial condition, results of operations and cash flows.
If there were a significant increase in the number of these claims against us or an increase in amounts owing should plaintiffs be successful in their claims, this could have a material adverse effect on our business, financial condition, results of operations and cash flows.
Second, and relatedly, for SNFs that have graduated from the SFF program, they are subject to a three-year period of enhanced scrutiny where adverse findings by a SA and a single survey’s finding of poor compliance may result in CMS discretionarily terminating that facility’s Medicare and/or Medicaid participation, which would likely cause other payors to terminate their agreements with the facility as well.
Second, for SNFs that have graduated from the SFF program, they are subject to a three-year period of enhanced scrutiny where adverse findings by a SA and a single survey’s finding of poor compliance may result in CMS discretionally terminating that facility’s Medicare and/or Medicaid participation, which would likely cause other payors to terminate their agreements with the facility as well.
Through these internal inquiries, we have identified potential deficiencies in the assessment of and recordkeeping for small subsets of patients. We have assisted in implementing, targeted improvements in the assessment and recordkeeping practices to make them consistent with the existing standards and policies applicable to our independent SNFs.
Through these internal inquiries, we have identified potential deficiencies in the assessment of and recordkeeping for small subsets of patients. We have assisted in implementing, targeted improvements in the assessment and recordkeeping practices to make them consistent with the existing standards and policies applicable to our independent subsidiaries.
Also, the newly acquired facilities may require us to spend significant time improving services that have historically been substandard, and if we are unable to improve such facilities quickly enough, we may be subject to litigation and/or loss of licensure or certification.
Also, the newly acquired operations may require us to spend significant time improving services that have historically been substandard, and if we are unable to improve such operations quickly enough, we may be subject to litigation and/or loss of licensure or certification.
As discussed in detail in Item 1., under Government Regulation , sub-heading Part B Rehabilitation Requirements , several government actions have been taken in recent years to try and contain the costs of rehabilitation therapy services provided under Medicare Part B, including the MPPR, institution of annual caps, mandatory medical reviews for annual claims beyond a certain monetary threshold, and a reduction in reimbursement rates for therapy assistant claim modifiers.
As discussed in detail in Item 1., under Government Regulation , sub-heading Part B Rehabilitation Requirements , several government actions have been taken in recent years to try and contain the costs of rehabilitation therapy services provided under Medicare Part B, including the MPPR, institution of annual caps, mandatory medical reviews for annual claims beyond a certain monetary threshold, and a reduction in reimbursement rates.
If we elect to voluntary close any operations in the future or to opt to stop accepting new patients pending completion of a state or federal survey, it could negatively impact our financial condition and results of operation.
If we elect to voluntarily close any operations in the future or to opt to stop accepting new patients pending completion of a state or federal survey, it could negatively impact our financial condition and results of operation.
CMS has published guidance to surveyors addressing topics that specifically include nurse staffing and collection of payroll data to evaluate appropriate staffing levels, which may lead to future regulation that increase our staffing requirements and labor costs or lower revenues.
CMS has published guidance to surveyors addressing topics that specifically include nurse staffing and collection of payroll data to evaluate appropriate staffing levels, which may lead to future regulations that increase our staffing requirements and labor costs or lower revenues.
Our Credit Facility has a borrowing capacity of up to $600.0 million in aggregate principal amount. As of December 31, 2023 and through the filing date of this report, we had no outstanding borrowings under our Credit Facility.
Our Credit Facility has a borrowing capacity of up to $600.0 million in aggregate principal amount. As of December 31, 2024 and through the filing date of this report, we had no outstanding borrowings under our Credit Facility.
Accordingly, no assurance can be given that the currently anticipated tax treatment of an investment will not be modified by legislative, judicial or administrative changes, possibly with retroactive effect. 61 Table of Contents Standard Bearer could fail to qualify to be taxed as a REIT if income it receives from our tenants is not treated as qualifying income.
Accordingly, no assurance can be given that the currently anticipated tax treatment of an investment will not be modified by legislative, judicial or administrative changes, possibly with retroactive effect. Standard Bearer could fail to qualify to be taxed as a REIT if income it receives from our tenants is not treated as qualifying income.
Based on this information, SNFs in particular are potential targets for more robust scrutiny and examination by regulators. Recent publications and statements by the Biden-Harris Administration have also called for greater scrutiny of SNF facilities.
Based on this information, SNFs in particular are potential targets for more robust scrutiny and examination by regulators. Prior publications and statements by the Biden-Harris Administration have also called for greater scrutiny of SNF facilities.
The ACA continues to be a salient political topic and proposed changes to it may become the subject of campaign promises, litigation, administrative action, or legislation leading up to or following the 2024 Presidential election.
The ACA continues to be a salient political topic and proposed changes to it may become the subject of campaign promises, litigation, administrative action, or legislation following the 2024 presidential election.
We may not be successful in attracting qualified individuals necessary for future acquisitions to be successful, and our management team may expend significant time and energy working to attract qualified personnel to manage facilities we may acquire in the future.
We may not be successful in attracting qualified individuals necessary for future acquisitions to be successful, and our management team may expend significant time and energy working to attract qualified personnel to manage operations we may acquire in the future.
In undertaking acquisitions, we also may be adversely impacted by unforeseen liabilities attributable to the prior providers who operated those facilities, against whom we may have little or no recourse. Many facilities we have historically acquired were underperforming financially and had clinical and regulatory issues prior to and at the time of acquisition.
In undertaking acquisitions, we also may be adversely impacted by unforeseen liabilities attributable to the prior providers who operated those businesses, against whom we may have little or no recourse. Many operations we have historically acquired were underperforming financially and had clinical and regulatory issues prior to and at the time of acquisition.
If Standard Bearer fails to qualify to be taxed as a REIT in any year, it would be subject to U.S. federal income tax, including any applicable alternative minimum tax, on our taxable income at regular corporate rates, and dividends paid to its shareholders would not be deductible by it in computing its taxable income.
If Standard Bearer fails to remain qualified to be taxed as a REIT in any year, it would be subject to U.S. federal income tax, including any applicable alternative minimum tax, on our taxable income at regular corporate rates, and dividends paid to its shareholders would not be deductible by it in computing its taxable income.
Any successful cyber-attack or other unauthorized attempt to access our systems or facilities also could result in negative publicity which could damage our reputation or brand with our patients, referral sources, payors or other third parties and could subject us to a number of adverse consequences, the vast majority of which are not insurable, including but not limited to, disruptions in our operations, regulatory and other civil and criminal penalties, fines, investigations and enforcement actions (including, but not limited to, those arising from the SEC, Federal Trade Commission, Office of Civil Rights, the OIG or state attorneys general), fines, private litigation with those affected by the data breach (including class action litigation), loss of customers, disputes with payors and increased operating expense, which either individually or in the aggregate could have a material adverse effect on our business, financial position, results of operations, liquidity, and stock price.
Any successful cyber-attack or other unauthorized attempt to access our systems or facilities also could result in negative publicity which could damage our reputation or brand with our patients, referral sources, payors or other third parties and could subject us to a number of adverse consequences, the vast majority of which are not insurable, including but not limited to, disruptions in our operations, regulatory and other civil and criminal penalties, fines, investigations and enforcement actions (including, but not limited to, those arising from the SEC, FTC, OCR, the OIG or state attorneys general), fines, private litigation with those affected by the data breach (including class action litigation), loss of customers, disputes with payors and increased operating expense, which either individually or in the aggregate could have a material adverse effect on our business, financial position, results of operations, liquidity, and stock price.
For example, d espite the decision of the DOJ to decline to participate in litigation based on the subject matter of its previously issued CID, the involved qui tam relator moved forward with the complaint in December 2020. Refer to Item 3. Legal Proceedings for additional information on this case.
For example, d espite the decision of the DOJ to decline to participate in litigation based on the subject matter of its issued CID, the involved qui tam relator moved forward with the complaint in December 2020. Refer to Part I, Item 3., Legal Proceedings for additional information on this case.
While the most recent attempt by the California Assembly (Bill 1537) to impose direct spending requirements on SNFs has been placed in suspense with no action has been taken on, similar legislation in the future may seek to impose identical or analogous funding requirements for SNFs operating in California.
While the most recent attempt by the California Assembly (Bill 1537) to impose direct spending requirements on SNFs has been placed in suspense with no action being taken, similar legislation in the future may seek to impose identical or analogous funding requirements for SNFs operating in California or other states.
In addition, several states have established minimum staffing requirements for facilities operating in those states. 44 Table of Contents Failure to comply with these requirements can, among other things, jeopardize a facility's compliance with the conditions of participation under relevant state and federal healthcare programs.
In addition, several states have established minimum staffing requirements for facilities operating in those states. Failure to comply with these requirements can, among other things, jeopardize a facility's compliance with the conditions of participation under relevant state and federal healthcare programs.
We currently have one facility placed on SFF status. CMS’s changes to the SFF program and its look-back period may create greater risk of our facilities being subject to this program and subject to potential fines and sanctions, even after graduating from the SFF program.
We currently have no facilities placed on SFF status. CMS’s changes to the SFF program and its look-back period may create greater risk of our facilities being subject to this program and subject to potential fines and sanctions, even after graduating from the SFF program.
Among the measures implemented to avoid this issue of “yo-yo” noncompliance was a three-year lookback period for facilities that graduate from the SFF program to ensure that the quality and compliance improvements achieved through the SFF program were sustained.
Among the measures implemented to avoid this issue of “yo-yo” noncompliance was a three-year look-back period for facilities that graduate from the SFF program to ensure that the quality and compliance improvements achieved through the SFF program were sustained.
In wrongful death cases, the cap increases from $0.25 million to $0.5 million on January 1, 2023, with incremental increases over the following 10 years until the cap reaches a maximum of $1.0 million, with adjustments for inflation. Due to California's influence on other states, other jurisdictions where we operate may enact similar laws.
In wrongful death cases, the cap increases from $0.25 million to $0.5 million on January 1, 2023, with incremental increases over the following 10 years until the cap reaches a maximum of $1.0 million, with adjustments for inflation. Due to California's influence on other states, other jurisdictions where we operate have enacted and may enact similar laws in the future.
On June 29, 2022, CMS announced updated guidance for Phase 2 and 3 of the requirements of participation, discussed in greater detail in Item 1., under Government Regulation. The application of CMS’s new guidance could result in more aggressive and stringent surveys, and potential fines, penalties, sanctions, or administrative actions taken against our independent subsidiaries.
In 2022, CMS updated guidance for Phase 2 and 3 of the requirements of participation, discussed in greater detail in Item 1., under Government Regulation . The application of CMS’s new guidance could result in more aggressive and stringent surveys, and potential fines, penalties, sanctions, or administrative actions taken against our independent subsidiaries.
The July 2023 change also increases the pressure on our independent subsidiaries to obtain a smaller number of available five-star ratings, as lower ratings may make it more difficult to attract prospective residents to receive our services. 53 Table of Contents In September 2023, CMS announced that it will update the staffing level case-mix adjustment methodology and freeze four of the quality measures used in the Nursing Home Five-Star Quality Rating System beginning with the April 2024 refresh of the Nursing Home Compare website data.
These changes also increase the pressure on our independent subsidiaries to obtain a smaller number of available five-star ratings, as lower ratings may make it more difficult to attract prospective residents to receive our services. 53 Table of Contents In September 2023, CMS announced that it will update the staffing level case-mix adjustment methodology and freeze four of the quality measures used in the Nursing Home Five-Star Quality Rating System beginning with the April 2024 refresh of the Nursing Home Compare website data.
If we are not operating in compliance with these laws and regulations or if these laws and regulations change, we could be required to make significant expenditures or change our operations in order to bring our facilities and operations into compliance. • Public and government calls for increased enforcement efforts toward SNFs, potential rulemaking that may result in enhanced enforcement and penalties, and new guidance for surveyors regarding the review of SNFs and enforcement of their Requirements of Participation, could result in increased scrutiny by state and federal survey agencies, including sanctions that could negatively affect our financial condition and results of operations. • CMS’s changes to the SFF program and its look-back period may create greater risk of our facilities being subject to this program and subject to potential fines and sanctions, even after graduating from the SFF program. • Federal minimum staffing mandates may adversely affect our labor costs, ability to maintain desired levels of patient or resident capacity, and profitability. • Future cost containment initiatives undertaken by payors may limit our revenue and profitability. • Changes in Medicare reimbursements for physician and non-physician services could impact reimbursement for medical professionals. • We face numerous risks related to the COVID-19 PHE's expiration and surrounding wind-down and uncertainty, which could individually or in the aggregate have a material adverse effect on our business, financial condition, liquidity, results of operations and prospects. • We may be subject to increased investigation and enforcement activities related to HIPAA violations. • Security breaches and other cyber-security incidents could violate security laws and subject us to significant liability. • If our independent subsidiaries are not fully reimbursed for all services for which each facility bills through consolidated billing, our revenue, financial condition and results of operations could be adversely affected. • Increased competition for, or a shortage of, nurses and other skilled personnel, could increase our staffing and labor costs and subject us to monetary fines resulting from a failure to maintain minimum staffing requirements, or may affect reimbursement. • Annual caps, uncertainty regarding reimbursement and other cost-reductions for outpatient therapy services may reduce our future revenue and profitability or cause us to incur losses. • Increased scrutiny of our activities and billing practices by the OIG or other regulatory authorities may result in an increase in regulatory monitoring and oversight, decreased reimbursement rates, or otherwise adversely affect our business, financial condition and results of operations. • State efforts to regulate or deregulate the healthcare services industry or the construction or expansion of healthcare facilities could impair our ability to expand our operations, or could result in increased competition. • Newly enacted legislation in the States where our independent subsidiaries are located may impact the volume of cases filed and the overall cost of those cases from a defense and indemnity standpoint. • Changes to federal and state employment-related laws and regulations could increase our cost of doing business. • Required regulatory approvals could delay or prohibit transfers of our healthcare operations, which could result in periods in which we are unable to receive reimbursement for such properties. • Compliance with federal and state fair housing, fire, safety, staffing, and other regulations may require us to incur unexpected expenses, which could be costly to us. • Our revenue, financial condition and results of operations could be negatively impacted by any changes in the acuity mix of patients in our independent subsidiaries as well as payor mix and payment methodologies. • We are subject to litigation that could result in significant legal costs and large settlement amounts or damage awards.
If we are not operating in compliance with these laws and regulations or if these laws and regulations change, we could be required to make significant expenditures or change our operations in order to bring our facilities and operations into compliance. • Public and government calls for increased enforcement efforts toward SNFs, past and potential rulemaking that results in enhanced enforcement and penalties, and new guidance for surveyors regarding the review of SNFs and enforcement of their Requirements of Participation, could result in increased scrutiny by state and federal survey agencies, including sanctions that could negatively affect our financial condition and results of operations. • CMS’s changes to the SFF program and its look-back period may create greater risk of our facilities being subject to this program and subject to potential fines and sanctions, even after graduating from the SFF program. • Federal minimum staffing mandates may adversely affect our labor costs, ability to maintain desired levels of patient or resident capacity, and profitability. • Future cost containment initiatives undertaken by payors may limit our revenue and profitability. • Reductions in Medicare reimbursements for physician and non-physician services could impact reimbursement for medical professionals. • We may be subject to increased investigation and enforcement activities related to HIPAA violations. • Security breaches and other cyber-security incidents could violate security laws and subject us to significant liability. • If our independent subsidiaries are not fully reimbursed for all services for which each facility bills through consolidated billing, our revenue, financial condition and results of operations could be adversely affected. • Increased competition for, or a shortage of, nurses and other skilled personnel, could increase our staffing and labor costs and subject us to monetary fines resulting from a failure to maintain minimum staffing requirements, or may affect reimbursement. • Annual caps, uncertainty regarding reimbursement and other cost-reductions for outpatient therapy services may reduce our future revenue and profitability or cause us to incur losses. • Increased scrutiny of our activities and billing practices by the OIG or other regulatory authorities may result in an increase in regulatory monitoring and oversight, decreased reimbursement rates, or otherwise adversely affect our business, financial condition and results of operations. • State efforts to regulate or deregulate the healthcare services industry or the construction or expansion of healthcare facilities could impair our ability to expand our operations, or could result in increased competition. • Newly enacted legislation in the States where our independent subsidiaries are located may impact the volume and exposure in claims filed and the overall cost of those cases from a defense and indemnity standpoint. • Changes to federal and state employment-related laws and regulations could increase our cost of doing business. • Required regulatory approvals could delay or prohibit transfers of our healthcare operations, which could result in periods in which we are unable to receive reimbursement for such properties. • Compliance with federal and state fair housing, fire, safety, staffing, and other regulations may require us to incur unexpected expenses, which could be costly to us. • Our revenue, financial condition and results of operations could be negatively impacted by any changes in the acuity mix of patients in our independent subsidiaries as well as payor mix and payment methodologies. • We are subject to litigation that could result in significant legal costs and large settlement amounts or damage awards.
All facilities that are not undergoing Targeted Probe and Educate (TPE) reviews, or have not recently passed a TPE review, will be subject to the nationwide audit. Private pay sources also reserve the right to conduct audits.
All facilities that are not undergoing Targeted Probe and Educate (TPE) reviews, or have not recently passed a TPE review, will be subject to the nationwide audit. Private payors also reserve the right to conduct audits.
We believe that such regulations that may adversely affect our business, operation and profitability may increase in the future and we cannot predict the ultimate content, timing or impact on us of any healthcare reform legislation.
We believe that such regulations that may adversely affect our business, operation and profitability. The quantity and scope of these regulations may increase in the future, and we cannot predict the ultimate content, timing or impact on us of any healthcare reform legislation.
Even where we have improved independent subsidiaries and patient care at facilities that we have acquired, we still may face post-acquisition regulatory issues related to pre-acquisition events. These may include, without limitation, payment recoupment related to our predecessors' prior noncompliance, the imposition of fines, penalties, operational restrictions or special regulatory status.
Even where we have improved independent subsidiaries and patient care, we still may face post-acquisition regulatory issues related to pre-acquisition events. These may include, without limitation, payment recoupment related to our predecessors' prior noncompliance, the imposition of fines, penalties, operational restrictions or special regulatory status.
Such provisions set forth in our amended and restated certificate of incorporation or our amended and restated bylaws include: • our Board of Directors is authorized, without prior stockholder approval, to create and issue preferred stock, commonly referred to as “blank check” preferred stock, with rights senior to those of common stock; • advance notice requirements for stockholders to nominate individuals to serve on our Board of Directors or to submit proposals that can be acted upon at stockholder meetings; • our Board of Directors is classified so not all members of our board are elected at one time, which may make it more difficult for a person who acquires control of a majority of our outstanding voting stock to replace our directors; • stockholder action by written consent is limited; • special meetings of the stockholders are permitted to be called only by the chairman of our Board of Directors, our chief executive officer or by a majority of our Board of Directors; • stockholders are not permitted to cumulate their votes for the election of directors; • newly created directorships resulting from an increase in the authorized number of directors or vacancies on our Board of Directors are filled only by majority vote of the remaining directors; • our Board of Directors is expressly authorized to make, alter or repeal our bylaws; and • stockholders are permitted to amend our bylaws only upon receiving the affirmative vote of at least a majority of our outstanding common stock. 62 Table of Contents We are also subject to the anti-takeover provisions of Section 203 of the General Corporation Law of the State of Delaware.
Such provisions set forth in our amended and restated certificate of incorporation or our amended and restated bylaws include: • our Board of Directors is authorized, without prior stockholder approval, to create and issue preferred stock, commonly referred to as “blank check” preferred stock, with rights senior to those of common stock; • advance notice requirements for stockholders to nominate individuals to serve on our Board of Directors or to submit proposals that can be acted upon at stockholder meetings; • our Board of Directors is classified so not all members of our board are elected at one time, which may make it more difficult for a person who acquires control of a majority of our outstanding voting stock to replace our directors; • stockholder action by written consent is limited; • special meetings of the stockholders are permitted to be called only by the chairman of our Board of Directors, our chief executive officer or by a majority of our Board of Directors; • stockholders are not permitted to cumulate their votes for the election of directors; 62 Table of Contents • newly created directorships resulting from an increase in the authorized number of directors or vacancies on our Board of Directors are filled only by majority vote of the remaining directors; • our Board of Directors is expressly authorized to make, alter or repeal our bylaws; and • stockholders are permitted to amend our bylaws only upon receiving the affirmative vote of at least a majority of our outstanding common stock.
This change made it more competitive to obtain a five-star rating, and more difficult to maintain such a rating once achieved. Only 10% of nursing facilities can receive a five-star rating in the state where it operates.
This change made it more competitive to obtain a five-star rating, and more difficult to maintain such a rating once achieved. Only 10% of nursing facilities can receive a five-star rating in the state where they operate.
If we fail to attract and retain qualified and skilled personnel, our ability to conduct our business operations could be harmed. 45 Table of Contents Annual caps and other cost-reductions for outpatient therapy services may reduce our future revenue and profitability or cause us to incur losses.
If we fail to attract and retain qualified and skilled personnel, our ability to conduct our business operations could be harmed. Annual caps and other cost-reductions for outpatient therapy services may reduce our future revenue and profitability or cause us to incur losses.
CMS's recently finalized ownership transparency rule, discussed in Item 1., under Government Regulation , may provide an additional basis for further investigation, administrative action and ultimately fines, penalties, or sanctions if finalized, and may dissuade parties from working with us or our independent subsidiaries due to the reporting and disclosure obligations of being an Additional Disclosable Party under that final rule.
CMS's recently finalized ownership transparency rule, and similar state disclosure requirements such as California’s, discussed in Item 1., under Government Regulation , may provide an additional basis for further investigation, administrative action and ultimately fines, penalties, or sanctions if finalized, and may dissuade parties from working with us or our independent subsidiaries due to the reporting and disclosure obligations of being an Additional Disclosable Party under that final rule.
If we are unable to obtain insurance, or if insurance becomes more costly for us to obtain, or if the coverage levels we can economically obtain decline, our business may be adversely affected. 54 Table of Contents Our self-insurance programs may expose us to significant and unexpected costs and losses.
If we are unable to obtain insurance, or if insurance becomes more costly for us to obtain, or if the coverage levels we can economically obtain decline, our business may be adversely affected. Our self-insurance programs may expose us to significant and unexpected costs and losses.
Forthcoming proposed rules from CMS, which, based on the Biden-Harris Administration's executive orders discussed under Government Regulation in Item 1., as well as potential legislation such as the HCBS Access Act aimed toward providing more resources to those considering care-based careers, may increase the likelihood of employee unionization due to increased emphasis on care-based careers in SNF facilities.
We previously indicated there may be forthcoming proposed rules from CMS, based on the Biden-Harris Administration's executive orders discussed under Government Regulation in Item 1., as well as potential legislation such as the HCBS Access Act aimed toward providing more resources to those considering care-based careers, may increase the likelihood of employee unionization due to increased emphasis on care-based careers in SNF facilities.
We have maintained general and professional liability insurance since 2002 and workers compensation insurance since 2005 through a wholly-owned captive insurance subsidiary to insure our self-insurance reimbursements and deductibles as part of a continually evolving overall risk management strategy. We establish the insurance loss reserves based on an estimation process that uses information obtained from both company-specific and industry data.
We maintain general and professional liability insurance and workers compensation insurance through a wholly-owned captive insurance subsidiary to insure our self-insurance reimbursements and deductibles as part of a continually evolving overall risk management strategy. We establish the insurance loss reserves based on an estimation process that uses information obtained from both company-specific and industry data.
In fact, Medicaid is our largest source of revenue, accounting for 46.0% of our revenue for both the year ended December 31, 2023 and 2022, respectively. Medicaid is a state-administered program financed by both state funds and matching federal funds.
In fact, Medicaid is our largest source of revenue, accounting for 46.0% of our revenue for both the years ended December 31, 2024 and 2023, respectively. Medicaid is a state-administered program financed by both state funds and matching federal funds.
Similar to the potential incentive of increased damages caps, the Supreme Court’s recent decision in certain case may increase public interest in potential claims against SNFs and senior living facilities, particularly pertaining to specific civil rights claims against governmental actors rather than general liability claims against privately owned SNFs such as those operated by our independent subsidiaries.
Similar to the potential incentive of increased damages caps, recent Supreme Court decisions may increase public interest in potential claims against SNFs and senior living facilities, particularly pertaining to specific civil rights claims against governmental actors rather than general liability claims against privately owned SNFs such as those operated by our independent subsidiaries.
For state fiscal year 2024, Texas requires all nursing facilities must show that funds paid to SNFs by Texas’s Medicaid program, including both fee-for-service and managed care reimbursement, were expanded for direct care activities, including direct care staff wages and benefits.
For state fiscal year 2024, Texas requires all nursing facilities must show that a portion of funds paid to SNFs by Texas’s Medicaid program, including both fee-for-service and managed care reimbursement, were expended for direct care activities, including direct care staff wages and benefits.
Turnover rates and the magnitude of the shortage of nurses or other trained personnel vary substantially from facility to facility, and may adversely affect those facilities' quality ratings based on data reported to CMS.
Turnover rates and the magnitude of the shortage of nurses or other trained personnel vary substantially from operation to operation and may adversely affect those operations' quality ratings based on data reported to CMS.
Risks Related to Ownership of our Common Stock • We may not be able to pay or maintain dividends and the failure to do so would adversely affect our stock price. • Our amended and restated certificate of incorporation, amended and restated bylaws and Delaware law contain provisions that could discourage transactions resulting in a change in control, which may negatively affect the market price of our common stock. 32 Table of Contents You should carefully consider each of the following risk factors and all other information set forth in this information statement.
Risks Related to Ownership of our Common Stock • We may not be able to pay or maintain dividends and the failure to do so would adversely affect our stock price. • Our amended and restated certificate of incorporation, amended and restated bylaws and Delaware law contain provisions that could discourage transactions resulting in a change in control, which may negatively affect the market price of our common stock. 34 Table of Contents You should carefully consider each of the following risk factors.
For example, refer to the matter discussed in Item 3. Legal Proceedings .
For example, refer to the matter discussed in Part I, Item 3., Legal Proceedings .
Risks Related to our Business and Industry • The rules of Medicare and Medicaid, including reductions of reimbursement rates, changes to spending requirements, data reporting, measurement and evaluation standards could have a material, adverse effect on our revenues, financial condition and results of operations. • Reforms to the U.S. healthcare system, including new regulations under the ACA, new transparency and disclosure requirements, potential federal and state standards for minimum nurse staffing levels, continue to impose new requirements upon us that could materially impact our business. • Changes in the U.S. political environment may result in significant changes to the regulatory framework, enforcement, and reimbursements in our industry. • We are subject to various government reviews, audits and investigations that could adversely affect our business, including an obligation to refund amounts previously paid to us, potential criminal charges, loss of licensure, the imposition of fines and sanctions. • We are subject to extensive and complex laws and government regulations.
Risks Related to our Business and Industry • The rules of Medicare and Medicaid, including reductions of reimbursement rates, changes to spending requirements, data reporting, measurement and evaluation standards could have a material, adverse effect on our revenues, financial condition and results of operations. • State-level direct spending requirements could negatively impact our results of operations. • Changes to the U.S. healthcare system, including changes to the ACA or its regulations, new transparency and disclosure requirements, and federal and state standards for minimum nurse staffing levels, continue to impose new requirements upon us that could materially impact our business. • Anticipated changes in the U.S. political environment, including those as a result of the change in Presidential administration and control of Congress, and to regulatory agencies, particularly HHS, may result in significant changes to the regulatory framework, enforcement, and reimbursements in our industry. • We are subject to various government reviews, audits and investigations that could adversely affect our business, including an obligation to refund amounts previously paid to us, potential criminal charges, loss of licensure, the imposition of fines and sanctions. • We are subject to extensive and complex laws and government regulations.
As of December 31, 2023 and through the filing date of this report, 40 of our independent subsidiaries had reviews scheduled or in process, either pre- or post-payment. We anticipate that these reviews could increase in frequency in the future.
As of December 31, 2024 and through the filing date of this report, 18 of our independent subsidiaries had multi-claim reviews scheduled or in process, either pre- or post-payment. We anticipate that these reviews could increase in frequency in the future.
To the extent we dispose of such a facility without simultaneously acquiring a facility in exchange, our revenue may decrease. We may not be able to successfully integrate acquired facilities and businesses into our operations, and we may not achieve the benefits we expect from any of our facility acquisitions.
To the extent we dispose of such an operation without simultaneously acquiring an operation in exchange, our revenue may decrease. We may not be able to successfully integrate acquired assets and businesses into our operations, and we may not achieve the benefits we expect from any of our acquisitions.
As discussed in Item 1., under Government Regulation , from time to time in the ordinary course of business, we receive deficiency reports from state and federal regulatory bodies resulting from such inspections or surveys. CMS's updated guidance to these surveyors incorporate recent changes to CMS’s methods for surveying infection control procedures.
From time to time in the ordinary course of business, we receive deficiency reports from state and federal regulatory bodies resulting from such inspections or surveys. CMS's updated guidance to these surveyors incorporate recent changes to CMS’s methods for surveying infection control procedures.
On February 17, 2023, CMS most recently updated the survey resources that CMS and state surveyors use in evaluating our SNFs’ compliance with federal Requirements for Participation, incorporating recent changes to CMS’s methods for surveying infection control procedures.
In addition, in 2023, CMS updated the survey resources that CMS and state surveyors use in evaluating our SNFs’ compliance with federal Requirements for Participation, incorporating recent changes to CMS’s methods for surveying infection control procedures.
If national or local housing markets enter a persistent decline, our occupancy rates, revenues, results of operations and cash flow could be negatively impacted. As we continue to acquire and lease real estate assets, we may not be successful in identifying and consummating these transactions. We lease 30 of our properties to third-party operators.
If national or local housing markets enter a persistent decline, our occupancy rates, revenues, results of operations and cash flow could be negatively impacted. 57 Table of Contents As we continue to acquire and lease real estate assets, we may not be successful in identifying and consummating these transactions.
For the year ended December 31, 2023 and 2022, 72.6% and 73.7%, of our revenue was provided by government payors that reimburse us at predetermined rates, respectively. If our labor or other operating costs increase, we will be unable to recover such increased costs from government payors.
For the years ended December 31, 2024 and 2023, 70.9% and 72.6% of our revenue was provided by government payors that reimburse us at predetermined rates, respectively. If our labor or other operating costs increase, we will be unable to recover such increased costs from government payors.
By way of example, all of our independent subsidiaries are required to comply with the ADA, which has separate compliance requirements for “public accommodations” and “commercial properties,” but generally requires that buildings be made accessible to people with disabilities.
The compliance costs associated with these laws and evolving regulations could be substantial. By way of example, all of our independent subsidiaries are required to comply with the ADA, which has separate compliance requirements for “public accommodations” and “commercial properties,” but generally requires that buildings be made accessible to people with disabilities.
This publicly available information may result in potential residents perceiving our highly rated facilities to be less desirable if they share ownership with lower rated facilities, even if the lower rated facility is a new acquisition or has a lower score for reasons beyond our control.
The publicly available information disclosed as a result of these laws and rules may result in potential residents perceiving our highly rated facilities to be less desirable if they share ownership with lower rated facilities, even if the lower rated facility is a new acquisition or has a lower score for reasons beyond our control.
Any discontinuance or reduction in federal matching of provider tax-related Medicaid expenditures could have a significant and adverse effect on states' Medicaid expenditures, and as a result could have a material and adverse effect on our business, financial condition or results of operations.
Any discontinuance or reduction in federal matching of provider tax-related Medicaid expenditures could have a significant and adverse effect on states' Medicaid expenditures, and as a result could have a material and adverse effect on our business, financial condition or results of operations. State-level direct spending requirements could negatively impact our results of operations.
During the year ended December 31, 2023, we expanded our operations and real estate portfolio through a combination of long-term leases and real estate purchases , with the addition of 26 skilled nursing operations. This growth has placed and will continue to place significant demands on our current management resources.
During the year ended December 31, 2024, we expanded our operations through a combination of long-term leases and real estate purchases, with the addition of 28 stand-alone skilled nursing operations and three campus operations. This growth has placed and will continue to place significant demands on our current management resources.
Under the CY 2024 PF Final Rule, reductions in conversion factor, payments to providers and conditions imposed in exchange for higher payments may impose operational requirements and working conditions that further detract from and reduce our financial performance.
Under both the 2024 and 2025 PFS Final Rules, reductions in conversion factor, payments to providers and conditions imposed in exchange for higher payments may impose operational requirements and working conditions that further detract from and reduce our financial performance.
While it is not possible to predict whether and when any such changes will occur, specific proposals discussed during and after the midterm election in 2022, including a repeal or material amendment of the ACA, could harm our business, operating results and financial condition.
While it is not possible to predict whether and when any such changes will occur, specific proposals discussed during and after the election, including a repeal or material amendment of the ACA or other laws affecting the provision of healthcare services, could harm our business, operating results and financial condition.
We derived 26.6% and 27.7% of our service revenue from the Medicare programs for the year ended December 31, 2023 and 2022, respectively. In addition, many other payors may use published Medicare rates as a basis for reimbursements.
We derived 24.9% and 26.6% of our service revenue from the Medicare programs for the years ended December 31, 2024 and 2023, respectively. In addition, many other payors may use published Medicare rates as a basis for reimbursements.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeRISK MANAGEMENT AND STRATEGY Risk Management We assess and identify security risk to the organization by: • conducting assessments of risk including likelihood and magnitude from unauthorized access, use, disclosure, disruption, modification or destruction of information systems and the related information processes, stored, or transmitted. • performing risk assessments and producing security assessment reports that document the results of the assessment for use and review by information technology (IT) senior leadership, including the Service Center's Chief Information Officer. • ensuring security controls are assessed for effectiveness, are implemented correctly, operating as intended and producing the desired outcome; and • continuously scanning for vulnerabilities and remedying all vulnerabilities in accordance with the associated risk.
Biggest changeRISK MANAGEMENT AND STRATEGY Risk Management We assess and identify security risk to the organization by: • conducting risk assessments to determine the likelihood and magnitude of an attack from unauthorized access, use, disclosure, disruption, modification or destruction of information systems and the related information processes, stored, or transmitted; • performing penetration testing assessments annually and producing security assessment reports that document the results of the assessment for use and review by information technology (IT) senior leadership, including the Service Center's Chief Information Officer; • ensuring security controls are assessed for effectiveness, are implemented correctly, operating as intended and producing the desired outcome; • continuously scanning for vulnerabilities and remediating vulnerabilities within their service level agreements in accordance with the associated risk level; and • reviewing third party and vendor risks to our organization through an internal interdisciplinary Technology Advisory Committee that includes members from our IT, Information Security Office (ISO), legal, compliance, clinical, finance and billing departments. 63 Table of Contents Monitoring We have established a continuous monitoring strategy and program, which includes: • a set of defined security metrics to be monitored; • performance of security control assessments on an ongoing basis; • addressing results of analysis and reporting security status to the executive team; • monitoring information systems to detect attacks and indicators of potential attacks or compromises; • identification of unauthorized use of the information system resources; • deployment of monitoring systems and agents strategically within the information system environment; and • require that third party service providers who store, process or transmit data with access to electronic Protected Health Information (ePHI) undergo an independent third-party audit to achieve system organization controls certification annually.
This program includes: • Establishing policies governing data security. • Monitoring data access throughout the organization’s independent subsidiaries. • Providing continuous security training and awareness. • Establishing controls over devices on the network which are actively tracked, monitored and evaluated for new, missing, or updated software needed to strengthen security on the device, patch known vulnerabilities, or stabilize software or operating system issues. • Protecting sensitive data through encryption techniques. • Designing and implementing systems to include backup and recoverability principles, such as periodic data backups and safeguards in the case of a disaster.
This program includes: • establishing policies governing data security; • monitoring data access throughout the organization’s independent subsidiaries; • providing continuous security training and awareness; • establishing controls over devices on the network which are actively tracked, monitored and evaluated for new, missing, or updated software needed to strengthen security on the device, patch known vulnerabilities, or stabilize software or operating system issues; • protecting sensitive data through encryption techniques; and • designing and implementing systems to include backup and recoverability principles, such as periodic data backups and safeguards in the case of a disaster.
We have not experienced a material cybersecurity breach in the past five years and, as a result, there have been no charges related to a breach in the past five years. Moreover, no risks from cybersecurity threats have materially affected our business strategy, results of operations, or financial condition.
We have not experienced a material cybersecurity breach in the past five years and, as a result, there have been no charges related to a breach in the past five years. Moreover, risks from cybersecurity threats have not materially affected our business strategy, results of operations, or financial condition.
Beyond initial creation, procedures are continually re-assessed, updated and tested on an ongoing basis. • The Service Center's Chief Information Officer and Director of Information Security work with the Executive Team on the identification, assessment, verification and classification of incidents to determine affected stakeholders and appropriate parties for contact. • The Service Center's Chief Information Officer and Director of Information Security are responsible for launching the Incident Response Team (IRT) if necessary and for notification to the Executive Team, who in turn will contact the Board of Directors and the Audit Committee to validate that the response is being addressed appropriately. • The IRT, in consultation with outside experts if needed, is responsible for the following: • Initial containment by making tactical changes to the computing environment to mitigate active threats based on currently known information. • Analysis to establish the root cause of incidents, identification and evidence collection from all affected machines and log sources, threat intelligence and other information sources.
Beyond initial creation, procedures are continually re-assessed, updated and tested on an ongoing basis. • The ISO team works with the Executive Team on the identification, assessment, verification and classification of incidents to determine affected stakeholders and appropriate parties for contact. • The Service Center's Chief Information Officer and Director of Information Security are responsible for launching the Incident Response Team (IRT) if necessary and for notification to the Executive Team, who in turn will contact the Board of Directors and the Audit Committee to validate that the response is being addressed appropriately. • The IRT, in consultation with outside experts if needed, is responsible for the following: • Initial containment by making tactical changes to the computing environment to mitigate active threats based on currently known information. • Analysis to establish the root cause of incidents, identification and evidence collection from all affected machines and log sources, threat intelligence and other information sources.
Incident Management Plan Our cybersecurity incident management plan comprises the following six-step process: • The Service Center's Chief Information Officer and Director of Information Security lead its Information Security Office (ISO) team in the development, documentation, review and testing of security procedures and incident management procedures.
Incident Management Plan Our cybersecurity incident management plan comprises the following six-step process: • The Service Center's Chief Information Officer and Director of Information Security lead its ISO team in the development, documentation, review and testing of security procedures and incident management procedures.
Once all appropriate information has been collected, we perform a careful analysis using forensically-sound tools and methods to prevent any contamination of evidence. • Incident containment by further analyzing additional information and further identifying any additional compromised machines or resources not previously identified. • Incident eradication by re-assessing the root cause of incidents where solutions are then implemented to solve underlying problems and prevent re-occurrence. • Recovery and restoring normal business functionality, which includes the reversal of any damage caused by the incident and responding as necessary. • Review after closure of each incident and conducting a lessons learned analysis to improve prevention and help to make incident response processes more efficient and effective.
Once all appropriate information has been collected, we perform a careful analysis using forensically-sound tools and methods to prevent any contamination of evidence. • Incident containment by further analyzing additional information and further identifying any additional compromised machines or resources not previously identified. • Incident eradication by re-assessing the root cause of incidents where solutions are then implemented to solve underlying problems and prevent re-occurrence. • Recovery and restoring normal business functionality, which includes the reversal of any damage caused by the incident and responding as necessary. 64 Table of Contents • Review after closure of each incident and conducting a lessons learned analysis to improve prevention and help to make incident response processes more efficient and effective.
While we have implemented processes and procedures that we believe are tailored to address and mitigate the cybersecurity threats that our Company faces, there can be no assurances that such an incident will not occur despite our efforts, as more fully described in Item 1A.
While we have implemented processes and procedures that we believe are tailored to address and mitigate the cybersecurity threats that our company faces, there can be no assurances that such an incident will not occur despite our efforts, as more fully described in Item 1A. Risk Factors .
We align to the National Institute of Standards and Technology (NIST) Special Publication 800-53 Revision 4, a globally recognized cyber security framework of Policies, Standards and Controls that comprises of five categories of defense – Identify, Protect, Detect, Respond and Recover.
We align to the National Institute of Standards and Technology (NIST) Special Publication 800-53 Revision 4, a globally recognized cyber security framework of Policies, Standards and Controls is comprised of five categories of defense – Identify, Protect, Detect, Respond and Recover.
One of the three members of our Audit Committee is a cybersecurity expert. The ISO has been established by the Service Center's Chief Information Officer, with dedicated cyber security staff focusing on security monitoring, vulnerability management, incident response, risk assessments, employee training, security engineering and management of cyber security policies, standards and regulatory compliance.
The ISO has been established by the Service Center's Chief Information Officer, with dedicated cyber security staff focusing on security monitoring, vulnerability management, incident response, risk assessments, employee training, security engineering and management of cyber security policies, standards and regulatory compliance.
Risk Factors. 64 Table of Contents GOVERNANCE Our Audit Committee receives quarterly reports on our information security and cyber fraud prevention programs from the Service Center's Chief Information Officer and Director of Information Security, who each have over 24 years of experience in IT, including various leadership roles at other large corporations.
GOVERNANCE Our Audit Committee receives quarterly reports on our information security and cyber fraud prevention programs from the Service Center's Chief Information Officer and Director of Information Security, who each have over 24 years of experience in IT, including various leadership roles at other large corporations. One of the three members of our Audit Committee is a cybersecurity expert.
Removed
Monitoring We have established a continuous monitoring strategy and program, which includes: • a set of defined security metrics to be monitored. • performance of security control assessments on an ongoing basis. • addressing results of analysis and reporting security status to the executive team. • monitoring information systems to detect attacks and indicators of potential attacks. • identification of unauthorized use of the information system resources; and • deployment of monitoring devices strategically within the information system environment. 63 Table of Contents Data Protection We have implemented an Information Security Management System (ISMS) Program to secure sensitive data protected by us.
Added
Data Protection We have implemented an Information Security Management System Program to secure sensitive data protected by us.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe following table provides summary information regarding the location of our facilities, operational beds and units by property type as of December 31, 2023: Operated Facilities Leased without a Purchase Option Leased with a Purchase Option Owned Total Facilities Beds/Units Facilities Beds/Units Facilities Beds/Units Facilities Beds/Units California 59 5,734 — — 11 1,227 70 6,961 Texas 56 6,929 5 714 22 2,914 83 10,557 Arizona 23 3,336 — — 13 1,930 36 5,266 Wisconsin — — — — 2 100 2 100 Utah 12 1,311 2 159 7 661 21 2,131 Colorado 16 1,668 1 125 8 916 25 2,709 Washington 12 1,098 — — 4 413 16 1,511 Idaho 7 553 — — 5 470 12 1,023 Nebraska 5 364 — — 2 390 7 754 Kansas 1 45 3 325 4 458 8 828 Iowa 6 399 — — — — 6 399 South Carolina 4 582 — — 5 544 9 1,126 Nevada 2 358 — — — — 2 358 203 22,377 11 1,323 83 10,023 297 33,723 65 Table of Contents The following table sets forth the location of our facilities and the number of operational beds and units located at our skilled nursing, senior living and campus facilities as of December 31, 2023: Facility Counts Bed / Unit Counts Skilled Nursing Operations Senior Living Communities Campus Operations Total Skilled Nursing Beds Senior Living Units Total Beds / Units California 67 — 3 70 6,764 197 6,961 Texas 77 1 5 83 9,954 603 10,557 Arizona 30 1 5 36 4,535 731 5,266 Wisconsin 2 — — 2 100 — 100 Utah 18 2 1 21 1,968 163 2,131 Colorado 19 5 1 25 1,986 723 2,709 Washington 15 1 — 16 1,413 98 1,511 Idaho 11 — 1 12 1,002 21 1,023 Nebraska 4 1 2 7 413 341 754 Kansas 1 — 7 8 615 213 828 Iowa 4 — 2 6 368 31 399 South Carolina 9 — — 9 1,126 — 1,126 Nevada 2 — — 2 358 — 358 259 11 27 297 30,602 3,121 33,723 Real Estate Properties — As of December 31, 2023, we owned 113 real estate properties in Arizona, California, Colorado, Idaho, Kansas, Nebraska, Nevada, South Carolina, Texas, Utah, Washington and Wisconsin, which include 83 of the 297 facilities that we operate and manage.
Biggest changeManagement's Discussion and Analysis of Financial Condition and Results of Operations. 65 Table of Contents The following table provides summary information regarding the location of our facilities, operational beds and units by property type as of December 31, 2024: Operated Facilities Leased without a Purchase Option Leased with a Purchase Option Owned Total Facilities Beds/Units Facilities Beds/Units Facilities Beds/Units Facilities Beds/Units Texas 56 6,975 6 834 22 2,915 84 10,724 California 59 5,636 — — 11 1,232 70 6,868 Arizona 23 3,342 — — 15 2,198 38 5,540 Colorado 27 2,916 1 125 9 971 37 4,012 Utah 12 1,311 2 159 8 764 22 2,234 Washington 12 1,085 — — 4 391 16 1,476 Idaho 7 540 — — 5 470 12 1,010 Kansas 2 147 3 325 6 607 11 1,079 South Carolina 4 582 — — 5 544 9 1,126 Nebraska 5 364 — — 3 331 8 695 Iowa 6 399 — — 2 158 8 557 Tennessee 3 349 — — 3 300 6 649 Nevada 3 483 — — — — 3 483 Wisconsin — — — — 3 182 3 182 219 24,129 12 1,443 96 11,063 327 36,635 The following table sets forth the location of our facilities and the number of operational beds and units located at our skilled nursing, senior living and campus facilities as of December 31, 2024: Facility Counts Bed / Unit Counts Skilled Nursing Operations Senior Living Communities Campus Operations Total Skilled Nursing Beds Senior Living Units Total Beds / Units Texas 78 1 5 84 10,120 604 10,724 California 67 — 3 70 6,671 197 6,868 Arizona 31 1 6 38 4,649 891 5,540 Colorado 31 5 1 37 3,379 633 4,012 Utah 19 2 1 22 2,071 163 2,234 Washington 15 1 — 16 1,378 98 1,476 Idaho 11 — 1 12 989 21 1,010 Kansas 3 — 8 11 828 251 1,079 South Carolina 9 — — 9 1,126 — 1,126 Nebraska 4 1 3 8 496 199 695 Iowa 6 — 2 8 526 31 557 Tennessee 6 — — 6 649 — 649 Nevada 3 — — 3 483 — 483 Wisconsin 3 — — 3 182 — 182 286 11 30 327 33,547 3,088 36,635 66 Table of Contents Real Estate Properties — As of December 31, 2024, we owned 129 real estate properties in Arizona, California, Colorado, Idaho, Iowa, Kansas, Nebraska, Nevada, South Carolina, Tennessee, Texas, Utah, Washington and Wisconsin, which include 96 of the 327 facilities that we operate and manage.
In addition, we lease a portion of the space within the campus to third-party tenants. We also have service centers located in Tempe, Arizona, San Antonio, Texas and Salt Lake City, Utah.
In addition, we lease a portion of the space within the campus to third-party tenants. We also have service centers located in Tempe, Arizona; San Antonio, Texas; Dallas, Texas and Salt Lake City, Utah.
Of our 113 real estate properties, 30 operations are leased to and operated by third-party operators. One senior living facility is located on the same real estate property as a skilled nursing facility that we own and operate.
Of our 129 real estate properties, 33 operations are leased to and operated by third-party operators. One senior living facility is located on the same real estate property as a skilled nursing facility that we own and operate.
We further own the real estate property of our Service Center's California location and continue to lease a portion of the office space to third-party tenants. Our Standard Bearer segment reflects the results of operations for 108 of the 113 owned real estate properties.
We further own the real estate property of our Service Center's California location and continue to lease a portion of the office space to third-party tenants. Our Standard Bearer segment reflects the results of operations for 124 of the 129 owned real estate properties.
In this situation, the senior living operation is included in the total under "Owned and Leased to Third Party Operators" and the skilled nursing operation is included in the total under "Owned and Operated by Ensign", however, the amount reflected under "Total Properties" only recognizes the operation as a single property. 66 Table of Contents
In this situation, the senior living operation is included in the total under "Owned and Leased to Third Party Operators" and the skilled nursing operation is included in the total under "Owned and Operated by Ensign", however, the amount reflected under "Total Properties" only recognizes the operation as a single property.
The following table provides summary information regarding the location of our owned real estate properties as of December 31, 2023: Owned and Operated by Ensign (1) Owned and Leased to Third-Party Operators (1) Service Center Total Properties (1) California 11 2 1 14 Texas (1) 22 6 — 27 Arizona 13 1 — 14 Wisconsin 2 19 — 21 Utah 7 — — 7 Colorado 8 — — 8 Washington 4 1 — 5 Idaho 5 — — 5 Nebraska 2 — — 2 Kansas 4 — — 4 South Carolina 5 — — 5 Nevada — 1 — 1 83 30 1 113 (1) One senior living operation in Texas, which is owned by Ensign and leased to a third-party operator, is located on the same real estate property as a skilled nursing facility that we own and operate.
The following table provides summary information regarding the location of our owned real estate properties as of December 31, 2024: Owned and Operated by Ensign (1) Owned and Leased to Third-Party Operators (1) Service Center Total Properties (1) Texas (1) 22 6 — 27 Wisconsin 3 22 — 25 Arizona 15 1 — 16 California 11 2 1 14 Colorado 9 — — 9 Utah 8 — — 8 Kansas 6 — — 6 Idaho 5 — — 5 South Carolina 5 — — 5 Washington 4 1 — 5 Nebraska 3 — — 3 Tennessee 3 — — 3 Iowa 2 — — 2 Nevada — 1 — 1 96 33 1 129 (1) One senior living operation in Texas, which is owned by an independent subsidiary of Ensign and leased to a third-party operator, is located on the same real estate property as a skilled nursing facility that we own and operate.
Operating Facilities — We operate 297 independent subsidiaries in Arizona, California, Colorado, Idaho, Iowa, Kansas, Nebraska, Nevada, South Carolina, Texas, Utah, Washington and Wisconsin, with the operational capacity to serve approximately 34,000 patients as of December 31, 2023. Of the 297 facilities, we operate 214 facilities under long-term lease arrangements and have options to purchase 11 of those 214 facilities.
Operating Facilities — We operate 327 independent subsidiaries in Arizona, California, Colorado, Idaho, Iowa, Kansas, Nebraska, Nevada, South Carolina, Tennessee, Texas, Utah, Washington and Wisconsin, with the operational capacity to serve approximately 37,000 patients as of December 31, 2024.
The results of our independent subsidiaries are reflected in our skilled services segment for our skilled nursing operations and in the "All Other" category for our senior living operations.
Of the 327 facilities, we operate 231 facilities under long-term lease arrangements and have options to purchase 12 of those 231 facilities. The results of our independent subsidiaries are reflected in our skilled services segment for our skilled nursing operations and in the "All Other" category for our senior living operations.
Added
For more information about our subsequent acquisitions, see Part II, Item 7.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeWe and our independent subsidiaries are party to various legal actions and administrative proceedings and are subject to various claims arising in the ordinary course of business, including claims that services provided to patients by our independent subsidiaries have resulted in injury or death, and claims related to employment and commercial matters.
Biggest changeIncluded in these laws and regulations is the Health Insurance Portability and Accountability Act of 1996 (monitored and enforced by the Office of Civil Rights), the terms of which require healthcare providers (among other things) to safeguard the privacy and security of certain patient protected health information. 67 Table of Contents We and our independent subsidiaries are party to various legal actions and administrative proceedings and are subject to various claims arising in the ordinary course of business, including claims that services provided to patients by our independent subsidiaries have resulted in injury or death, and claims related to employment and commercial matters.
We and our independent subsidiaries have been subjected to, and/or are currently involved in, class action litigation alleging violations (alone or in combination) of state and federal wage and hour law as related to the alleged failure to pay wages, to timely provide and authorize meal and rest breaks, and other such similar causes of action.
We and our independent subsidiaries have been subjected to, and/or are currently involved in, class action litigation alleging violations (alone or in combination) of state and federal wage and hour law related to the alleged failure to pay wages, to timely provide and authorize meal and rest breaks, and other such similar causes of action.
Compliance with such laws and regulations is evaluated regularly, the results of which can be subject to future governmental review and interpretation, and can include significant regulatory action with fines, penalties, and exclusion from certain governmental programs.
Compliance with such laws and regulations is evaluated regularly, the results of which can be subject to future governmental review and interpretation and can include significant regulatory action with the possibility of fines, penalties, and exclusion from certain governmental programs.
As such, we and our independent subsidiaries are continuously subject to state and federal regulatory scrutiny, supervision and control in the ordinary course of business. Such regulatory scrutiny often includes inquiries, investigations, examinations, audits, site visits and surveys, some of which are non-routine.
As such, we and our independent subsidiaries are continuously subject to state and federal regulatory scrutiny, supervision and intervention in the ordinary course of business. Such regulatory scrutiny often includes inquiries, investigations, examinations, audits, site visits and surveys, some of which are non-routine.
For example, on May 31, 2018, we, on behalf of our independent subsidiaries, received a CID from the DOJ stating that it was investigating to determine whether there had been a violation of the False Claims Act (FCA) and/or the Anti-Kickback Statute (AKS) with respect to the relationships between certain of our independent subsidiaries and persons who serve or have served as medical directors.
For example, on May 31, 2018, we, on behalf of our independent subsidiaries, received a CID from the DOJ stating that it was investigating to determine whether there had been a violation of the FCA and/or the Anti-Kickback Statute (AKS) with respect to the relationships between certain of our independent subsidiaries and persons who serve or have served as medical directors.
In addition to the potential lawsuits and claims described above, we and our independent subsidiaries are also subject to potential lawsuits under the FCA and comparable state laws alleging submission of fraudulent claims for services to any healthcare program (such as Medicare or Medicaid) or other payor. A violation may provide the basis for exclusion from federally funded healthcare programs.
In addition to the potential lawsuits and claims described above, we and our independent subsidiaries are also subject to potential lawsuits under the FCA and comparable state laws alleging submission of fraudulent claims for services to any Federal and State healthcare program (such as Medicare or Medicaid). A violation may provide the basis for exclusion from federally funded healthcare programs.
Such exclusions could have a correlative negative impact on our financial performance. In addition, and pursuant to the qui tam or "whistleblower" provisions of the FCA, a private individual with knowledge of fraud or potential fraud may bring a claim on behalf of the federal government and receive a percentage of the federal government's recovery.
Such exclusions could have a correlative negative impact on our financial performance. In addition, and pursuant to the qui tam or "whistleblower" provisions of the FCA, a private individual with knowledge of fraud or potential fraud may bring a claim on behalf of the Federal government, and receive a percentage of any recovery obtained.
Additionally, CMS’s education for each SNF will be individualized and based on observed claim review errors, with rationales for denial explained to the SNF on a claim-by-claim basis. This program will apply only to claims submitted after October 1, 2019, and will exclude claims containing a COVID-19 diagnosis. Item 4. MINE SAFETY DISCLOSURES None. PART II.
Additionally, CMS’s education for each SNF will be individualized and based on observed claim review errors, with rationales for denial explained to the SNF on a claim-by-claim basis. This program will apply only to claims submitted after October 1, 2019, and will exclude claims containing a COVID-19 diagnosis. 69 Table of Contents Item 4. MINE SAFETY DISCLOSURES None. PART II.
In addition to being subject to direct regulatory oversight from state and federal agencies, the skilled nursing and post-acute care industry is also subject to regulatory requirements which, if noncompliance is identified, could result in civil, administrative or criminal fines, penalties or restitutionary relief, and reimbursement; authorities could also seek the suspension or exclusion of the provider or individual from participation in their programs.
In addition to being subject to regulatory oversight from state and federal agencies, the skilled nursing and post-acute care industry is also subject to regulatory requirements which, if noncompliance is identified, could result in civil, administrative or criminal fines, penalties or restitutionary relief, and/or reimbursement; authorities could also seek the suspension or exclusion of a provider or individual from participation in State and Federal healthcare programs.
We believe that there has been, and will continue to be, an increase in governmental investigations of post-acute providers, particularly in the area of Medicare/Medicaid false claims, as well as an increase in enforcement actions resulting from these investigations.
We believe that there has been, and will continue to be, an increase in governmental investigations of post-acute providers, particularly in alleged Medicare/Medicaid false claims, as well as an increase in enforcement actions resulting from these investigations.
Item 3. LEGAL PROCEEDINGS Indemnities — From time to time, we enter into certain types of contracts that contingently require us to indemnify parties against third-party claims.
Item 3. LEGAL PROCEEDINGS Indemnities — From time to time, we enter into contracts that contingently require us to indemnify parties against third-party claims.
We do not believe that the ultimate resolution of these actions will have a material adverse effect on our business, cash flows, financial condition or results of operations.
We do not believe that the ultimate resolution of this matter will have a material adverse effect on our business, cash flows, financial condition or results of operations.
As of December 31, 2023, and through the filing date of this report, 40 of our independent subsidiaries had Reviews scheduled or in process. In June 2023, CMS announced a new nationwide audit, the “SNF 5-Claim Probe & Educate Review”, in which the Medicare Administrative Contractors will review five claims from each SNF to check for compliance.
As of December 31, 2024 and through the filing date of this report, 18 of our independent subsidiaries had multi-claim Reviews scheduled or in process. In June 2023, CMS announced a new nationwide audit, the “SNF 5-Claim Probe & Educate Review,” in which the Medicare Administrative Contractors will review five claims from each SNF to evaluate for claims compliance.
For example, in a four-week medical negligence trial in the State of Arizona, the jury returned a verdict against one of our independent subsidiaries in late November 2023. We intend to appeal the verdict. We have in the past appealed and have in some circumstances received returned decisions in our favor.
For example, in a four-week medical negligence trial in the State of Arizona, the jury returned a verdict against one of our independent subsidiaries in late November 2023. We are in the process of appealing the jury verdict. We have in the past appealed similar decisions and have, in some circumstances, received decisions in our favor.
The government can argue, therefore, that an FCA violation can occur without any affirmative fraudulent action or statement, as long as the action or statement is knowingly improper. In addition, FERA extended protections against retaliation for whistleblowers, including protections not only for employees, but also contractors and agents.
This includes the retention of any government overpayment. The government can argue, therefore, that an FCA violation can occur without any affirmative fraudulent action or statement, if the action or statement is knowingly improper. In addition, FERA extended protections against retaliation for whistleblowers, including protections not only for employees, but also contractors and agents.
Adverse determinations in civil legal proceedings or governmental investigations, whether currently asserted or arising in the future, could have a material adverse effect on our financial position, results of operations, and cash flows. Additionally, such proceedings and/or investigation can be a distraction to the business. 67 Table of Contents For example, in 2020, the U.S.
Adverse determinations in civil legal proceedings or governmental investigations, whether currently asserted or arising in the future, could have a material adverse effect on our financial position, results of operations, and cash flows. Additionally, such proceedings and/or investigation can be a distraction to the business of our independent subsidiaries.
Beginning in August 2020, CMS resumed TPE Program activity. If an operation fails a Review and/or subsequent Reviews, the operation could then be subject to extended review or an extrapolation of the identified error rate to billings in the same time period. We anticipate that these Reviews could increase in frequency in the future.
If an operation has a significant error or fails a Review and/or subsequent Reviews, the operation could then be subject to extended review or an extrapolation of the identified error rate to billings in the same time period. We anticipate that these Reviews could increase in frequency in the future.
From that time until December 2023, and notwithstanding our success in early pre-trial motions, we continued to incur legal defense costs and fees, including significant amounts as part of discovery in the fourth quarter of 2023.
From that time until December 2023, and notwithstanding our success in early pre-trial motions, we continued to incur legal defense costs and fees, including significant amounts related to the mandatory exchange of information between the parties in the fourth quarter of 2023.
Following changes by FERA, health care providers face significant penalties for the knowing retention of government overpayments, even if no false claim was involved. Health care providers can now be liable for knowingly and improperly avoiding or decreasing an obligation to pay money or property to the government. This includes the retention of any government overpayment.
Under the Fraud Enforcement and Recovery Act of 2009 (FERA), health care providers face significant penalties for the knowing retention of government overpayments, even if no false claim was involved. Health care providers can now be liable for knowingly and improperly avoiding or decreasing an obligation to pay money or property to the government.
As a general matter, our independent subsidiaries maintain policies and procedures to promote compliance with all applicable Medicare and Medicaid requirements, including, but not limited to those relating to the presentation of claims for reimbursement for services provided. We intend to fully cooperate with the DOJ in response to the CID.
The CID covers the period from January 1, 2016 to the present. As a general matter, our independent subsidiaries maintain policies and procedures to promote compliance with all applicable Medicare and Medicaid requirements, including, but not limited to those relating to the presentation of claims for reimbursement for services provided.
Medicare Revenue Recoupments — We and our independent subsidiaries are subject to regulatory reviews relating to the provision of Medicare services, billings and potential overpayments resulting from reviews conducted via RAC, Program Safeguard Contractors, and Medicaid Integrity Contractors (collectively referred to as Reviews). For several months during the COVID-19 pandemic, CMS suspended its Targeted Probe and Educate (TPE) Program.
Medicare Revenue Recoupments — We and our independent subsidiaries are subject to regulatory reviews relating to the provision of Medicare services, billings and potential overpayments resulting from reviews conducted via RAC, various Program Safeguard Contractors and Medicaid Integrity Contractors (collectively referred to as Reviews).
However, we cannot predict the outcome of the investigation or its potential impact to the consolidated financial statements.
We are fully cooperating with the DOJ in response to the CID. However, we cannot predict the outcome of the investigation or its potential impact to the consolidated financial statements.
In addition, these claims could impact our ability to procure insurance to cover our exposure related to the various services provided by our independent subsidiaries to their residents, customers and patients. Claims and suits, including class actions, continue to be filed against our independent subsidiaries and other companies in the post-acute care industry.
In addition, these claims could impact our ability to procure insurance to cover our exposure related to the various services provided by our independent subsidiaries to their residents, customers and patients.
Department of Justice (DOJ) in January of 2024 indicating that the DOJ is investigating the Company to determine whether we have caused the submission of claims to Medicare and Texas Medicaid for services which were unnecessary or otherwise not consistent with existing reimbursement requirements. The CID covers the period from January 1, 2016 to the present.
We, on behalf of our independent subsidiaries, received a Civil Investigative Demand (CID) from the U.S. Department of Justice (DOJ) in January of 2024 indicating that the DOJ is investigating the Company to determine whether claims have been submitted to Medicare and Texas Medicaid for services which were unnecessary or otherwise not consistent with existing reimbursement requirements.
The settlement does not include admissions on the part of the Company or our independent subsidiaries, and we maintain that we have and continue to comply with all applicable State and Federal statutes (including but not limited to the FCA and the AKS).
The settlement does not include admissions on the part of the Company or our independent subsidiaries, and we maintain that we have consistently complied with and continue to comply with all applicable State and Federal statutes (including but not limited to the FCA and the AKS). 68 Table of Contents In addition to the FCA, some states, including California, Arizona and Texas, have enacted similar whistleblower and false claims laws and regulations.
Thus, an employment relationship is generally not required in order to qualify for protection against retaliation for whistleblowing. 68 Table of Contents Healthcare litigation (including class action litigation) is common and is filed based upon a wide variety of claims and theories, and our independent subsidiaries are routinely subjected to varying types of claims, including class action "staffing" suits where the allegation is understaffing at the facility level.
Thus, an employment relationship is generally not required in order to qualify for protection against retaliation for whistleblowing. Healthcare litigation (including class action litigation) is common and is filed based upon a wide variety of claims and theories.
As such, we and our independent subsidiaries could face increased scrutiny, potential liability and legal expenses and costs based on claims under state false claims acts in markets where our independent subsidiaries do business. In May 2009, Congress passed the FERA which made significant changes to the FCA and expanded the types of activities subject to prosecution and whistleblower liability.
Further, the Deficit Reduction Act of 2005 created incentives for states to enact anti-fraud legislation modeled on the FCA. As such, we and our independent subsidiaries could face increased scrutiny, potential liability and legal expenses and costs based on claims under state false claims acts in markets where our independent subsidiaries do business.
These claims include but are not limited to potential claims related to patient care and treatment (professional negligence claims) as well as employment related claims. In addition, we and our independent subsidiaries, and others in the industry, are subject to claims and lawsuits in connection with COVID-19 and facility preparation for and/or response to the COVID-19 pandemic.
These claims include but are not limited to potential claims related to patient care and treatment (professional negligence claims) as well as employment related claims.
In early January 2024, we entered into mediation and on January 19, 2024, the parties agreed to settle the civil case for $48.0 million, subject to the review of the DOJ and other relevant government entities.
In 2024, we entered into mediation with the involved parties and agreed to settle the civil case for $48.0 million. Following the finalization of the settlement documents and payment of the settlement funds, the qui tam complaint was dismissed and the matter was resolved.
These guarantees could result in significant additional liabilities and obligations for us if Pennant were to default on their obligations under their leases with respect to these properties. Litigation and Regulatory Matters — Laws and regulations governing Medicare and Medicaid programs are complex and subject to review and interpretation.
Consequently, because no claims have been asserted, no liabilities have been recorded for these obligations on our balance sheets for any of the periods presented. Litigation and Regulatory Matters — Laws and regulations governing Medicare and Medicaid programs are complex and subject to review and interpretation.
Removed
Consequently, because no claims have been asserted, no liabilities have been recorded for these obligations on our balance sheets for any of the periods presented. In connection with the spin-off transaction in 2019, certain landlords required, in exchange for their consent to the transaction, that our lease guarantees remain in place for a certain period of time following the spin-off.
Added
Additionally, in July of 2024, two of our independent subsidiaries received a subpoena to produce documents related to alleged environmental matters from the United States’ Attorney’s office for the Western District of Washington. Our independent subsidiaries are fully cooperating with the United States' Attorney’s office in response to the subpoena.
Removed
Included in these laws and regulations is monitoring performed by the Office of Civil Rights which covers the Health Insurance Portability and Accountability Act of 1996, the terms of which require healthcare providers (among other things) to safeguard the privacy and security of certain patient protected health information.
Added
Reviews vary in claim selection size and processes, ranging from a single episode/claim to larger, multi-claim batches; and from single rounds of review to reviews of multiple rounds with pass/fail criteria.
Removed
House of Representatives Select Subcommittee on the Coronavirus Crisis launched a nation-wide investigation into the COVID-19 pandemic, which included the impact of the coronavirus on residents and employees in nursing homes. In June 2020, we and our independent subsidiaries received a document and information request from the House Select Subcommittee.
Removed
We and our independent subsidiaries cooperated in responding to this inquiry. In July 2022 and thereafter, we and our independent subsidiaries received follow up requests for additional documents and information. We and our independent subsidiaries responded to these requests and cooperated with the House Select Subcommittee in connection with its investigation.
Removed
On December 9, 2022, the House Select Subcommittee issued its final report summarizing its investigation and related recommendations designed "to strengthen the nation's ability to prevent and respond to public health and economic emergencies." According to the information provided by the House Select Subcommittee, the issuance of this report was the House Select Subcommittee's final official act in connection with their assigned responsibilities.
Removed
Also, we, on behalf of our independent subsidiaries, received a Civil Investigative Demand (CID) from the U.S.
Removed
In addition to the FCA, some states, including California, Arizona and Texas, have enacted similar whistleblower and false claims laws and regulations. Further, the Deficit Reduction Act of 2005 created incentives for states to enact anti-fraud legislation modeled on the FCA.
Removed
These class-action “staffing” suits have the potential to result in large jury verdicts and settlements. We expect the plaintiffs' bar to continue to be aggressive in their pursuit of these staffing and similar claims.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changePreviously on July 28, 2022, the Board of Directors approved a stock repurchase program pursuant to which we could repurchase up to $20.0 million of our common stock under the program for a period of approximately 12 months from August 2, 2022.
Biggest changeWe did not purchase any shares pursuant to this stock repurchase program during the year ended December 31, 2024. On August 29, 2023, the Board of Directors approved a stock repurchase program pursuant to which we may repurchase up to $20.0 million of our common stock under the program for a period of approximately 12 months from September 1, 2023.
The graph below shows the cumulative total stockholder return of investment of $100 (and the reinvestment of any dividends thereafter) on December 31, 2018 in (i) our common stock, (ii) the Skilled Nursing Facilities Peer Group 1 and (iii) the NASDAQ Market Index. Our stock price performance shown in the graph below is not indicative of future stock price performance.
The graph below shows the cumulative total stockholder return of investment of $100 (and the reinvestment of any dividends thereafter) on December 31, 2019 in (i) our common stock, (ii) the Skilled Nursing Facilities Peer Group 1 and (iii) the NASDAQ Market Index. Our stock price performance shown in the graph below is not indicative of future stock price performance.
We have been a dividend-paying company since 2002 and have increased our dividend every year for the last 21 years.
We have been a dividend-paying company since 2002 and have increased our dividend every year for the last 22 years.
Issuer Repurchases of Equity Securities Stock Repurchase Programs — On August 29, 2023, the Board of Directors approved a stock repurchase program pursuant to which we may repurchase up to $20.0 million of our common stock under the program for a period of approximately 12 months from September 1, 2023.
Issuer Repurchases of Equity Securities Stock Repurchase Programs — On May 16, 2024, the Board of Directors approved a stock repurchase program pursuant to which we may repurchase up to $20.0 million of our common stock under the program for a period of approximately 12 months from September 1, 2024.
As of January 29, 2024, there were approximately 315 holders of record of our common stock. 69 Table of Contents Notwithstanding anything to the contrary set forth in any of our filings under the Securities Act or the Exchange Act that might incorporate future filings, including the Annual Report on Form 10-K, in whole or in part, the Stock Performance Graph and supporting data which follows shall not be deemed to be incorporated by reference into any such filings except to the extent that we specifically incorporate any such information into any such future filings.
Notwithstanding anything to the contrary set forth in any of our filings under the Securities Act or the Exchange Act that might incorporate future filings, including the Annual Report on Form 10-K, in whole or in part, the Stock Performance Graph and supporting data which follows shall not be deemed to be incorporated by reference into any such filings except to the extent that we specifically incorporate any such information into any such future filings.
Under this program, we were authorized to repurchase our issued and outstanding common shares from time to time in open-market and privately negotiated transactions and block trades in accordance with federal securities laws. The share repurchase program does not obligate us to acquire any specific number of shares.
Under these repurchase programs, we are authorized to repurchase our issued and outstanding common shares from time to time in open-market and privately negotiated transactions, tender offers, pursuant to contractual provisions, and block trades, or otherwise in accordance with federal securities laws. The share repurchase program does not obligate us to acquire any specific number of shares.
COMPARISON OF 60 MONTH CUMULATIVE TOTAL RETURN* Among Ensign Group, the NASDAQ Composite Index and Our Peer Group December 2023 *Assumes $100 invested on December 31, 2018 in stock in index, including reinvestment of dividends. Fiscal year ended December 31. December 31, 2018 2019 2020 2021 2022 2023 The Ensign Group, Inc.
COMPARISON OF 60 MONTH CUMULATIVE TOTAL RETURN* Among Ensign Group, the NASDAQ Composite Index and Our Peer Group December 2024 *Assumes $100 invested on December 31, 2019 in stock in index, including reinvestment of dividends.
The stock repurchase program expired on August 2, 2023 and is no longer in effect. We did not purchase any shares pursuant to this stock repurchase program. Item 6. [RESERVED]
The program terminated by its terms on August 31, 2024 and is no longer in effect. We did not purchase any shares pursuant to this stock repurchase program.
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common stock has been traded under the symbol “ENSG” on the NASDAQ Global Select Market since our initial public offering on November 8, 2007. Prior to that time, there was no public market for our common stock.
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common stock is traded under the symbol “ENSG” on the NASDAQ Global Select Market. As of January 31, 2025, there were approximately 359 holders of record of our common stock.
Removed
Since our inception in 1999, we completed the spin-off of two independent publicly traded companies. On June 1, 2014, Ensign completed the spin-off of CareTrust REIT, Inc. (CareTrust) into an independent publicly traded company. On October 1, 2019, Ensign completed the spin-off of The Pennant Group, Inc.
Added
Fiscal year ended December 31. 2019 2020 2021 2022 2023 2024 The Ensign Group, Inc. $ 100.00 $ 161.37 $ 186.25 $ 210.40 $ 250.09 $ 296.63 NASDAQ Market Index 100.00 144.92 177.06 119.45 172.77 223.87 Peer Group (1) 100.00 98.69 103.32 87.81 114.10 157.80 (1) The current composition of our Peer Group is as follows: Amedysis, Inc., CareTrust REIT Inc., Encompass Healthcare Corp., LTC Properties, Inc., National Healthcare Corporation, National Health Investors, Inc., Omega Healthcare Investors, Inc., PACS Group, Inc., Select Medical Holdings Corp. and Welltower Inc. 70 Table of Contents Dividend Policy We do not have a formal dividend policy, but we currently intend to continue to pay regular quarterly dividends to the holders of our common stock.
Removed
(Pennant) with the pro rata distribution of 1.18 shares of Pennant’s common stock for every share of Ensign’s common stock to our stockholders, pursuant to which Pennant became an independent company. Pennant's stock traded at $6.15 at opening price on the first day of trading and closed at $15.09.
Added
Any such repurchases will depend on our business strategy, prevailing market conditions, our liquidity requirements, contractual restrictions or covenants, compliance with securities laws, and other factors. The amounts involved in any such transaction may be material. Item 6. [RESERVED]
Removed
Ensign's stock price was reduced by the same value on the same day. For the purpose of this graph, the effect of the final separation of Pennant is reflected in the cumulative total return of Ensign Common Stock as a reinvested dividend.
Removed
(2) $ 100.00 $ 127.85 $ 206.31 $ 238.12 $ 268.99 $ 319.74 NASDAQ Market Index 100.00 136.69 198.10 242.03 163.28 236.17 Peer Group (1) 100.00 123.99 122.37 128.11 108.87 141.47 (1) The current composition of our Peer Group is as follows: Amedysis, Inc., CareTrust REIT Inc., Encompass Healthcare Corp., LTC Properties, Inc., National Healthcare Corporation, National Health Investors, Inc., Omega Healthcare Investors, Inc., Select Medical Holdings Corp. and Welltower Inc.
Removed
(2) The value displayed only incorporates the value of The Ensign Group, Inc. stock and does not incorporate the value shareholders received in connection with our spin-off of The Pennant Group, Inc. 70 Table of Contents Dividend Policy We do not have a formal dividend policy, but we currently intend to continue to pay regular quarterly dividends to the holders of our common stock.
Removed
Under this program, we are authorized to repurchase our issued and outstanding common shares from time to time in open-market and privately negotiated transactions and block trades in accordance with federal securities laws. We did not purchase any shares pursuant to this stock repurchase program during the year ended December 31, 2023.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

96 edited+32 added−27 removed68 unchanged
Biggest changeSkilled Services Segment Revenue The following table presents the skilled services revenue and key performance metrics by category during the year ended December 31, 2023 and 2022: Year Ended December 31, 2023 2022 Change % Change TOTAL FACILITY RESULTS: (Dollars in thousands) Skilled services revenue $ 3,578,855 2,906,215 $ 672,640 23.1 % Number of facilities at period end 259 234 25 10.7 % Number of campuses at period end (1) 27 26 1 3.8 % Actual patient days 8,590,995 7,243,781 1,347,214 18.6 % Occupancy percentage — Operational beds 78.5 % 75.3 % 3.2 % Skilled mix by nursing days 30.4 % 31.8 % (1.4) % Skilled mix by nursing revenue 50.2 % 52.0 % (1.8) % Year Ended December 31, 2023 2022 Change % Change SAME FACILITY RESULTS: (2) (Dollars in thousands) Skilled services revenue $ 2,771,633 $ 2,569,807 $ 201,826 7.9 % Number of facilities at period end 189 189 — — % Number of campuses at period end (1) 24 24 — — % Actual patient days 6,563,672 6,299,331 264,341 4.2 % Occupancy percentage — Operational beds 79.2 % 76.0 % 3.2 % Skilled mix by nursing days 31.9 % 33.0 % (1.1) % Skilled mix by nursing revenue 51.4 % 53.3 % (1.9) % 82 Table of Contents Year Ended December 31, 2023 2022 Change % Change TRANSITIONING FACILITY RESULTS: (3) (Dollars in thousands) Skilled services revenue $ 251,872 $ 231,100 $ 20,772 9.0 % Number of facilities at period end 22 22 — — % Number of campuses at period end (1) 1 1 — — % Actual patient days 655,659 625,085 30,574 4.9 % Occupancy percentage — Operational beds 76.1 % 72.9 % 3.2 % Skilled mix by nursing days 21.4 % 23.1 % (1.7) % Skilled mix by nursing revenue 38.5 % 41.4 % (2.9) % Year Ended December 31, 2023 2022 Change % Change RECENTLY ACQUIRED FACILITY RESULTS: (4) (Dollars in thousands) Skilled services revenue $ 555,350 $ 105,308 $ 450,042 NM Number of facilities at period end 48 23 25 NM Number of campuses at period end (1) 2 1 1 NM Actual patient days 1,371,664 319,365 1,052,299 NM Occupancy percentage — Operational beds 76.8 % 67.9 % NM Skilled mix by nursing days 27.5 % 24.3 % NM Skilled mix by nursing revenue 49.3 % 42.8 % NM (1) Campus represents a facility that offers both skilled nursing and senior living services.
Biggest changeSkilled Services Segment Revenue The following tables present the skilled services revenue and key performance metrics by category during the years ended December 31, 2024 and 2023: Year Ended December 31, 2024 2023 Change % Change TOTAL FACILITY RESULTS: (Dollars in thousands) Skilled services revenue $ 4,076,825 3,578,855 $ 497,970 13.9 % Number of facilities at period end 286 259 27 10.4 % Number of campuses at period end (1) 30 27 3 11.1 % Actual patient days 9,431,825 8,590,995 840,830 9.8 % Occupancy percentage — Operational beds 80.5 % 78.5 % 2.0 % 2.5 % Skilled mix by nursing days 29.9 % 30.4 % (0.5) % (1.6) % Skilled mix by nursing revenue 48.6 % 50.2 % (1.6) % (3.2) % Year Ended December 31, 2024 2023 Change % Change SAME FACILITY RESULTS: (2) (Dollars in thousands) Skilled services revenue $ 3,018,601 $ 2,823,314 $ 195,287 6.9 % Number of facilities at period end 193 193 — — % Number of campuses at period end (1) 25 25 — — % Actual patient days 6,902,006 6,704,689 197,317 2.9 % Occupancy percentage — Operational beds 81.3 % 79.2 % 2.1 % 2.7 % Skilled mix by nursing days 31.7 % 31.8 % (0.1) % (0.3) % Skilled mix by nursing revenue 50.2 % 51.2 % (1.0) % (2.0) % Year Ended December 31, 2024 2023 Change % Change TRANSITIONING FACILITY RESULTS: (3) (Dollars in thousands) Skilled services revenue $ 507,143 $ 472,808 $ 34,335 7.3 % Number of facilities at period end 40 40 — — % Number of campuses at period end (1) 1 1 — — % Actual patient days 1,336,074 1,302,680 33,394 2.6 % Occupancy percentage — Operational beds 76.0 % 73.0 % 3.0 % 4.1 % Skilled mix by nursing days 21.8 % 20.7 % 1.1 % 5.3 % Skilled mix by nursing revenue 38.4 % 38.4 % — % — % 82 Table of Contents Year Ended December 31, 2024 2023 Change % Change RECENTLY ACQUIRED FACILITY RESULTS: (4) (Dollars in thousands) Skilled services revenue $ 550,507 $ 278,791 $ 271,716 NM Number of facilities at period end 53 25 28 NM Number of campuses at period end (1) 4 1 3 NM Actual patient days 1,191,663 566,398 625,265 NM Occupancy percentage — Operational beds 81.6 % 84.4 % NM NM Skilled mix by nursing days 28.9 % 37.4 % NM NM Skilled mix by nursing revenue 48.9 % 59.7 % NM NM Year Ended December 31, 2024 2023 Change % Change FACILITY CLOSED RESULTS: (5) (Dollars in thousands) Skilled services revenue $ 574 $ 3,942 $ (3,368) NM Actual patient days 2,082 17,228 (15,146) NM Occupancy percentage — Operational beds 52.6 % 90.8 % NM NM (1) Campus represents a facility that offers both skilled nursing and senior living services.
References herein to the consolidated “Company” and “its” assets and activities, as well as the use of the terms “we,” “us,” “our” and similar terms in this Annual Report, are not meant to imply, nor should they be construed as meaning, that The Ensign Group, Inc. has direct operating assets, employees or revenue, or that any of the subsidiaries are operated by The Ensign Group.
References herein to the consolidated “Company” and “its” assets and activities, as well as the use of the terms “we,” “us,” “our” and similar terms in this Annual Report, are not meant to imply, nor should they be construed as meaning that The Ensign Group, Inc. has direct operating assets, employees or revenue, or that any of the subsidiaries are operated by The Ensign Group, Inc.
Adjusted EBITDA is EBITDA adjusted for the same non-core business items as listed in Adjusted EBT, except for depreciation and amortization of patient base intangible assets and write-off of deferred financing fees. 79 Table of Contents Funds from Operations (FFO) We consider FFO to be a useful supplemental measure of the operating performance of Standard Bearer.
Adjusted EBITDA is EBITDA adjusted for the same non-core business items as listed in Adjusted EBT, except for write off of deferred financing fees and amortization of patient base intangible assets. 79 Table of Contents Funds from Operations (FFO) We consider FFO to be a useful supplemental measure of the operating performance of Standard Bearer.
The interest rates applicable to loans under the Credit Facility are, at our option, equal to either a base rate plus a margin ranging from 0.25% to 1.25% per annum or SOFR plus a margin range from 1.25% to 2.25% per annum, based on the Consolidated Total Net Debt to Consolidated EBITDA ratio (as defined in the Credit Facility).
The interest rates applicable to loans under the Credit Facility are, at our option, equal to either a base rate plus a margin ranging from 0.25% to 1.25% per annum or SOFR plus a margin ranging from 1.25% to 2.25% per annum, based on the Consolidated Total Net Debt to Consolidated EBITDA ratio (as defined in the Credit Facility).
Primary Components of Expense Cost of Services (exclusive of rent and depreciation and amortization shown separately) — Our cost of services represents the costs of operating our independent subsidiaries, which primarily consists of payroll and related benefits, supplies, purchased services, and ancillary expenses such as the cost of pharmacy and therapy services provided to patients.
Primary Components of Expense Cost of Services (exclusive of rent and depreciation and amortization shown separately) — Our cost of services represents the costs of operating our operating subsidiaries, which primarily consists of payroll and related benefits, supplies, purchased services, and ancillary expenses such as the cost of pharmacy and therapy services provided to patients.
We believe the presentation of certain Non-GAAP Financial Measures are useful to investors and other external users of our financial statements regarding our results of operations because: • they are widely used by investors and analysts in our industry as a supplemental measure to evaluate the overall performance of companies in our industry without regard to items such as other income (expense), net and depreciation and amortization, which can vary substantially from company to company depending on the book value of assets, capital structure and the method by which assets were acquired; and • they help investors evaluate and compare the results of our operations from period to period by removing the impact of our capital structure and asset base from our operating results.
We believe the presentation of certain Non-GAAP Financial Measures are useful to investors and other external users of our financial statements regarding our results of operations because: • they are widely used by investors and analysts in our industry as a supplemental measure to evaluate the overall performance of companies in our industry without regard to items such as interest income, interest expense and depreciation and amortization, which can vary substantially from company to company depending on the book value of assets, capital structure and the method by which assets were acquired; and • they help investors evaluate and compare the results of our operations from period to period by removing the impact of our capital structure and asset base from our operating results.
Credit Facility with a Lending Consortium Arranged by Truist We maintain a revolving credit facility with Truist Securities (Truist) (the Credit Facility) with availability up to $600.0 million in aggregate principal amount. The maturity date of the Credit Facility is April 8, 2027. Borrowings are supported by a lending consortium arranged by Truist.
Credit Facility with a Lending Consortium Arranged by Truist We maintain a revolving credit facility with Truist Securities (Truist) (the Credit Facility) with availability of up to $600.0 million in aggregate principal. The maturity date of the Credit Facility is April 8, 2027. Borrowings are supported by a lending consortium arranged by Truist.
We may, in the future, seek to raise additional capital to fund growth, capital renovations, operations and other business activities, but such additional capital may not be available on acceptable terms, on a timely basis, or at all. Our cash and cash equivalents as of December 31, 2023 consisted of bank term deposits, money market funds and U.S.
We may, in the future, seek to raise additional capital to fund growth, capital renovations, operations and other business activities, but such additional capital may not be available on acceptable terms, on a timely basis, or at all. Our cash and cash equivalents as of December 31, 2024 consisted of bank term deposits, money market funds and U.S.
Overview We are a provider of health care services across the post-acute care continuum. We engage in the operation, ownership, acquisition, development and leasing of skilled nursing, senior living and other healthcare related properties and ancillary businesses located in Arizona, California, Colorado, Idaho, Iowa, Kansas, Nebraska, Nevada, South Carolina, Texas, Utah, Washington and Wisconsin.
Overview We are a provider of health care services across the post-acute care continuum. We engage in the operation, ownership, acquisition, development and leasing of skilled nursing, senior living and other healthcare related properties and ancillary businesses located in Alabama, Arizona, California, Colorado, Idaho, Iowa, Kansas, Nebraska, Nevada, South Carolina, Tennessee, Texas, Utah, Washington and Wisconsin.
We believe our investments that were in an unrealized loss position as of December 31, 2023 do not require an allowance for expected credit losses, nor has any event occurred subsequent to that date that would indicate so. 86 Table of Contents As mentioned above, our primary source of cash is from our ongoing operations.
We believe our investments that were in an unrealized loss position as of December 31, 2024 do not require an allowance for expected credit losses, nor has any event occurred subsequent to that date that would indicate so. 86 Table of Contents As mentioned above, our primary source of cash is from our ongoing operations.
We also lease certain facilities and our administrative offices under non-cancelable operating leases, most of which have initial lease terms ranging from five to 20 years and is subject to annual escalation equal to the percentage change in the Consumer Price Index with a stated cap percentage.
We also lease certain facilities and our administrative offices under non-cancelable operating leases, most of which have initial lease terms ranging from five to 20 years and are subject to annual escalation equal to the percentage change in the Consumer Price Index with a stated cap percentage.
Our positive cash flows have supported our business and have allowed us to pay regular dividends to our stockholders. We currently anticipate that existing cash and total investments as of December 31, 2023, along with projected operating cash flows and available financing, will support our normal business operations for the foreseeable future.
Our positive cash flows have supported our business and have allowed us to pay regular dividends to our stockholders. We currently anticipate that existing cash and total investments as of December 31, 2024, along with projected operating cash flows and available financing, will support our normal business operations for the foreseeable future.
Revenue and expenses related to skilled nursing and senior living services have been allocated and recorded in the respective operating segment. (2) Same Facility results represent all facilities purchased prior to January 1, 2020. (3) Transitioning Facility results represent all facilities purchased from January 1, 2020 to December 31, 2021.
Revenue and expenses related to skilled nursing and senior living services have been allocated and recorded in the respective operating segment. (2) Same Facility results represent all facilities purchased prior to January 1, 2021. (3) Transitioning Facility results represent all facilities purchased from January 1, 2021 to December 31, 2022.
We define (in accordance with the definition used by NAREIT) FFO to consist of Standard Bearer segment income, excluding depreciation and amortization related to real estate, gains or losses from the sale of real estate, insurance recoveries related to real estate and impairment of depreciable real estate assets.
We define (in accordance with the definition used by NAREIT) FFO to consist of Standard Bearer segment income, excluding depreciation and amortization related to real estate, gains or losses from the sale of real estate, insurance recoveries related to real estate and impairment of long-lived assets.
The terms for all the mortgage loans are 25 to 35 years. In addition to the HUD mortgage loans, one of our subsidiaries has a promissory note that bears a fixed interest rate of 5.3% per annum and has a term of 12 years.
The terms for all the mortgage loans are 25 to 35 years. 88 Table of Contents In addition to the HUD mortgage loans, one of our subsidiaries has a promissory note that bears a fixed interest rate of 5.3% per annum and has a term of 12 years.
For discussion of 2021 items and year-over-year comparisons between 2022 and 2021 that are not included in this 2023 Form 10-K, refer to “Item 7. – Management’s Discussion and Analysis of Financial Condition and Results of Operations” found in our Form 10-K for the year ended December 31, 2022, that was filed with the Securities and Exchange Commission on February 2, 2023.
For discussion of 2022 items and year-over-year comparisons between 2023 and 2022 that are not included in this 2024 Form 10-K, refer to “Item 7. – Management’s Discussion and Analysis of Financial Condition and Results of Operations” found in our Form 10-K for the year ended December 31, 2023, that was filed with the Securities and Exchange Commission on February 1, 2024.
A discussion of our cash flows for the year ended December 31, 2021 is included in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources, included in our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the Securities and Exchange Commission on February 2, 2023.
A discussion of our cash flows for the year ended December 31, 2022 is included in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources, included in our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the Securities and Exchange Commission on February 1, 2024.
In addition, we lease certain of our equipment under non-cancelable operating leases with initial terms ranging from three to five years. Most of these leases contain renewal options, certain of which involve rent increases. Eighty of our independent subsidiaries, excluding the subsidiaries that are operated under the Master Leases from CareTrust, are operated under 13 separate master lease arrangements.
In addition, we lease certain of our equipment under non-cancelable operating leases with initial terms ranging from three to five years. Most of these leases contain renewal options, certain of which involve rent increases. Ninety of our independent subsidiaries, excluding the subsidiaries that are operated under the Master Leases from CareTrust, are operated under 14 separate master lease arrangements.
We also establish compensation programs and bonuses for our leaders that are partially based upon the achievement of Adjusted EBITDAR targets. Despite the importance of these measures in analyzing our underlying business, designing incentive compensation and for our goal setting, the Non-GAAP Financial Measures have no standardized meaning defined by GAAP.
We also establish compensation programs and bonuses for our leaders that are partially based upon the achievement of certain Non-GAAP Financial Measures. Despite the importance of these measures in analyzing our underlying business, designing incentive compensation and for our goal setting, the Non-GAAP Financial Measures have no standardized meaning defined by GAAP.
Numerous independent subsidiaries entered into transactions with various hospital districts providing for the transfer of the licenses for those skilled nursing facilities to the hospital districts. Each affected independent subsidiary agreement between the hospital district and our subsidiary is terminable by either party to fully restore the prior license status.
A number of our independent subsidiaries have entered into transactions with various hospital districts providing for the transfer of the licenses for those skilled nursing facilities to the hospital districts. Each affected independent subsidiary agreement between the hospital district and our subsidiary is terminable by either party to fully restore the prior license status.
The following table summarizes our overall skilled mix from our skilled nursing services for the periods indicated as a percentage of our total skilled nursing routine revenue and as a percentage of total skilled nursing patient days: Year Ended December 31, Skilled Mix: 2023 2022 Days 30.4 % 31.8 % Revenue 50.2 % 52.0 % 73 Table of Contents Occupancy — We define occupancy derived from our skilled services as the ratio of actual patient days (one patient day equals one patient occupying one bed for one day) during any measurement period to the number of beds in facilities which are available for occupancy during the measurement period.
The following table summarizes our overall skilled mix from our skilled nursing services for the periods indicated as a percentage of our total skilled nursing routine revenue and as a percentage of total skilled nursing patient days: Year Ended December 31, Skilled Mix: 2024 2023 Days 29.9 % 30.4 % Revenue 48.6 % 50.2 % 73 Table of Contents Occupancy — We define occupancy derived from our skilled services as the ratio of actual patient days (one patient day equals one patient occupying one bed for one day) during any measurement period to the number of beds in facilities which are available for occupancy during the measurement period.
Common Stock Repurchase Program — On August 29, 2023, the Board of Directors approved a stock repurchase program pursuant to which we may repurchase up to $20.0 million of our common stock under the program for a period of approximately 12 months from September 1, 2023.
On May 16, 2024, the Board of Directors approved a stock repurchase program pursuant to which we may repurchase up to $20.0 million of our common stock under the program for a period of approximately 12 months from September 1, 2024.
Operating Leases As of December 31, 2023, 214 of our facilities are under long-term lease arrangements, of which 96 of the operations are under nine triple-net Master Leases and one stand-alone lease with CareTrust REIT, Inc. (CareTrust). The Master Leases consist of multiple leases, each with its own pool of properties, that have varying maturities and diversity in property geography.
Operating Leases As of December 31, 2024, 231 of our facilities are under long-term lease arrangements, of which 99 of the operations are under nine triple-net Master Leases and one stand-alone lease with CareTrust. The Master Leases consist of multiple leases, each with its own pool of properties, that have varying maturities and diversity in property geography.
These rates exclude additional state relief funding, which includes ARPA, FFCRA and other state relief programs. • Occupancy percentage (operational beds) — The total number of patients occupying a bed in a skilled nursing facility as a percentage of the beds in a facility which are available for occupancy during the measurement period. • Number of facilities and operational beds — The total number of skilled nursing facilities that we own or operate and the total number of operational beds associated with these facilities.
These rates exclude additional state relief funding, which includes the American Rescue Plan Act (ARPA), the Family First Coronavirus Response Act (FFCRA) and other state specific relief programs. • Occupancy percentage (operational beds) — The total number of patients occupying a bed in a skilled nursing facility as a percentage of the beds in a facility which are available for occupancy during the measurement period. • Number of facilities and operational beds — The total number of skilled nursing facilities that we own or operate and the total number of operational beds associated with these facilities.
Adjusted EBT is income before provision for income taxes adjusted for non-core business items, which for the reported periods includes, to the extent applicable: • stock-based compensation expense; • litigation; • gain on sale of assets and business interruption of recoveries; • write-off of deferred financing fees; • acquisition related costs; • costs incurred related to new systems implementation; and • depreciation and amortization of patient base intangible assets.
Adjusted EBT is income before provision for income taxes adjusted for non-core business items, which for the reported periods includes, to the extent applicable: • stock-based compensation expense; • litigation; • loss (gain) on long-lived assets and gain on business interruption recoveries; • acquisition related costs; • costs incurred related to system implementations; • write off of deferred financing fees; and • amortization of patient base intangible assets.
(b) Costs incurred to acquire operations that are not capitalizable. Year Ended December 31, 2023 Compared to the Year Ended December 31, 2022 The following table sets forth details of operating results for our revenue and earnings, and their respective components, by our reportable segment for the periods indicated.
(2) Costs incurred to acquire operations that are not capitalizable. Year Ended December 31, 2024 Compared to the Year Ended December 31, 2023 The following tables set forth details of operating results for our revenue and earnings, and their respective components, by our reportable segment for the periods indicated.
The following table summarizes our overall occupancy statistics for skilled nursing operations for the periods indicated: Year Ended December 31, Occupancy for skilled services: 2023 2022 Operational beds at end of period 30,602 28,130 Available patient days 10,940,320 9,614,460 Actual patient days 8,590,995 7,243,781 Occupancy percentage (based on operational beds) 78.5 % 75.3 % Segments We have two reportable segments: (1) skilled services, which includes the operation of skilled nursing facilities and rehabilitation therapy services and (2) Standard Bearer, which is comprised of select properties owned by us through our captive REIT and leased to skilled nursing and senior living operations, including our own independent subsidiaries and third-party operators.
The following table summarizes our overall occupancy statistics for skilled nursing operations for the periods indicated: Year Ended December 31, Occupancy for skilled services: 2024 2023 Operational beds at end of period 33,547 30,602 Available patient days 11,710,297 10,940,320 Actual patient days 9,431,825 8,590,995 Occupancy percentage (based on operational beds) 80.5 % 78.5 % Segments We have two reportable segments: (1) skilled services, which includes the operation of skilled nursing facilities and rehabilitation therapy services and (2) Standard Bearer, which is comprised of select properties owned by us through our captive REIT and leased to skilled nursing and senior living operations, including our own independent subsidiaries and third-party operators.
Of the 30 real estate operations leased to third-party operators, one senior living facility is located on the same real estate property as a skilled nursing facility that we own and operate. 71 Table of Contents Ensign is a holding company with no direct operating assets, employees or revenues.
Of the 33 third-party operations, one senior living operation is located on the same real estate property as a skilled nursing operation that we own and operate. 71 Table of Contents The Ensign Group, Inc. is a holding company with no direct operating assets, employees or revenues.
Our real estate portfolio includes 113 owned real estate properties, which includes 83 facilities operated and managed by us, 30 operations leased to and operated by third-party operators and the Service Center location.
Our real estate portfolio includes 129 owned real estate properties, which includes 96 facilities operated and managed by us, 33 operations leased to and operated by third-party operators and the Service Center location.
During the year ended December 31, 2023, we generated rental revenues of $82.5 million, of which $66.7 million, was derived from our independent subsidiaries' operators and therefore eliminated in consolidation. 74 Table of Contents Other — Within our senior living operations, we generate revenue primarily from private pay sources, with a portion earned from Medicaid payors or through other state-specific programs.
During the year ended December 31, 2024, we generated rental revenues of $95.1 million, of which $78.1 million was derived from our independent subsidiaries and therefore eliminated in consolidation. 74 Table of Contents Other — Within our senior living operations, we generate revenue primarily from private pay sources, with a portion earned from Medicaid payors or through other state-specific programs.
Our general and professional liability as of the year ended December 31, 2023 and 2022 was $117.7 million and $87.0 million, respectively. Our policy is to accrue amounts equal to the actuarially estimated costs to settle open claims of insureds, as well as an estimate of the cost of insured claims that have been incurred but not reported.
Our general and professional liability as of the years ended December 31, 2024 and 2023 was $160.1 million and $117.7 million, respectively. 75 Table of Contents Our policy is to accrue amounts equal to the actuarially estimated costs to settle open claims of insureds, as well as an estimate of the cost of insured claims that have been incurred but not reported.
Our independent subsidiaries, each of which strive to be the operation of choice in the community they serve, provide a broad spectrum of services. As of December 31, 2023, we offered skilled nursing, senior living and rehabilitative care services through 297 skilled nursing and senior living facilities.
Our independent subsidiaries, each of which strive to be the operation of choice in the communities they serve, provide a broad spectrum of services. As of December 31, 2024, we offered skilled nursing, long term acute care, senior living and rehabilitative care services through 327 skilled nursing and senior living facilities.
As of December 31, 2023, our real estate portfolio within Standard Bearer is comprised of 108 real estate properties. Of these properties, 79 are leased to our independent subsidiaries and 30 are leased to facilities wholly-owned and managed by third-party operators.
As of December 31, 2024, our real estate portfolio within Standard Bearer is comprised of 124 real estate properties. Of these properties, 92 are leased to our independent subsidiaries and 33 are leased to facilities wholly-owned and managed by third-party operators.
We continued to see a shift in our patient population from Medicare to managed care as Medicare Advantage enrollment accounts for a larger portion of the overall population. In addition, Medicaid revenue increased by $116.7 million or 9.9%, mainly from the increases in Medicaid days and revenue per patient day.
We continued to see a shift in our patient population from Medicare to managed care as Medicare Advantage enrollment continues to account for a larger portion of the overall Medicare eligible population. In addition, Medicaid revenue increased by $89.8 million or 6.8%, mainly from the increases in Medicaid days and revenue per patient day.
Included in our metrics for Recently Acquired Facilities are 17 facilities we acquired that are mature and have higher occupancy rates, higher skilled mix days and higher skilled mix revenue than our typical acquisitions.
Included in our metrics for Recently Acquired Facilities are 17 facilities we acquired in California in 2023 that were more mature and accordingly, had higher occupancy rates, higher skilled mix days and higher skilled mix revenue than our typical acquisitions.
The following table presents selected data from our consolidated statement of cash flows for the periods presented: Year Ended December 31, 2023 2022 NET CASH PROVIDED BY/(USED IN): (In thousands) Operating activities $ 376,666 $ 272,513 Investing activities (182,698) (186,182) Financing activities (612) (32,262) Net increase in cash and cash equivalents 193,356 54,069 Cash and cash equivalents beginning of period 316,270 262,201 Cash and cash equivalents at end of period $ 509,626 $ 316,270 Operating Activities Cash provided by operating activities is net income adjusted for certain non-cash items and changes in operating assets and liabilities.
The following table presents selected data from our consolidated statement of cash flows for the periods presented: Year Ended December 31, 2024 2023 NET CASH PROVIDED BY/(USED IN): (In thousands) Operating activities $ 347,186 $ 376,666 Investing activities (390,052) (182,698) Financing activities (2,162) (612) Net (decrease) increase in cash and cash equivalents $ (45,028) $ 193,356 Cash and cash equivalents beginning of period 509,626 316,270 Cash and cash equivalents at end of period $ 464,598 $ 509,626 Operating Activities Cash provided by operating activities is net income adjusted for certain non-cash items and changes in operating assets and liabilities.
Skilled services revenue generated by Recently Acquired Facilities increased by approximately $450.0 million compared to the year ended December 31, 2022.
Skilled services revenue generated by Recently Acquired Facilities increased by approximately $271.7 million compared to the year ended December 31, 2023.
Medicaid rates exclude the amount of state relief revenue we recorded. Payor Sources as a Percentage of Skilled Nursing Services — We use our skilled mix as a measure of the quality of reimbursements we receive at our independent skilled nursing facilities over various periods.
Payor Sources as a Percentage of Skilled Nursing Services — We use our skilled mix as a measure of the quality of reimbursements we receive at our independent skilled nursing facilities over various periods.
The following tables set forth our percentage of skilled nursing patient revenue and days by payor source: Year Ended December 31, Same Facility Transitioning Acquisitions Total 2023 2022 2023 2022 2023 2022 2023 2022 PERCENTAGE OF SKILLED NURSING REVENUE Medicare 22.5 % 26.0 % 21.8 % 24.9 % 31.0 % 20.4 % 23.8 % 25.7 % Managed care 20.1 19.2 12.6 12.6 13.3 9.9 18.5 18.3 Other skilled 8.8 8.1 4.1 3.9 5.0 12.5 7.9 8.0 Skilled mix 51.4 53.3 38.5 41.4 49.3 42.8 50.2 52.0 Private and other payors 7.5 7.0 8.6 8.1 8.0 6.4 7.6 7.0 Medicaid 41.1 39.7 52.9 50.5 42.7 50.8 42.2 41.0 TOTAL SKILLED NURSING 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 84 Table of Contents Year Ended December 31, Same Facility Transitioning Acquisitions Total 2023 2022 2023 2022 2023 2022 2023 2022 PERCENTAGE OF SKILLED NURSING DAYS Medicare 11.9 % 13.9 % 10.7 % 12.4 % 14.5 % 9.3 % 12.3 % 13.5 % Managed care 14.4 14.0 8.0 8.3 8.8 6.4 13.0 13.1 Other skilled 5.6 5.1 2.7 2.4 4.2 8.6 5.1 5.2 Skilled mix 31.9 33.0 21.4 23.1 27.5 24.3 30.4 31.8 Private and other payors 11.0 10.4 11.7 10.8 11.1 9.5 11.0 10.3 Medicaid 57.1 56.6 66.9 66.1 61.4 66.2 58.6 57.9 TOTAL SKILLED NURSING 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % Cost of Services The following table sets forth total cost of services for our skilled services segment for the periods indicated (dollars in thousands): Year Ended December 31, Change 2023 2022 $ % Cost of service $ 2,832,012 $ 2,267,691 $ 564,321 24.9 % Revenue percentage 79.1 % 78.0 % 1.1 % Cost of services related to our skilled services segment increased by $564.3 million, or 24.9% from prior year.
The following tables set forth our percentage of skilled nursing patient revenue and days by payor source: Year Ended December 31, Same Facility Transitioning Acquisitions Total 2024 2023 2024 2023 2024 2023 2024 2023 PERCENTAGE OF SKILLED NURSING REVENUE Medicare 20.5 % 22.4 % 19.4 % 20.8 % 31.4 % 42.2 % 21.9 % 23.8 % Managed care 20.4 20.1 14.3 12.3 12.7 13.3 18.6 18.5 Other skilled 9.3 8.7 4.7 5.3 4.8 4.2 8.1 7.9 Skilled mix 50.2 % 51.2 % 38.4 % 38.4 % 48.9 % 59.7 % 48.6 % 50.2 % Private and other payors 7.2 7.6 8.6 8.9 8.2 6.4 7.5 7.6 Medicaid 42.6 41.2 53.0 52.7 42.9 33.9 43.9 42.2 TOTAL SKILLED NURSING 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 84 Table of Contents Year Ended December 31, Same Facility Transitioning Acquisitions Total 2024 2023 2024 2023 2024 2023 2024 2023 PERCENTAGE OF SKILLED NURSING DAYS Medicare 10.9 % 11.9 % 9.4 % 9.8 % 16.2 % 22.7 % 11.4 % 12.3 % Managed care 14.8 14.3 9.3 7.5 9.4 10.1 13.4 13.0 Other skilled 6.0 5.6 3.1 3.4 3.3 4.6 5.1 5.1 Skilled mix 31.7 % 31.8 % 21.8 % 20.7 % 28.9 % 37.4 % 29.9 % 30.4 % Private and other payors 10.4 11.0 12.0 12.1 10.7 8.6 10.7 11.0 Medicaid 57.9 57.2 66.2 67.2 60.4 54.0 59.4 58.6 TOTAL SKILLED NURSING 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % Cost of Services The following table sets forth total cost of services for our skilled services segment for the periods indicated (dollars in thousands): Year Ended December 31, Change 2024 2023 $ % Cost of service $ 3,242,737 $ 2,832,012 $ 410,725 14.5 % Revenue percentage 79.5 % 79.1 % 0.4 % Cost of services related to our skilled services segment increased by $410.7 million, or 14.5%, from the same period in 2023.
Our diligent efforts to strengthen our partnerships with various managed care organizations, hospitals and the local communities we operate in, increased our managed care revenue by 14.8%, mainly due to increases in managed care days of 7.2% and revenue per patient day of 5.3%.
Our diligent efforts to strengthen our partnerships with various managed care organizations, hospitals and local communities, increased our managed care revenue by 12.1%, mainly due to increases in managed care days of 6.5% and revenue per patient day of 3.6%.
The increase in revenue is primarily attributable to five real estate purchases as well as annual rent increases since the year ended December 31, 2022. FFO — Our FFO increased by $4.8 million, or 9.7%, to $54.3 million, compared to the year ended December 31, 2022.
The increase in revenue is primarily attributable to 17 real estate purchases as well as annual rent increases since the year ended December 31, 2023. FFO — Our FFO increased by $4.4 million, or 8.0%, to $58.6 million, compared to the year ended December 31, 2023.
Depreciation and amortization — Depreciation and amortization expense increased $10.0 million, or 16.1%, to $72.4 million. This increase was primarily related to the additional depreciation and amortization incurred as a result of our newly acquired operations and capital expenditures. Depreciation and amortization decreased 0.2%, to 1.9%, as a percentage of revenue.
Depreciation and amortization — Depreciation and amortization expense increased by $11.8 million, or 16.2%, to $84.1 million. This increase was primarily related to the additional depreciation and amortization incurred as a result of our newly acquired operations and capital expenditures. Depreciation and amortization expense as a percentage of revenue remained consistent at 1.9%.
Our strength remains in our operating model, which empowers each operator to form their own market-specific strategy and adjust to the needs of their local medical communities, including methods for attracting new healthcare professionals into our workforce and retaining and developing existing staff.
Our strength remains in our operating model, which empowers each operator to form their own market-specific strategy and adjust to the needs of their local medical communities, including methods for attracting new healthcare professionals into our workforce and retaining and developing existing staff. Despite continued labor pressures, there are positive trends on both turnover and agency usage across our operations.
On August 29, 2023, the Board of Directors approved a stock repurchase program pursuant to which we may repurchase up to $20.0 million of our common stock under the program for a period of approximately 12 months from September 1, 2023.
Common Stock Repurchase Program — On May 16, 2024, the Board of Directors approved a stock repurchase program pursuant to which we may repurchase up to $20.0 million of our common stock under the program for a period of approximately 12 months from September 1, 2024. We did not repurchase any shares during the fiscal year 2024.
In addition, we hold majority membership interests in certain of our other ancillary operations. Payment for these services varies and is based upon the service provided. The payment is adjusted for an inability to obtain appropriate billing documentation or authorizations acceptable to the payor and other reasons unrelated to credit risk.
Payment for these services varies and is based upon the service provided. The payment is adjusted for an inability to obtain appropriate billing documentation or authorizations acceptable to the payor and other reasons unrelated to credit risk.
Under this program, we are authorized to repurchase our issued and outstanding common shares from time to time in open-market and privately negotiated transactions and block trades in accordance with federal securities laws. The share repurchase program does not obligate us to acquire any specific number of shares.
Under these repurchase programs, we are authorized to repurchase our issued and outstanding common shares from time to time in open-market and privately negotiated transactions, tender offers, pursuant to contractual provisions, and block trades, or otherwise in accordance with federal securities laws. The stock repurchase programs do not obligate us to acquire any specific number of shares.
Our Medicare daily rates at Same Facilities and Transitioning Facilities increased by 4.1% and 4.2%, respectively, compared to the year ended December 31, 2022. The increase is attributable to the 2.7% and 4.0% net market basket increase that became effective in October 2022 and October 2023, respectively, offset by the phased reinstatement of the sequestration.
Our Medicare daily rates at Same Facilities and Transitioning Facilities increased by 5.1% and 4.1%, respectively, compared to the year ended December 31, 2023. The increase is attributable to the 4.0% and 4.2% net market basket increase that became effective in October 2023 and October 2024, respectively, and a shift toward higher acuity patients.
Treasury bill related investments. In addition, as of December 31, 2023, we held investments of approximately $109.9 million.
Treasury bill related investments. In addition, as of December 31, 2024, we held investments of approximately $203.5 million.
This structure gives us new pathways to growth with transactions we would not have considered in the past. During the year ended December 31, 2023, Standard Bearer acquired the real estate of three stand-alone skilled nursing facilities and two campus operations for an aggregate purchase price of $65.9 million .
This structure gives us new pathways to growth with transactions we would not have considered in the past. During the year ended December 31, 2024, Standard Bearer added $131.9 million of real estate associated with 11 stand-alone skilled nursing operations, three stand-alone senior living operations and three campus operations.
We believe that the application of the following accounting policies, which are important to our financial position and results of operations, require significant judgments and estimates on the part of management. For a summary of our significant accounting policies, including the accounting policies discussed below, see Note 2, Summary of Significant Accounting Policies of the Notes to Consolidated Financial Statements.
We believe that the application of the following accounting policies, which are important to our financial position and results of operations, require significant judgments and estimates on the part of management.
We use the expected value method in determining the variable component that should be used to arrive at the transaction price, using contractual agreements and historical reimbursement experience within each payor type.
We determine the transaction price based on contractually agreed-upon amounts or rates, adjusted for estimates of variable consideration. We use the expected value method in determining the variable component that should be used to arrive at the transaction price, using contractual agreements and historical reimbursement experience within each payor type.
The following table sets forth details of operating results for our revenue, expenses and earnings, and their respective components, as a percentage of total revenue for the periods indicated: 76 Table of Contents Year Ended December 31, 2023 2022 REVENUE: Service revenue 99.4 % 99.4 % Rental revenue 0.6 0.6 TOTAL REVENUE 100.0 % 100.0 % Expenses: Cost of services 78.9 77.8 Rent—cost of services 5.3 5.1 General and administrative expense 7.1 5.2 Depreciation and amortization 1.9 2.1 TOTAL EXPENSES 93.2 90.2 Income from operations 6.8 9.8 Other income (expense): Interest expense (0.2) (0.3) Other income 0.7 — Other income (expense), net 0.5 (0.3) Income before provision for income taxes 7.3 9.5 Provision for income taxes 1.7 2.1 NET INCOME 5.6 7.4 Less: net income attributable to noncontrolling interests — — Net income attributable to The Ensign Group, Inc. 5.6 % 7.4 % Year Ended December 31, 2023 2022 SEGMENT INCOME (1) (In thousands) Skilled services $ 464,925 $ 408,732 Standard Bearer (2) 29,065 27,871 NON-GAAP FINANCIAL MEASURES: PERFORMANCE METRICS Adjusted EBT 365,310 314,609 EBITDA (3) 327,303 359,209 Adjusted EBITDA 419,496 383,570 FFO for Standard Bearer 54,270 49,484 VALUATION METRICS Adjusted EBITDAR $ 616,854 (1) Segment income represents operating results of the reportable segments excluding gain and loss on sale of assets, real estate insurance recoveries and losses, impairment charges and provision for income taxes.
During 2024, we added over 4,000 full-time equivalent team members, or 11%, to our independent subsidiaries and the Service Center. 76 Table of Contents The following table sets forth details of operating results for our revenue, expenses and earnings, and their respective components, as a percentage of total revenue for the periods indicated: Year Ended December 31, 2024 2023 REVENUE: Service revenue 99.5 % 99.4 % Rental revenue 0.5 0.6 TOTAL REVENUE 100.0 % 100.0 % Expenses: Cost of services 79.3 78.9 Rent—cost of services 5.1 5.3 General and administrative expense 5.3 7.1 Depreciation and amortization 1.9 1.9 TOTAL EXPENSES 91.6 % 93.2 % Income from operations 8.4 6.8 Other income (expense): Interest expense (0.2) (0.2) Interest income 0.7 0.5 Other income (expense) 0.2 0.2 OTHER INCOME (EXPENSE), NET 0.7 % 0.5 % Income before provision for income taxes 9.1 7.3 Provision for income taxes 2.1 1.7 NET INCOME 7.0 % 5.6 % Less: net income attributable to noncontrolling interests — — Net income attributable to The Ensign Group, Inc. 7.0 % 5.6 % Year Ended December 31, 2024 2023 SEGMENT INCOME (1) (In thousands) Skilled services $ 518,463 $ 464,925 Standard Bearer (2) 29,335 29,065 NON-GAAP FINANCIAL MEASURES: PERFORMANCE METRICS Adjusted EBT $ 427,976 $ 365,310 EBITDA (3) 449,284 333,569 Adjusted EBITDA 490,392 425,762 FFO for Standard Bearer 58,632 54,270 VALUATION METRICS Adjusted EBITDAR $ 706,408 (1) Segment income represents operating results of the reportable segments excluding gain and loss on sale of assets, real estate insurance recoveries and losses, impairment charges and provision for income taxes.
Of these additions, the three skilled nursing facilities and one campus operation acquired are operated by our independent subsidiaries and the other campus operation is leased to a new third-party operator. Our existing relationship with third-party operators within our industry allowed us to expand our growing REIT structure to operators outside of our organization.
Of these additions, the stand-alone skilled nursing and campus operations are operated by 14 of our independent subsidiaries and the three stand-alone senior living operations are leased to a third-party operator. Our existing relationships with third-party operators within our industry have allowed us to expand our growing REIT structure to operators outside of our organization.
Revenue in our Same Facilities increased $201.8 million, or 7.9%, compared to the same period in 2022, due to increases in occupancy from both skilled and long-term care patients and revenue per patient day.
Revenue in our Same Facilities increased $195.3 million, or 6.9%, compared to the same period in 2023, due to increased occupancy from long-term care patients, strong skilled days and revenue per patient day.
In addition, certain of our wholly-owned subsidiaries including Ensign Services, Inc. and Cornet Limited, Inc., referred to collectively as the Service Center, provide centralized accounting, payroll, human resources, information technology, legal, risk management and other centralized services to the other independent subsidiaries through contractual relationships with such subsidiaries.
Our subsidiaries are operated by separate, independent entities, each of which has its own management, employees and assets. In addition, certain of our wholly-owned subsidiaries including Ensign Services, Inc. and Cornet Limited, Inc., referred to collectively as the Service Center, provide centralized accounting, payroll, human resources, information technology, legal, risk management and other centralized services to the other independent subsidiaries.
The increase in rental revenue of $9.5 million is offset by increases in interest expense of $4.3 million associated with the intercompany debt arrangements between Standard Bearer and us, as we continue to grow our real estate portfolio. 85 Table of Contents All Other Revenue Our other revenue increased by $33.2 million, or 27.1%, to $155.8 million, compared to the year ended December 31, 2022.
The increase in rental revenue of $12.6 million is offset by increases in interest expense of $7.4 million associated with the intercompany debt arrangements as Standard Bearer continues to grow its real estate portfolio. 85 Table of Contents All Other Revenue Our other revenue increased by $37.1 million, or 23.8%, to $192.9 million, compared to the year ended December 31, 2023.
We calculate EBITDA as net income, adjusted for net losses attributable to noncontrolling interest, before (a) other income (expense), net, (b) provision for income taxes, and (c) depreciation and amortization.
We calculate EBITDA as net income, adjusted for net losses attributable to noncontrolling interest, before (a) interest income, (b) provision for income taxes, (c) depreciation and amortization, and (d) interest expense. EBITDA in the prior period has been recast to conform to the current period presentation.
The increases in skilled services revenue were across all payer types including increases in Medicaid revenue of $315.9 million, or 23.2%, Medicare revenue of $153.6 million, or 18.5%, managed care revenue of $140.4 million, or 26.7% and private revenue of $62.7 million, or 33.1%.
The increases in skilled services revenue were across all payer types including increases in Medicaid revenue of $238.0 million, or 14.2%, Medicare revenue of $69.4 million, or 7.0%, managed care revenue of $123.6 million, or 18.6% and private revenue of $67.0 million, or 26.6%.
See Note 14, Income Taxes , in the Financial Statements for further discussion. Liquidity and Capital Resources Our primary sources of liquidity have historically been derived from our cash flows from operations and long-term debt secured by our real property and our Credit Facility.
Liquidity and Capital Resources Our primary sources of liquidity have historically been derived from our cash flows from operations and long-term debt secured by our real property and our Credit Facility (defined below).
Material cash requirements from known contractual and other obligations Total long-term debt obligations outstanding as of the end of each fiscal year were as follows: December 31, 2023 2022 2021 2020 2019 (In thousands) Credit facilities and term loans $ — $ — $ — $ — $ 210,000 Mortgage loans and promissory note 152,388 156,271 159,967 117,806 120,350 TOTAL $ 152,388 $ 156,271 $ 159,967 $ 117,806 $ 330,350 Significant contractual obligations as of December 31, 2023 were as follows, including the future periods in which payments are expected: 2024 2025 2026 2027 2028 Thereafter Total (In thousands) Operating lease obligations $ 191,352 $ 191,269 $ 191,058 $ 190,481 $ 189,224 $ 1,722,259 $ 2,675,643 Long-term debt obligations 3,950 4,086 4,227 3,897 3,779 132,449 152,388 Interest payments on long-term debt 4,623 4,487 4,346 4,207 4,091 54,436 76,190 TOTAL $ 199,925 $ 199,842 $ 199,631 $ 198,585 $ 197,094 $ 1,909,144 $ 2,904,221 Not included in the table above are our actuarially determined self-insured general and professional malpractice liability, workers' compensation and medical (including prescription drugs) and dental healthcare obligations, which are broken out between current and long-term liabilities in our financial statements included in this Annual Report on Form 10-K.
Material cash requirements from known contractual and other obligations Total long-term debt obligations, net of debt discount, outstanding as of the end of each fiscal year were as follows: December 31, 2024 2023 2022 2021 2020 (In thousands) Mortgage loans and promissory note 148,438 152,388 156,271 159,967 117,806 TOTAL $ 148,438 $ 152,388 $ 156,271 $ 159,967 $ 117,806 Significant contractual obligations as of December 31, 2024 were as follows, including the future periods in which payments are expected: 2025 2026 2027 2028 2029 Thereafter Total (In thousands) Operating lease obligations $ 204,909 $ 204,696 $ 204,002 $ 202,994 $ 199,144 $ 1,776,571 $ 2,792,316 Long-term debt obligations 4,086 4,227 3,897 3,779 3,896 128,553 148,438 Interest payments on long-term debt 4,487 4,346 4,207 4,091 3,974 50,463 71,568 TOTAL $ 213,482 $ 213,269 $ 212,106 $ 210,864 $ 207,014 $ 1,955,587 $ 3,012,322 Not included in the table above are our actuarially determined self-insured general and professional malpractice liability, workers' compensation and medical (including prescription drugs) and dental healthcare obligations which are broken out between current and long-term liabilities in our financial statements included in this Annual Report on Form 10-K.
Other income (expense), net — Other income (expense), net as a percentage of revenue increased by 0.8%. Other income primarily includes interest income from our investments offset by interest expense related to our debt. Additionally, our deferred investment program may incur gains or losses depending on market performance.
Other income (expense), net — Other income (expense), net as a percentage of revenue increased by 0.2%. Other income primarily includes interest income from our investments, interest expense related to our debt and deferred compensation gains and losses.
The increase in revenue was primarily driven by an increase in occupancy of 3.2% from our skilled services Same Facilities and Transitioning Facilities coupled with increasing daily revenue rates and the impact of acquisitions.
The increase in revenue was primarily driven by an increase in occupancy of 2.7% and 4.1% from our skilled services in Same Facilities and Transitioning Facilities, respectively, coupled with increasing daily revenue rates and the impact of acquisitions. Additionally, our skilled services in Recently Acquired Facilities increased total revenue by $271.7 million, when compared to the same period in 2023.
Additionally, four of the 97 facilities leased from CareTrust include an option to purchase that we can exercise starting on December 1, 2024.
Additionally, four of the 100 facilities leased from CareTrust include an option to purchase that we can exercise starting on December 1, 2024. Subsequent to December 31, 2024, we, through Standard Bearer, exercised the option to purchase the real estate of the four facilities from CareTrust for $44.6 million.
Over the last five years, our total revenue increased by $2.0 billion, or 112.5%, representing a 16.3% compound annual growth rate (CAGR) while our diluted GAAP earning per share (EPS) from continued operations grew by $2.56 from 2018 to $3.65 in 2023, representing a 27.4% CAGR.
Over the last five years, our total revenue increased by $2.2 billion, or 109.2%, representing a 15.9% compound annual growth rate (CAGR) while our diluted GAAP earning per share (EPS) from continuing operations grew by $3.48 from 2019 to 2024, representing a 25.6% CAGR.
Our total revenue for the year ended December 31, 2023 increased $703.9 million, or 23.3%, compared to the year ended December 31, 2022.
Our total revenue for the year ended December 31, 2024 increased $531.1 million, or 14.2%, compared to the year ended December 31, 2023.
Cash paid to fund acquisitions was $69.0 million and $101.1 million for the year ended December 31, 2023 and 2022, respectively. Total capital expenditures for property and equipment were $106.2 million and $87.5 million for the year ended December 31, 2023 and 2022, respectively. We currently have approximately $110.0 million budgeted for renovation projects in 2024.
Total capital expenditures for property and equipment were $158.2 million and $106.2 million for the years ended December 31, 2024 and 2023, respectively. We currently have approximately $150.0 million budgeted for renovation projects in 2025.
General and Administrative Expense — General and administrative expense consists primarily of payroll and related benefits and travel expenses for our Service Center personnel, including training and other operational support.
General and Administrative Expense — General and administrative expense consists primarily of payroll and related benefits and travel expenses for our Service Center personnel, including training and other operational support. General and administrative expense also includes professional fees (including accounting and legal fees), costs relating to our information systems and stock-based compensation related to our Service Center employees.
Investing Activities Investing cash flows consist primarily of capital expenditures, investment activities, insurance proceeds and cash used for acquisitions.
This cash outflow was partially offset by an increase in operational performance. Investing Activities Investing cash flows consist primarily of capital expenditures, investment activities, insurance proceeds and cash used for acquisitions.
Standard Bearer Year Ended December 31, Change 2023 2022 $ % (Dollars in thousands) Rental revenue generated from third-party tenants $ 15,774 $ 14,970 $ 804 5.4 % Rental revenue generated from Ensign's independent subsidiaries 66,712 57,967 8,745 15.1 TOTAL RENTAL REVENUE $ 82,486 $ 72,937 $ 9,549 13.1 % Segment income 29,065 27,871 1,194 4.3 Depreciation and amortization 25,205 21,613 3,592 16.6 FFO $ 54,270 $ 49,484 $ 4,786 9.7 % Rental revenue — Our rental revenue, including revenue generated from our independent subsidiaries, increased by $9.5 million, or 13.1%, to $82.5 million, compared to the year ended December 31, 2022.
Standard Bearer Year Ended December 31, Change 2024 2023 $ % (Dollars in thousands) Rental revenue generated from third-party tenants $ 16,976 $ 15,774 $ 1,202 7.6 % Rental revenue generated from Ensign's independent subsidiaries 78,110 66,712 11,398 17.1 TOTAL RENTAL REVENUE $ 95,086 $ 82,486 $ 12,600 15.3 % Segment income 29,335 29,065 270 0.9 Depreciation and amortization 29,297 25,205 4,092 16.2 FFO $ 58,632 $ 54,270 $ 4,362 8.0 % Rental revenue — Our rental revenue, including revenue generated from our independent subsidiaries, increased by $12.6 million, or 15.3%, to $95.1 million, compared to the year ended December 31, 2023.
Throughout 2023, we have continued to make progress on targeted initiatives related to increasing occupancy in our facilities, attracting and developing our people and acquiring new skilled nursing operations and integrating them with our proven cultural and operational principals. We continue to experience healthy growth in both revenue and operational earnings.
Throughout 2024, we continued to make progress on targeted initiatives related to increasing occupancy and the level of acuity and complexity of the patients we serve in our facilities, attracting and developing our people and acquiring underperforming skilled nursing operations and integrating them with our proven cultural and operational principles.
Depreciation is computed using the straight-line method over the estimated useful lives of the depreciable assets.
Depreciation and Amortization — Property and equipment are recorded at their original historical cost. Depreciation is computed using the straight-line method over the estimated useful lives of the depreciable assets.
The table below reconciles income before provision for income taxes to Adjusted EBT for the periods presented: Year Ended December 31, 2023 2022 Consolidated statements of income data: (In thousands) Income before provision for income taxes $ 272,762 $ 289,089 Stock-based compensation expense 30,767 22,720 Litigation (a) 60,781 4,553 Gain on sale of assets and business interruption recoveries (1,132) (4,380) Write-off of deferred financing fees (b) — 566 Acquisition related costs (c) 814 669 Costs incurred related to new systems implementation 963 1,072 Depreciation and amortization - patient base (d) 355 320 ADJUSTED EBT $ 365,310 $ 314,609 (a) Litigation relates to specific proceedings arising outside of the ordinary course of business, which includes the portion attributable to non-controlling interests.
The table below reconciles income before provision for income taxes to Adjusted EBT for the periods presented: Year Ended December 31, 2024 2023 Consolidated statements of income data: (In thousands) Income before provision for income taxes $ 386,094 $ 272,762 Stock-based compensation expense 36,226 30,767 Litigation (1) (1,425) 60,781 Loss (gain) on long-lived assets and gain on business interruption recoveries 2,335 (1,132) Acquisition related costs (2) 1,019 814 Costs incurred related to system implementations 2,953 963 Depreciation and amortization - patient base (3) 574 355 Interest expense - write off deferred financing fees (4) 200 — ADJUSTED EBT $ 427,976 $ 365,310 (1) Represents specific proceedings and adjustments arising outside of the ordinary course of business.
The increases were primarily due to 26 operational expansions in 2023 as well as the full year impact of the 24 operational expansions in 2022. 83 Table of Contents In the future, if we acquire additional turnaround or start-up operations, we typically expect to see lower occupancy rates and skilled mix and these metrics are expected to vary from period to period based upon the maturity of the facilities within our portfolio.
In the future, if we acquire additional turnaround or start-up operations, we expect to see lower occupancy rates and skilled mix and these metrics are expected to vary from period to period based upon the type of the facilities and operations that we acquire.
If actual amounts of consideration ultimately received differ from our estimates, we adjust these estimates, which would affect net service revenue in the period such variances become known. 75 Table of Contents Self-insurance for general and professional liability — The self-insured retention and deductible limits for general and professional liability for all states are self-insured through our wholly-owned captive insurance subsidiary (the Captive Insurance), the related assets and liabilities of which are included in the accompanying consolidated balance sheets.
Self-insurance for general and professional liability — The self-insured retention and deductible limits for general and professional liability for all states, except Kansas, are self-insured through our wholly owned captive insurance subsidiary (the Captive Insurance), the related assets and liabilities of which are included in the accompanying consolidated balance sheets.
Year Ended December 31, 2023 Skilled Services Standard Bearer All Other Eliminations Consolidated Total revenue $ 3,578,855 $ 82,486 $ 155,804 $ (87,790) $ 3,729,355 Total expenses, including other income (expense), net 3,113,930 53,421 377,055 (87,790) 3,456,616 Segment income (loss) 464,925 29,065 (221,251) — 272,739 Gain on sale of assets and insurance recoveries from real estate, net 23 Income before provision for income taxes $ 272,762 81 Table of Contents Year Ended December 31, 2022 Skilled Services Standard Bearer All Other Eliminations Consolidated Total revenue $ 2,906,215 $ 72,937 $ 122,610 $ (76,294) $ 3,025,468 Total expenses, including other income (expense), net 2,497,483 45,066 273,391 (76,294) 2,739,646 Segment income (loss) 408,732 27,871 (150,781) — 285,822 Gain on sale of assets and insurance recoveries from real estate, net 3,267 Income before provision for income taxes $ 289,089 Our total revenue increased $703.9 million, or 23.3%, compared to the year ended December 31, 2022.
Year Ended December 31, 2024 Skilled Services Standard Bearer All Other Eliminations Consolidated Total revenue $ 4,076,825 $ 95,086 $ 192,881 $ (104,307) $ 4,260,485 Total expenses, including other income, net 3,558,362 65,751 352,250 (104,307) 3,872,056 Segment income (loss) 518,463 29,335 (159,369) — 388,429 Loss on long-lived assets (2,335) Income before provision for income taxes $ 386,094 Year Ended December 31, 2023 Skilled Services Standard Bearer All Other Eliminations Consolidated Total revenue $ 3,578,855 $ 82,486 $ 155,804 $ (87,790) $ 3,729,355 Total expenses, including other income, net 3,113,930 53,421 377,055 (87,790) 3,456,616 Segment income (loss) 464,925 29,065 (221,251) — 272,739 Gain on sale of assets and insurance recoveries from real estate, net 23 Income before provision for income taxes $ 272,762 81 Table of Contents Our total revenue increased by $531.1 million, or 14.2%, compared to the year ended December 31, 2023.
Provision for income taxes — Our effective tax rate was 23.1% for the year ended December 31, 2023, compared to 22.3% for the same period in 2022. The effective tax rate for both periods is driven by the impact of excess tax benefits from stock-based compensation, partially offset by non-deductible expenses, including non-deductible compensation.
The effective tax rate for both periods was driven by the impact of excess tax benefits from stock-based compensation, partially offset by non-deductible expenses, including non-deductible compensation. See Note 13, Income Taxes , in the Financial Statements for further discussion.
Financing Activities Financing cash flows consist primarily of payment of dividends to stockholders, issuance and repayment of short-term and long-term debt, payment for share repurchases and sale of subsidiary shares. 87 Table of Contents The $31.7 million decrease in cash used in financing activities for the year ended December 31, 2023 compared to the same period in 2022, was primarily due to $29.9 million of share repurchases as part of our stock repurchase program in 2022.
Financing Activities Financing cash flows consist primarily of cash provided by the issuance of common stock upon exercise of stock options, payment of dividends to stockholders, issuance and repayment of short-term and long-term debt, payment for share repurchases and the noncontrolling interest activity. 87 Table of Contents The $1.6 million increase in cash provided by financing activities for the year ended December 31, 2024 compared to the same period in 2023, was primarily due to stock option exercises offset by the purchase of non-controlling interest in one of our ancillary businesses.
The increase in skilled services revenue was driven by strong performance across our existing skilled services operations as our census continued to recover in 2023, as well as the favorable impact of skilled census from our recent acquisitions. Our consolidated occupancy increased by 3.2% during the year ended December 31, 2023 compared to the same period in 2022.
The increase in skilled services revenue was primarily driven by strong occupancy performance across our skilled services operations. Our consolidated occupancy increased by 2.5% to 80.5% during the year ended December 31, 2024 compared to the same period in 2023, as a result of an increase in long-term care Medicaid patients and an increase in managed care skilled days.
We continue to work diligently with existing and recently acquired operations so that each can reach its full clinical and financial potential.
During the year ended December 31, 2024, we added 31 new operations. We consistently experience healthy growth in both revenue and overall results as we continue to work diligently with existing and recently acquired operations so that each can reach its full clinical and financial potential.
Historically, we have generally experienced lower occupancy rates and lower skilled mix at Recently Acquired Facilities and therefore, we anticipate generally lower overall occupancy during years of growth.
The increases were primarily due to 31 operational expansions between January 1, 2024 and December 31, 2024 across ten states. 83 Table of Contents Historically, we have generally experienced lower occupancy rates and lower skilled mix at Recently Acquired Facilities and therefore, we anticipate lower overall occupancy during years of growth.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeOur cash and cash equivalents as of December 31, 2023 consisted of bank term deposits, money market funds and U.S. Treasury bill related investments. In addition, as of December 31, 2023, we held investments of approximately $109.9 million.
Biggest changeOur cash and cash equivalents as of December 31, 2024 consisted of bank term deposits, money market funds and U.S. Treasury bill related investments. In addition, as of December 31, 2024, we held investments of approximately $203.5 million.
These prepayment rights may afford us opportunities to mitigate the risk of refinancing our debts at maturity at higher rates by refinancing prior to maturity. We have a Credit Facility with Truist of up to $600.0 million in aggregate principal amount.
These prepayment rights may afford us opportunities to mitigate the risk of refinancing our debts at maturity at higher rates by refinancing prior to maturity. We have a Credit Facility with Truist of up to $600.0 million in aggregate principal.
Accordingly, we would not expect our operating results or cash flows to be affected to any significant degree by the effect of a sudden change in market interest rates on our securities portfolio. The above only incorporates those exposures that exist as of December 31, 2023 and does not consider those exposures or positions which could arise after that date.
Accordingly, we would not expect our operating results or cash flows to be affected to any significant degree by the effect of a sudden change in market interest rates on our securities portfolio. The above only incorporates those exposures that exist as of December 31, 2024 and does not consider those exposures or positions which could arise after that date.
We believe our investments that were in an unrealized loss position as of December 31, 2023 do not require an allowance for expected credit losses, nor has any event occurred subsequent to that date that would indicate so. Our market risk exposure is interest income sensitivity, which is affected by changes in the general level of U.S. interest rates.
We believe our investments that were in an unrealized loss position as of December 31, 2024 do not require an allowance for expected credit losses, nor has any event occurred subsequent to that date that would indicate so. Our market risk exposure is interest rate sensitivity, which is affected by changes in the general level of U.S. interest rates.
We have no outstanding borrowings under our Credit Facility as of December 31, 2023 and through the filing date of this report. In addition, we have outstanding indebtedness under mortgage loans insured with HUD and a promissory note payable to a third party of $152.4 million, all of which are at fixed interest rates.
We have no outstanding borrowings under our Credit Facility as of December 31, 2024 and through the filing date of this report. In addition, we have outstanding indebtedness under mortgage loans insured with HUD and a promissory note payable to a third party of $148.4 million, all of which are at fixed interest rates.

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