What changed in ENSIGN GROUP, INC's 10-K — 2024 vs 2025

The real estate portfolio in Standard Bearer consists of 124 of our 129 owned real estate properties. During the year ended December 31, 2024, Standard Bearer acquired the real estate of 11 stand-alone skilled nursing facilities, three stand-alone senior living facilities, and three campus operations.

Our Chief Executive Officer, who is our chief operating decision maker, or CODM, reviews financial information at the operating segment level. We have presented our segment results in this Annual Report on Form 10-K on a comparative basis to conform to the segment structure.

For more information about our operating segments, as well as financial information, see Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations and Note 8, Business Segments of the Notes to the Consolidated Financial Statements.

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.

Our residents are often high-acuity patients that come to our facilities to recover from strokes, cardiovascular and respiratory conditions, neurological conditions, joint replacements, and other muscular or skeletal disorders. We use interdisciplinary teams of experienced medical professionals to provide services prescribed by physicians. These medical professionals provide individualized comprehensive nursing care to our short-stay and long-stay patients.

Many of our skilled nursing facilities are equipped to provide specialty care, such as on-site dialysis, ventilator care, cardiac and pulmonary management. We also provide standard services such as room and board, special nutritional programs, social services, recreational activities, entertainment, and other services.

We are dedicated to ensuring our residents are happy, comfortable, and motivated to achieve their health goals through the provision of quality care. We generate our skilled services revenue from Medicaid, Medicare, managed care, commercial insurance, and private pay.

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.

We generate rental revenue primarily by leasing post-acute care properties we acquired to healthcare operators under triple-net lease arrangements, whereby the tenant is solely responsible for the costs related to the property, including property taxes, insurance and maintenance and repair costs, subject to certain exceptions.

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.

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.

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.

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.

Our senior living communities located in Arizona, California, Colorado, Idaho, Iowa, Kansas, Nebraska, Texas, Utah and Washington, provide residential accommodations, activities, meals, housekeeping and assistance in the activities of daily living to seniors who are independent or who require some support, but not the level of nursing care provided in a skilled nursing operation.

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.

Specifically, during the year ended December 31, 2024, approximately 60% of our senior living revenue was derived from private pay sources. Ancillary — As of December 31, 2024 , our independent subsidiaries operate ancillary services located in Arizona, California, Colorado, Idaho, Texas, Utah and Washington.

We have invested in and are exploring new business lines that are complementary to our existing skilled services and senior living services. These new business lines consist of mobile ancillary services, including digital x-ray, ultrasound, electrocardiograms, sub-acute services, dialysis, respiratory, long-term care pharmacy and patient transportation to people in their homes or at long-term care facilities.

To date, these businesses were not meaningful contributors to our operating results. GROWTH We have an established track record of successful acquisitions.

Much of our historical growth can be attributed to implementing our expertise in acquiring real estate or leasing both under-performing and performing post-acute care operations and transforming them into market leaders in clinical quality, staff competency, employee loyalty and financial performance. With each acquisition, we apply our core operating expertise to improve these operations, both clinically and financially.

In years where pricing has been high, we have focused on the integration and improvement of our existing independent subsidiaries while limiting our acquisitions to strategically situated properties. From January 1, 2020 through December 31, 2024, we acquired 99 facilities, which added 10,375 operational skilled nursing beds and 834 senior living units to our independent subsidiaries.

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.

The number of operations and operational beds do not include the closed facilities beginning in the year of their closures. We have also invested in new business lines that are complementary to our existing businesses, such as ancillary services.

We plan to continue to grow our revenue and earnings by: • continuing to grow our talent base and develop future leaders; • increasing the overall percentage or “mix” of higher acuity patients; • focusing on organic growth and internal operating efficiencies; • continuing to acquire additional operations in existing and new markets; • expanding and renovating our existing operations, and • strategically investing in and integrating other post-acute care healthcare businesses. 3 Table of Contents New Market CEO and New Ventures Programs — In order to broaden our reach into new markets, and in an effort to provide existing leaders in our company with the entrepreneurial opportunity and challenge of entering a new market and starting a new business, we established our New Market CEO program in 2006.

Supported by our Service Center and other resources, a New Market CEO evaluates a target market, develops a comprehensive business plan, and relocates to the target market to find talent and connect with other providers, regulators and the healthcare community in that market, with the goal of ultimately acquiring businesses and establishing an operating platform for future growth.

In addition, this program includes other lines of business that are closely related to the skilled nursing industry. The New Ventures program encourages our local leaders to evaluate service offerings with the goal of establishing an operating platform in new markets and new businesses.

We believe that this program will not only continue to drive growth, but will also provide a valuable training ground for our next generation of leaders, who will have experienced the challenges of growing and operating a new business.

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.

Additionally, we invested in new ancillary services that are complementary to our existing businesses.

Subsequent to December 31, 2024, we expanded through a combination of a long-term lease and a real estate purchase, with the addition of seven stand-alone skilled nursing operations totaling 682 operational skilled nursing beds to be operated by our independent subsidiaries, including one in a new state, Alabama.

For further discussion of our acquisitions, see Note 7, Operation Expansions in the Notes to the Consolidated Financial Statements. QUALITY OF CARE MEASURES Improvement in Acquired Facilities — The Five-Star Quality Rating System introduced by the Centers for Medicare and Medicaid Services (CMS) intends to help consumers, their families and caregivers compare nursing homes more easily.

The Five-Star Quality Rating System gives each skilled nursing operation a rating between one and five stars in various categories including health inspections, staffing and quality measures (QM). We have a strong history of quickly improving the quality of care in the facilities we acquire. Thus, as new assessments are conducted post-acquisition, the star ratings see consistent improvement.

At the time of acquisition, the majority of our facilities have 1 and 2-Star ratings. Over the last few years, CMS has modified the star rating requirements.

These changes have been significant and made it more difficult to achieve a 4 or 5-Star rating, resulting in certain skilled nursing operations losing stars in their "Quality" and "Staffing" ratings, which negatively impacted the "Overall" ratings. Nevertheless, we continue to demonstrate strong performance in the Five-Star Quality Rating System.

We believe compliance and quality outcomes are precursors to outstanding financial performance. Thus, we strive to aggressively increase quality and compliance in every facility we acquire, and to adjust our overall policies to adapt to CMS’s changing criteria for the Five-Star Quality Rating System.

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.

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).

The remaining three measures will continue to be frozen until January 2025 while the data for the equivalent measures are collected. Additionally, beginning in April of 2024, CMS revised the staffing rating methodology to give the lowest possible score for staffing turnover measures to providers who fail to submit staffing data or submit erroneous data.

Therefore, the predictability and movement in the QM ratings will not necessarily be consistent with our current quality performance. In addition, what and how we are measuring the QM will not be consistent with the historical practice and accordingly will not be comparable.

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%.

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.

INDUSTRY TRENDS The post-acute care industry has evolved to meet the growing demand for post-acute and custodial healthcare services generated by an aging population, increasing life expectancies and the trend toward shifting patient care to lower cost settings.

The industry has evolved in recent years, which we believe has led to a number of favorable improvements in the industry, as described below: • Shift of Patient Care to Lower Cost Alternatives — The growth of the senior population in the U.S. continues to increase healthcare costs, often faster than the available funding from government-sponsored healthcare programs.

In response, federal and state governments have adopted cost-containment measures that encourage the treatment of patients in more cost-effective settings such as skilled nursing facilities, for which the staffing requirements and associated costs are often significantly lower than acute care hospitals and other post-acute care settings.

As a result, skilled nursing facilities are generally serving a larger population of higher acuity patients than in the past. • Significant Acquisition and Consolidation Opportunities — The skilled nursing industry is large and highly fragmented, characterized predominantly by numerous local and regional providers.

Due to the increasing demands from hospitals and insurance carriers to implement sophisticated and expensive reporting systems, we believe this fragmentation provides us with significant acquisition and consolidation opportunities. • Improving Supply and Demand Balance — The number of skilled nursing facilities has declined modestly over the past several years.

We expect that the supply and demand balance in the skilled nursing industry will continue to improve due to the shift of patient care to lower cost settings, an aging population and increasing life expectancies. • Increased Demand Driven by Aging Populations — As seniors account for an increasing percentage of the total U.S. population, we believe the demand for skilled nursing and senior living services will continue to increase.

According to the census projection released by the U.S. Census Bureau in early 2020, between 2016 and 2030, the number of individuals over 65 years old is projected to be one of the fastest growing segments of the United States population, growing from 15% to 21%.

The Bureau expects this segment to increase nearly 50% to 73 million, as compared to the total U.S. population which is projected to increase by 10% over that time period. Furthermore, the generation currently retiring has accumulated less savings than prior generations, creating demand for more affordable senior housing and skilled nursing services.

As a high-quality provider in lower cost settings, we believe we are well-positioned to benefit from this trend. • Value-based Care and Reimbursement Reform — In response to rising healthcare spending in the United States, commercial, government and other payors are generally shifting away from fee-for-service (FFS) payment models towards value-based models, including risk-based payment models that tie financial incentives to quality, efficiency and coordination of care.

We believe that patient-centered outcomes driven reimbursement models will continue to grow in prominence.

Many of our operations already receive value-based payments, and as valued-based payment systems continue to increase in prominence, it is our view that our strong clinical outcomes will be increasingly rewarded. 5 Table of Contents A significant goal of U.S. federal health care reform is to transform the delivery of health care by changing reimbursement to reflect and support a focus on equity, payment for value and efficacious delivery of person-centered care.

Reimbursement models and demonstrations that increase accountability and provide financial incentives to encourage efficiency, affordability and high-quality care, have been developed and implemented by government and commercial third-party payers.

Special focus is placed on increasing the number of beneficiaries in care relationships with accountability for quality and total cost of care, improvements in care coordination, reducing inequities at the population level and supporting care innovation to close care gaps and increase access.

The most prominent value-based models designed to accomplish these aims include Accountable Care Models (e.g., MSSP ACOs, ACO REACH) and Disease-Specific & Episode-Based Models (e.g., BPCI Advanced, GUIDE Model, CJR).

These models, alongside State & Community, Statutory and Health Plan Models, are aimed at alignment across payers and care settings, leveraging effective clinical tools, outcomes-focused payment approaches and stakeholder-led policy development.

Reimbursement methodology reform includes Value-Based Purchasing (VBP), in which a portion of provider reimbursement is redistributed based on relative performance, or improvement on designated economic, clinical quality and patient satisfaction metrics. These reimbursement methodologies and similar programs are likely to continue and expand, both in government and commercial health plans.

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.

The use of long-term care insurance is increasing among seniors as a means of planning for the costs of skilled nursing services. In addition, as a result of increased mobility in society, reduction of average family size and the increased number of two-wage earner couples, more residents are looking for alternatives outside the family for their care.

REVENUE SOURCES We derive revenue primarily from the Medicaid and Medicare programs, managed care and commercial insurance payors and private pay patients. The majority of our revenue is derived from skilled nursing, which is highly dependent upon the Medicaid and Medicare programs. Thus, any changes to payment models, reimbursements and budgets impact our revenue, some positively and some negatively.

A detailed discussion of the regulatory framework impacting our business is found in the Government Regulation section below. See also, Item 1A., Risk Factors .

A brief overview of each of our revenue sources is as follows: Medicaid — Medicaid is a program financed by state funds and matching federal funds administered by the states and their political subdivisions, and often go by state-specific names, such as Medi-Cal in California and the Arizona Healthcare Cost Containment System in Arizona.

Medicaid programs generally provide health benefits for qualifying individuals and may supplement Medicare benefits for the disabled and for persons aged 65 and older meeting financial eligibility requirements. Medicaid reimbursement formulas are established by each state with the approval of the federal government in accordance with federal guidelines.

Seniors who enter skilled nursing facilities as private pay clients can become eligible for Medicaid once they have substantially depleted their assets. Medicaid is generally the largest source of funding for most skilled nursing facilities.

Medicaid reimbursement varies from state to state and is based upon a number of different systems, including cost-based, prospective payment; case mixed adjusted payments and negotiated rate systems. Rates are subject to a state’s annual budgetary requirements and funding, statutory and regulatory changes and interpretations and rulings by individual state agencies and State Plan Amendments approved by CMS.

However, given that most states are required to have balanced budgets and Medicaid is frequently their largest program, many states have implemented or might consider implementing various strategies to manage Medicaid expenses. Medicaid typically covers patients that require standard room and board services and provides reimbursement rates that are generally lower than rates earned from other sources.

We monitor our payor mix to measure the level received from each payor across each of our business units.