The Ensign Group Inc.

07/27/2026 | Press release | Distributed by Public on 07/27/2026 04:03

Quarterly Report for Quarter Ending June 30, 2026 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the condensed consolidated financial statements and accompanying notes, which appear elsewhere in this Quarterly Report on Form 10-Q. We urge you to carefully review and consider the various disclosures made by us in this Quarterly Report and in our other reports filed with the Securities and Exchange Commission (SEC), including our Annual Report on Form 10-K for the year ended December 31, 2025 (Annual Report), which discusses our business and related risks in greater detail, as well as subsequent reports we may file from time to time on Form 10-Q and Form 8-K, for additional information. The section entitled "Risk Factors" contained in Part II, Item 1A of this Quarterly Report on Form 10-Q, and similar discussions in our other SEC filings, also describe some of the important risk factors that may affect our business, financial condition, results of operations and/or liquidity. You should carefully consider those risks, in addition to the other information in this Quarterly Report on Form 10-Q and in our other filings with the SEC, before deciding to purchase, hold or sell our common stock.
This Quarterly Report on Form 10-Q contains "forward-looking statements," within the meaning of the Private Securities Litigation Reform Act of 1995, which include, but are not limited to our expected future financial position, results of operations, cash flows, financing plans, business strategy, budgets, capital expenditures, competitive positions, growth opportunities, and plans and objectives of management. Forward-looking statements can often be identified by words such as "anticipates," "expects," "intends," "plans," "predicts," "believes," "seeks," "estimates," "may," "will," "should," "would," "could," "potential," "continue," "ongoing," similar expressions, and variations or negatives of these words. These statements are not guarantees of future performance and are subject to risks, uncertainties and assumptions that are difficult to predict. Our actual results could differ materially from those expressed in any forward-looking statements as a result of various factors, some of which are listed under the section "Risk Factors" contained in Part II, Item 1A of this Quarterly Report on Form 10-Q. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q, and are based on our current expectations, estimates and projections about our industry and business, management's beliefs, and certain assumptions made by us, all of which are subject to change. We undertake no obligation to revise or update publicly any forward-looking statement for any reason, except as otherwise required by law.
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 17 states. 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 June 30, 2026, we offered skilled nursing, long-term acute care, senior living and rehabilitative care services through 396 skilled nursing and senior living facilities. Our real estate portfolio includes 181 owned real estate properties, which includes 142 facilities operated and managed by us, 39 operations leased to and operated by third-party operators and the Service Center location. Of the 39 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 following table summarizes our independent subsidiaries and operational skilled nursing beds and senior living units by ownership status as of June 30, 2026:
Owned and Operated Leased (with a Purchase Option) Leased (without a Purchase Option)
Total for Facilities Operated
Number of facilities 142 8 246 396
Percentage of total 35.9 % 2.0 % 62.1 % 100.0 %
Operational skilled nursing beds 14,079 687 25,945 40,711
Percentage of total 34.6 % 1.7 % 63.7 % 100.0 %
Senior living units 2,076 142 1,221 3,439
Percentage of total 60.4 % 4.1 % 35.5 % 100.0 %
The Ensign Group, Inc. is a holding company with no direct operating assets, employees or revenues. 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. We also have a wholly-owned captive insurance subsidiary that provides some claims-made coverage to our independent subsidiaries for general and professional liability, as well as coverage for certain workers' compensation insurance liabilities. Our captive real estate investment trust, Standard Bearer, owns and manages our real estate business. 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 Quarterly 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.
Our acquisition strategy has been focused on identifying both opportunistic and strategic acquisitions within our target markets that offer strong opportunities for return. The operations added by us are frequently underperforming financially and can have regulatory and clinical challenges to overcome. Financial information, especially with underperforming operations, is often inadequate, inaccurate or unavailable. Consequently, we believe that prior operating results are not a meaningful representation of our current operating results or indicative of the integration potential of our newly acquired independent subsidiaries.
Recent Activities
We believe we exist to dignify and transform post-acute care. We set out a strategy to achieve our goal of ensuring our patients are receiving the best possible care through our ability to acquire, integrate and improve our operations. Our results serve as a strong indicator that our strategy is working and our transformation is underway. Our dedication to our cultural and operational fundamentals continues to deliver strong results. Refer to Results of Operations for further discussion.
Operational Expansions - During the six months ended June 30, 2026, we expanded our operations with the addition of 21 stand-alone skilled nursing operations and two campus operations in four states. These new operations added a total of 2,724 operational skilled nursing beds operated by our independent subsidiaries. Twenty of our expansions were in Texas, establishing it as our largest market with 105 skilled nursing and senior living operations and reinforcing our continued growth in the state where we began in 1999.
Subsequent to June 30, 2026, we expanded our presence with the addition of two stand-alone skilled nursing operations in Texas, and these new operations will add 250 operational skilled nursing beds to be operated by our independent subsidiaries.
Standard Bearer Acquisitions - Standard Bearer Healthcare REIT, Inc. (Standard Bearer), our captive REIT, is a holding company with subsidiaries that own a majority of our real estate portfolio. Management believes that the REIT structure enhances transparency into the value of the Company's owned real estate and provides an efficient platform to support future property acquisitions, which may be operated by our independent subsidiaries or leased to third-party operators.
During the six months ended June 30, 2026, Standard Bearer added $374.6 million of real estate assets associated with 18 stand-alone skilled nursing operations, three stand-alone senior living operations and two campus operations. Of these additions, three stand-alone senior living operations are leased to a third-party operator and the remaining additions are operated by our independent subsidiaries.
Subsequent to June 30, 2026, Standard Bearer added approximately $36.0 million real estate assets associated with two stand-alone skilled nursing operations operated by our independent subsidiaries.
Common Stock Repurchase Program - On May 13, 2026, the Board of Directors approved a stock repurchase program pursuant to which we are authorized to repurchase up to $40.0 million of our common stock under the program for a period of approximately 12 months from June 12, 2026. On June 12, 2026, the Board of Directors approved an amendment to the stock repurchase program pursuant to which we are authorized to repurchase an additional $60.0 million of our common stock under the program. During the three months ended June 30, 2026, we repurchased 257 shares of our common stock for $40.0 million. As of June 30, 2026, $60.0 million remained authorized and available for repurchase under the stock repurchase program.
Facility Information
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 June 30, 2026:
Facility Counts Bed / Unit Counts
Skilled Operations Senior Living Communities
Campus Operations(1)
Total Skilled Operational Beds Senior Living Units Total Beds / Units
Texas 97 1 7 105 12,591 742 13,333
California 78 4 3 85 8,253 378 8,631
Arizona 36 1 5 42 5,396 791 6,187
Colorado 33 5 1 39 3,571 633 4,204
Utah
26 2 1 29 2,412 163 2,575
Washington 17 1 - 18 1,608 98 1,706
Idaho 14 - 1 15 1,331 21 1,352
Kansas 4 - 8 12 883 251 1,134
Tennessee 11 - - 11 1,122 - 1,122
Iowa 8 - 2 10 664 31 695
South Carolina 9 - - 9 1,126 - 1,126
Nebraska 4 1 3 8 496 199 695
Wisconsin 5 - - 5 350 - 350
Nevada 3 - - 3 483 - 483
Alaska 1 1 - 2 146 82 228
Alabama 2 - - 2 181 - 181
Oregon - - 1 1 98 50 148
348 16 32 396 40,711 3,439 44,150
(1) Campuses represent facilities that offer both skilled nursing and senior living services.
The following table provides summary information regarding the location of our owned and operated real estate properties as of June 30, 2026:
Facility Counts Bed / Unit Counts
Skilled Operations Senior Living Communities
Campus Operations(1)
Total Skilled Operational Beds Senior Living Units Total Beds / Units
Texas 40 1 6 47 5,426 712 6,138
Arizona 12 - 5 17 2,052 494 2,546
Utah 15 - - 15 1,102 - 1,102
California 11 - 1 12 1,291 42 1,333
Colorado 6 3 - 9 597 369 966
Kansas 2 - 5 7 495 167 662
Washington 6 - - 6 621 - 621
Idaho 6 - - 6 590 - 590
South Carolina 5 - - 5 544 - 544
Wisconsin 5 - - 5 350 - 350
Iowa 4 - - 4 296 - 296
Nebraska 1 1 1 3 171 160 331
Tennessee 3 - - 3 300 - 300
Alaska 1 1 - 2 146 82 228
Oregon - - 1 1 98 50 148
117 6 19 142 14,079 2,076 16,155
(1) Campuses represent facilities that offer both skilled nursing and senior living services.
The following table provides summary information regarding the location of our owned real estate properties as of June 30, 2026:
Owned and Operated by Ensign(1)
Owned and Leased to Third-Party Operators(1)
Service Center
Total Properties(1)
Texas(1)
47 7 - 53
Wisconsin 5 24 - 29
Arizona 17 1 - 18
Utah 15 - - 15
California
12 3 1 16
Colorado 9 - - 9
Washington 6 3 - 9
Kansas 7 - - 7
Idaho 6 - - 6
South Carolina 5 - - 5
Iowa 4 - - 4
Nebraska 3 - - 3
Tennessee 3 - - 3
Alaska 2 - - 2
Oregon 1 - - 1
Nevada - 1 - 1
142 39 1 181
(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. 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.
Key Performance Indicators
We manage the fiscal aspects of our business by monitoring key performance indicators that affect our financial performance. Revenue associated with these metrics is generated based on contractually agreed-upon amounts or rate, excluding the estimates of variable consideration under the revenue recognition standard, Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 606. These indicators and their definitions include the following:
Skilled Services
•Routine revenue - Routine revenue is generated by the contracted daily rate charged for all contractually inclusive skilled nursing services. The inclusion of therapy and other ancillary treatments varies by payor source and by contract. Services provided outside of the routine contractual agreement are recorded separately as ancillary revenue, including Medicare Part B therapy services, and are not included in the routine revenue definition.
•Skilled revenue - The amount of routine revenue generated from patients in the skilled nursing facilities who are receiving higher levels of care under Medicare, managed care, Medicaid, or other skilled reimbursement programs. The other skilled patients who are included in this population represent very high acuity patients who are receiving high levels of nursing and ancillary services which are reimbursed by payors other than Medicare or managed care. Skilled revenue excludes any revenue generated from our senior living services.
•Skilled mix - The amount of our skilled revenue as a percentage of our total skilled nursing routine revenue. Skilled mix (in days) represents the number of days our Medicare, managed care, or other skilled patients are receiving skilled nursing services at the skilled nursing facilities divided by the total number of days patients from all payor sources are receiving skilled nursing services at the skilled nursing facilities for any given period.
•Average daily rates - The routine revenue by payor source for a period at the skilled nursing facilities divided by actual patient days for that revenue source for that given period.
•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.
Skilled Mix - Like most skilled nursing providers, we measure both patient days and revenue by payor. Medicare, managed care and other skilled patients, whom we refer to as high acuity patients, typically require a higher level of skilled nursing and rehabilitative care. Accordingly, Medicare and managed care reimbursement rates are typically higher than from other payors. In most states, Medicaid reimbursement rates are generally the lowest of all payor types. Changes in the payor mix can significantly affect our revenue and profitability.
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:
Three Months Ended June 30, Six Months Ended June 30,
Skilled Mix: 2026 2025 2026 2025
Days 31.0 % 30.8 % 31.5 % 31.1 %
Revenue 50.0 % 49.2 % 50.3 % 49.7 %
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 number of beds in a skilled nursing facility that are actually operational and available for occupancy may be less than the total official licensed bed capacity. This sometimes occurs due to the permanent dedication of bed space to alternative purposes, such as enhanced therapy treatment space or other desirable uses calculated to improve service offerings and/or operational efficiencies in a facility. In some cases, three- and four-bed wards have been reduced to two-bed rooms for resident comfort, and larger wards have been reduced to conform to changes in Medicare requirements. These beds are seldom expected to be placed back into service. We believe that reporting occupancy based on operational beds is consistent with industry practices and provides a more useful measure of actual occupancy performance from period to period.
The following table summarizes our overall occupancy statistics for skilled nursing operations for the periods indicated:
Three Months Ended June 30, Six Months Ended June 30,
Occupancy for skilled services: 2026 2025 2026 2025
Operational beds at end of period 40,711 35,545 40,711 35,545
Available patient days 3,638,219 3,216,445 7,087,378 6,316,122
Actual patient days 3,017,641 2,615,490 5,913,675 5,153,626
Occupancy percentage (based on operational beds) 82.9 % 81.3 % 83.4 % 81.6 %
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.
We also reported an "all other" category that includes operating results from our senior living operations, mobile diagnostics, transportation, other real estate and other ancillary operations. These businesses are neither significant individually, nor in aggregate and therefore do not constitute a reportable segment. Our Chief Executive Officer, who is our chief operating decision maker, or CODM, reviews financial information at the operating segment level.
Revenue Sources
The following tables set forth our total service revenue by payor source generated by our skilled services segment and our "All Other" category and as a percentage of total revenue for the periods indicated (dollars in thousands):
Three Months Ended June 30,
Skilled Services
All Other (3)
Total Service Revenue
2026 2025 2026 2025 2026 2025
Medicaid(1)
$ 552,588 $ 473,904 $ 14,231 $ 11,944 $ 566,819 $ 485,848
Medicare 339,650 291,117 - - 339,650 291,117
Medicaid-skilled 80,664 75,207 - - 80,664 75,207
Subtotal $ 972,902 $ 840,228 $ 14,231 $ 11,944 $ 987,133 $ 852,172
Managed care 265,348 229,495 - - 265,348 229,495
Private and other(2)
141,662 103,853 38,354 35,894 180,016 139,747
TOTAL SERVICE REVENUE $ 1,379,912 $ 1,173,576 $ 52,585 $ 47,838 $ 1,432,497 $ 1,221,414
Three Months Ended June 30,
Skilled Services
All Other (3)
Total Service Revenue
2026 2025 2026 2025 2026 2025
Medicaid(1)
40.0 % 40.4 % 27.1 % 25.0 % 39.6 % 39.8 %
Medicare 24.6 24.8 - - 23.7 23.8
Medicaid-skilled 5.9 6.4 - - 5.6 6.2
Subtotal 70.5 % 71.6 % 27.1 % 25.0 % 68.9 % 69.8 %
Managed care 19.2 19.6 - - 18.5 18.8
Private and other(2)
10.3 8.8 72.9 75.0 12.6 11.4
TOTAL SERVICE REVENUE 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %
(1) Medicaid payor includes revenue for senior living operations.
(2) Private and other includes revenue for skilled services (private, Veteran Affairs and hospice payors), senior living and ancillary operations.
(3) All Other incorporates intercompany eliminations.
Six Months Ended June 30,
Skilled Services
All Other (3)
Total Service Revenue
2026 2025 2026 2025 2026 2025
Medicaid(1)
$ 1,081,921 $ 917,315 $ 28,348 $ 22,373 $ 1,110,269 $ 939,688
Medicare 675,479 578,868 - - 675,479 578,868
Medicaid-skilled 155,902 144,758 - - 155,902 144,758
Subtotal $ 1,913,302 $ 1,640,941 $ 28,348 $ 22,373 $ 1,941,650 $ 1,663,314
Managed care 526,199 456,712 - - 526,199 456,712
Private and other(2)
271,246 199,477 75,705 68,951 346,951 268,428
TOTAL SERVICE REVENUE $ 2,710,747 $ 2,297,130 $ 104,053 $ 91,324 $ 2,814,800 $ 2,388,454
(1) Medicaid payor includes revenue for senior living operations.
(2) Private and other in our "all other" category includes revenue from senior living operations and all revenue generated in our other ancillary operations.
(3) All Other incorporates intercompany eliminations.
Six Months Ended June 30,
Skilled Services
All Other (3)
Total Service Revenue
2026 2025 2026 2025 2026 2025
Medicaid(1)
39.9 % 39.9 % 27.2 % 24.5 % 39.4 % 39.3 %
Medicare 24.9 25.2 - - 24.0 24.2
Medicaid-skilled 5.8 6.3 - - 5.6 6.1
Subtotal 70.6 % 71.4 % 27.2 % 24.5 % 69.0 % 69.6 %
Managed care 19.4 19.9 - - 18.7 19.1
Private and other(2)
10.0 8.7 72.8 75.5 12.3 11.3
TOTAL SERVICE REVENUE 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %
(1) Medicaid payor includes revenue for senior living operations.
(2) Private and other in skilled services includes private, Veteran Affairs and hospice payors. In addition, private and other in our "all other" category includes revenue from senior living and ancillary operations.
(3) All Other incorporates intercompany eliminations.
GOVERNMENT REGULATION
General
Healthcare is an area of extensive and frequent regulatory change. Changes in the law or new interpretations of existing laws may have a significant impact on our revenue, costs and business operations. Our independent subsidiaries that provide healthcare services are subject to federal, state and local laws relating to, among other things, licensure, quality and adequacy of care, physical plant requirements, life safety, personnel and operating policies. In addition, these same subsidiaries are subject to federal and state laws that govern billing and reimbursement, relationships with vendors, business relationships with physicians and workplace protection for healthcare staff. Such laws include (but are not limited to) the Anti-Kickback Statute (AKS), the federal False Claims Act (FCA), the federal prohibition on physician self-referral known as the Stark Law, state law, and state corporate practice of medicine statutes.
Governmental and other authorities periodically inspect our independent subsidiaries to verify continued compliance with applicable regulations and standards. The operations must pass these inspections to remain licensed under state laws and to comply with Medicare and Medicaid provider agreements and applicable Conditions of Participation. The operations can only participate in these third-party payment programs if unannounced inspections by regulatory authorities reveal that the operations are in substantial compliance with applicable state and federal requirements. In the ordinary course of business, federal or state regulatory authorities may issue notices to the operations alleging deficiencies in certain regulatory practices, which may require corrective action to regain and maintain compliance. In some cases, federal or state regulators may impose other remedies including imposition of directed in-service training, state monitoring, civil monetary penalties, temporary admission and/or payment bans, loss of certification as a provider in the Medicare or Medicaid programs, or revocation of a state operating license.
We believe that the regulatory environment surrounding the healthcare industry subjects providers to intense scrutiny. In the ordinary course of business, providers are subject to inquiries, investigations and audits by federal and state agencies related to compliance with participation and payment rules under government payment programs. These inquiries may originate from the Department of Health and Human Services (HHS), Office of the Inspector General (OIG), state Medicaid agencies, state Attorneys General, local and state ombudsman offices and the Centers for Medicare and Medicaid Services (CMS) Recovery Audit Contractors, among other agencies. In response to the inquiries, investigations and audits, federal and state agencies may impose citations for regulatory deficiencies and other regulatory penalties, including demands for refund of overpayments, expanded civil monetary penalties that extend over long periods of time and date back to incidents prior to surveyor visits, Medicare and Medicaid payment bans and terminations from those programs, which may be temporary or permanent in nature. We vigorously contest each such regulatory outcome when appropriate; however, there are significant legal and other expenses involved that consume our financial and personnel resources. Expansion of enforcement activity could adversely affect our business, financial condition or the results of operations.
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 or final rulemaking, or administrative actions that may have an impact on our independent Skilled Nursing Facilities (SNFs) or senior living facilities:
CMS Risk-Based Surveys - In July 2026, CMS announced the nationwide implementation of a Risk-Based Survey (RBS) process for qualifying skilled nursing facilities, effective September 8, 2026. Under the program, qualifying facilities may undergo a streamlined survey process, while state survey resources are redirected toward complaint investigations and facilities with greater risk indicators. CMS will also identify qualifying facilities with a high-performing designation on Nursing Home Care Compare. While the Company continues to evaluate the operational implications of the program, changes in survey and regulatory oversight practices could affect compliance requirements, public quality reporting, and other aspects of facility operations.
Fiscal Year 2027 Skilled Nursing Facility Prospective Payment System Proposed Rule (FY 2027 PPS PR) - In April 2026, CMS released the FY 2027 PPS PR, which outlines proposed changes to SNF payment rates and program requirements beginning October 1, 2026. CMS is proposing a 2.4% net increase in SNF payment rates, reflecting a 3.2% market basket update offset by a 0.8% productivity adjustment, excluding any adjustments under the SNF Value-Based Purchasing (VBP) Program. The proposed rule also includes several changes to the SNF Quality Reporting Program (QRP), such as removing COVID-19 vaccination measures beginning in fiscal year 2028, shortening the data submission deadline from 4.5 months to 45 days after each quarter beginning in fiscal year 2029 and requiring SNFs to submit Minimum Data Set (MDS) data for all residents, regardless of payer source beginning in fiscal year 2031. Additionally, CMS proposes estimated performance standards for the fiscal year 2029 and fiscal year 2030 VBP Program years and updates to certain MDS-based VBP measure snapshot dates to align with the proposed QRP reporting deadlines. As this is a proposed rule, these provisions remain subject to change pending publication of the final rule later this year.
Final Rule Updating Health-Care Related Tax Policies - In February 2026, CMS published a final rule, effective April 3, 2026, related to the statistical test used to evaluate state Medicaid health care-related tax waiver requests, implementing requirements codified in the One Big Beautiful Bill (OBBB). In relevant part, this rule limits the circumstances under which states may obtain waivers from CMS to impose taxes that fund state Medicaid programs by assessing taxes that impose a greater burden on Medicaid-participating organizations (whether based on volume or percentage of Medicaid taxable units) than the burden imposed on organizations that do not participate in Medicaid, or have relatively less Medicaid participation. While the rule primarily targets managed care organization taxes, it applies to all permissible provider tax classes, including nursing facilities, for which CMS has identified at least two existing taxes that appear to exploit the loophole. Non-MCO provider taxes, including nursing facility taxes, have a compliance deadline of the end of the applicable state fiscal year ending in calendar year 2028 (no later than September 30, 2028).
Federal Nurse Staffing Legislation - Following the repeal of the federal minimum staffing requirements in December 2025, there has been legislation introduced in Congress, that if enacted, would impose mandatory minimum staffing requirements for skilled nursing facilities participating in the Medicare and Medicaid Programs including the Nurses Belong in Nursing Homes Act and the Safe Staffing Saves Lives Act.
Controlled Substances Act Telemedicine Flexibilities - On December 31, 2025, the Drug Enforcement Administration (DEA), working with HHS, extended certain telemedicine flexibilities through December 31, 2026. Under the Ryan Haight Online Pharmacy Consumer Protection Act of 2008, practitioners must conduct at least one in-person medical evaluation before prescribing controlled substances to a patient via telemedicine. During the COVID-19 Public Health Emergency (PHE), the DEA temporarily waived this requirement, permitting practitioners to prescribe Schedules II through V controlled substances through audio-only or audio-visual telemedicine encounters, subject to specific conditions. These exceptions also include FDA-approved narcotic medications classified under Schedules III through V of the Controlled Substances Act when used for maintenance or withdrawal management treatment of opioid use disorder. The DEA has extended these telemedicine flexibilities several times rather than allowing them to expire, and they may continue beyond 2026 depending on future regulatory decisions.
Consolidated Appropriations Act of 2026 (CAA 2026) - On February 3, 2026, the Consolidated Appropriations Act of 2026 (CAA 2026) was passed, which further extended government funding through September 30, 2026. Of specific importance to our businesses are:
•Telehealth Waivers: Since the COVID-19 Pandemic, Congress has temporarily waived restrictions so Medicare beneficiaries can access telehealth services at home and outside of rural areas. Medicare recipients can now continue using telehealth under these relaxed rules, regardless of location. The waivers expired on September 30th but were reinstated effective October 1, 2025 and extended through December 31, 2027. Specifically, key waivers that were restored temporarily include:
•Lifting geographic limitations for medical telehealth services, allowing them to be provided nationwide, including in a person's home such as an assisted living residence.
•Allowing physical therapists, occupational therapists and speech-language pathologists to deliver telehealth services.
•Delay the Medicare requirement for in-person visits for mental health services provided through telehealth or audio-only telecommunications technology.
•Permits telehealth to be used for face-to-face encounters required for Hospice recertification purposes.
•Work Geographic Index Floor: Temporarily and retroactively restores nationwide payment floor multiplier for the work component of Medicare Part B services paid under the physician fee schedule. This is effective October 1, 2025 through at least September 30, 2026.
•Extension of Funding for Quality Measure Endorsement, Input, and Selection: This extends such funding through September 30, 2026.
•Sequestration: This legislation prevents the triggering of statutory 4.0% Statutory Pay-As-You-Go Act of 2010 (PAYGO) sequestration cuts to Medicare (See Sequestration of Medicare Rates below).
CMS has issued guidance instructing Medicare Administrative Contractors (MACs) to perform mass adjustments to any paid claims that are inconsistent with the above and instructing Practitioners to resubmit to CMS any returned claims that were previously determined not payable during the shutdown.
One Big Beautiful Bill (OBBB) - The OBBB was signed into law on July 4, 2025, implementing a range of federal reforms targeting Medicaid financing, eligibility, and payment structures. The following provisions of the OBBB are expected to impact Medicaid reimbursement mechanisms and enrollment dynamics relevant to our business.
Moratorium on New or Increased Provider Taxes - Provider taxes, which are state taxes assessed on healthcare providers or facilities, are commonly used by states to generate non-federal share of Medicaid payments, including payments to SNFs. Under the ACA, provider taxes were capped at 6% of a provider's net patient revenue. Existing federal law prohibits states Medicaid programs from guaranteeing providers that they will receive their provider taxes paid back - this is known as the hold harmless provision. The OBBB prohibits states from imposing new provider taxes or increasing existing provider tax rates or tax bases, with specific carve outs for nursing facilities and intermediate care facilities to remain at status quo. The OBBB reduces the hold harmless threshold in expansion states beginning in fiscal year 2028. This threshold will decrease by 0.5% per year in ACA expansion states until the safe harbor limit is 3.5% in fiscal year 2032. While SNFs are exempt from the moratorium, broader limitations on provider taxes could reduce overall state Medicaid financing flexibility, increasing the risk of lower SNF reimbursement rates. In February 2026, CMS issued a final rule implementing these requirements as they pertain to granting state-requested waivers for imposing Medicaid provider taxes to fund those states' Medicaid programs. See Item 2., Government Regulation, Proposed, Anticipated and Recently Issued Rulemaking and Administrative Actions - Final Rule Updating Health-care Related Tax Policies.
Medicaid Recertification Changes and Retroactive Eligibility Cut - Beginning in the first quarter of 2027, states must conduct Medicaid eligibility redeterminations every six months, rather than annually, for individuals enrolled under Medicaid. Additionally, the OBBB includes a provision to reduce Medicaid retroactive eligibility from 90 days to 30 days for most enrollees but is 60 days for long-term care residents and traditional Medicaid enrollees. We believe that these provisions could create the conditions for coverage interruptions, potential delays or denied payments.
Revisions to State-Directed Payments (SDPs) - Prior to the OBBB's passage, state Medicaid programs could require Medicaid managed care organizations (MCOs) to pay providers certain rates, make uniform rate increases, or to use certain payment methods. These state-mandated payments by MCOs were known as SDPs, the upper limits for which generally were higher than the highest Medicare payment rate for those services, which is used in calculating Medicaid fee-for-service supplemental payments. The OBBB limits total payments under existing CMS-approved SDPs to current levels and caps future SDPs based on whether the state has expanded its Medicaid program under the ACA. SDPs approved prior to the OBBB's implementation are grandfathered by the OBBB, although those grandfathered payments are reduced by 10% per year starting on January 1, 2028, until those SDPs reach the allowable Medicare-related payment limit. For Medicaid expansion states, new SDPs may not exceed 100% of the Medicare equivalent payment rate; for non-expansion states, the cap is 110%. In the absence of published Medicare payment rates, the OBBB limits SDPs to the Medicaid fee-for-service payment rate. This provision could reduce overall state Medicaid financing flexibility, increasing the risk of lower SNF reimbursement rates. CMS issued implementing guidance on February 2, 2026, clarifying that SDPs covering rating periods for CY 2024 to CY 2026 may be grandfathered and qualify for protection from the OBBB's reductions in payment, provided that a state seeking this protection provided CMS with completed forms seeking approval for such directed payments before May 1, 2025; however, grandfathered dollar amounts are frozen at current approved levels and cannot be increased through any preprint version, amendment, or renewal. SDPs in rating periods beginning on or after March 30, 2026, will not qualify for grandfathering and must immediately comply with the new payment caps based on Medicare payment rates. On May 22, 2026, CMS published a proposed rule to implement the SDP provisions (the SDP Proposed Rule) included in the OBBB. Under the proposal, payment limits based on Medicare rates would be expanded to apply to all services covered by SDPs beginning with rating periods on or after January 1, 2029. The SDP Proposed Rule also applies similar Medicare-based payment caps to certain targeted Medicaid fee-for-service payments.
Cap on Home Equity Excluded for Long-Term Care Eligibility Determination - The OBBB establishes a limit of $1.0 million for home equity that can be exempted from calculating an individual's eligibility for Medicaid in seeking long-term care beginning January 1, 2028. This threshold is not indexed to inflation. States may, however, apply different home equity limits for primary residences that are located on farms.
Reduced Federal Contributions to State Medicaid Programs - Beginning in fiscal year 2030, the OBBB requires HHS to reduce federal financial contributions to Medicaid programs in states that identified improper payments to ineligible individuals or overpayments to eligible individuals. The OBBB expanded the scope of these improper payments to include payments where insufficient information is available to confirm the recipient's eligibility for payment.
Home and Community Based Services (HCBS) - The OBBB allows states to obtain waivers from CMS so that Medicaid can be used to pay for HCBS rendered to beneficiaries who do not require an institutional level of care found in a SNF. The OBBB requires these waiver applications to include a demonstration that the state's waiver will not increase the average amount of time that beneficiaries who need institutional levels of care will have to wait for services, intending to avoid HCBS being used in lieu of adequate SNF access for Medicaid beneficiaries requiring institutional care.
Overall Impact on State Budgets - The full effect of the OBBB on state budgets remains uncertain, particularly given the anticipated reduction in federal Medicaid contributions. A key risk to our revenue is that states may generally have fewer financial resources available without federal contributions to Medicaid. In response to how the overall budgets of states will be impacted by the OBBB due to reduced federal Medicaid contributions, some states have already taken legislative and regulatory actions to address the provisions of the OBBB and its potential impact. For instance, on September 17, 2025, California enacted Senate Bill 105, a comprehensive budget bill for the 2025-2026 fiscal year. This legislation allocates funding and makes budgetary adjustments across various state agencies, with notable emphasis on specific areas. Among its provisions, Senate Bill 105 designates targeted funding for the state's Medicaid program, Medi-Cal, to ensure alignment with the OBBB.
Similarly, Colorado enacted Senate Bill 0001 on August 28, 2025. This law establishes a process for the governor to implement spending reductions if the state is unable to meet its fiscal obligations. It also requires the governor to submit proposed spending reduction plans to a legislative budget committee, which is responsible for advising the governor on these matters.
Overall, we anticipate more states may face challenging choices regarding their state budgets, which will increase the risk of lower SNF reimbursement rates. We will continue to monitor any such developments and advocate accordingly at the federal, state and local levels.
Medicare Annual Payment Rule - The FY 2027 PPS PR is discussed in detail within this Item under the heading Proposed, Anticipated and Recently Issued Rulemaking and Administrative Actions.
FY 2026 Final Updates to the SNF Payment Rates - CMS finalized a 3.2% increase in SNF PPS payment rates for FY 2026 (October 1, 2025 - September 30, 2026). This update reflects a 3.3% SNF market basket increase, a 0.6% market basket forecast error adjustment and a negative 0.7% productivity adjustment. This increase does not reflect separate payment adjustments that may apply under the SNF VBP Program.
Patient-Driven Payment Model (PDPM) Updates - CMS finalized several technical revisions to the ICD-10 diagnosis code mappings used within the PDPM. These revisions are intended to improve the accuracy of patient classification, payment calculations and coding consistency.
SNF QRP - For residents admitted on or after October 1, 2025, CMS finalized changes affecting the FY 2027 SNF QRP. Specifically, CMS will remove four standardized patient assessment data elements within the Social Determinants of Health (SDOH). CMS also updated the policy and process for submitting reconsideration requests, including amendments and codification of these procedures.
SNF VBP Program - CMS has established performance standards for the FY 2028 and FY 2029 VBP program years to satisfy statutory notice requirements. Beginning with FY 2028, CMS will implement the previously finalized scoring methodology for the SNF Within-Stay Potentially Preventable Readmission (SNF WS PPR) measure, which will be included in the program's measure set for the first time. To simplify program scoring and strengthen quality improvement incentives, CMS finalized the removal of the Health Equity Adjustment. In addition, starting with the FY 2027 program year, SNFs will have access to a formal reconsideration process to challenge CMS determinations related to review and correction requests.
Medicare Part B Fee Schedule - On October 31, 2025, CMS issued the CY 2026 Medicare Physician Fee Schedule (CY 2026 PFS) Final Rule, which outlines significant changes aimed at modernizing Medicare, improving care quality, and reducing unnecessary spending.
Two Payment Rates Based on Advanced Alternative Payment Model (AAPM) Participation - For the first time, there are two separate conversion factors for all Medicare-participating providers which impacts reimbursement for therapeutic services (including occupational therapy, speech language therapy, and physical therapy), evaluation and management services, and other services furnished in SNFs covered by Medicare Part B. This is required under the Medicare Access and CHIP Reauthorization Act (MACRA) depending on whether a provider qualifies as a participant in an AAPM. CMS finalized a qualifying AAPM participant conversion factor of $33.57, representing a 3.77% increase over the 2025 conversion factor of $32.35. The non-AAPM participant conversion factor is $33.40, a 3.26% increase over the 2025 conversion factor.
Payment Adjustments - Under the CY 2026 PFS, CMS decreases payments by 2.5% for certain services that are not time-based, such as certain therapy services. The rationale is that providers are expected to deliver these services more efficiently as they performed them repeatedly over time. This reduction is designed to balance out other areas of Medicare spending increases.
Telehealth - Among other things, CMS finalized changes to the Medicare Telehealth Services List (MTSL) by adding additional services and expanding permanent flexibilities for virtual direct supervision. One key change is the permanent lifting of frequency limits on providing subsequent nursing facility visits furnished via telehealth. Previously, when adding some services to the MTSL, CMS has included certain frequency restrictions on how often physicians and other practitioners can furnish the service via telehealth (e.g., one subsequent nursing facility visit furnished through telehealth every 14 days). Removing these restrictions will likely result in increased access to care and allow for additional services to be provided via telehealth. Notably, CMS increased the originating site facility fee to $31.85 for CY 2026.
These changes could impact how SNFs deliver and bill for physician and ancillary services. The scope of reimbursable therapy and remote care services may expand, but future payment levels could fluctuate, positively or negatively, based on broader assumptions about efficiency and practice cost. SNFs that deliver telehealth-based care or participate in care coordination models may benefit from expanded flexibility and new billing pathways. However, these changes may also introduce added operational complexity and new compliance requirements.
Medicare
Medicare presently accounts for approximately 24.9% of our skilled nursing services revenue year-to-date, being our second-largest revenue payor. The Medicare program and its reimbursement rates and rules are subject to frequent change. These include statutory and regulatory changes, rate adjustments, administrative or executive orders and government funding restrictions, all of which may materially adversely affect the rates at which Medicare reimburses us for our services. Budget pressures often lead the federal government to reduce or place limits on reimbursement rates under Medicare. Implementation of these and other types of measures has in the past, and could in the future, result in substantial reductions in our revenue and operating margins.
Patient-Driven Payment Model (PDPM) - The FY 2020 PPS implemented the PDPM, a case mix methodology that bases Medicare reimbursement on the clinical condition and care needs of each patient. Under PDPM, diagnosis codes and various patient characteristics are used to classify residents and determine payment levels. The model incorporates five case-mix adjusted payment components - physical therapy, occupational therapy, speech language pathology, nursing and social services and non-therapy ancillary services - to reflect the complexity of care provided. Additionally, PDPM includes a sixth non-case mix component to account for utilization of SNFs' resources that are unrelated to individual resident characteristics.
PDPM is intended to achieve a more value-based, unified approach to post-acute care payments system. For example, it adjusts Medicare reimbursements to reflect the specific care requirements of each resident, rather than simply the volume or type of services delivered by the facility. As a result, payments to SNFs and nursing homes are primarily determined by the patient's clinical profile, promoting a system that better aligns payment with patient needs.
Skilled Nursing Facility - Quality Reporting Program (SNF QRP) - The Improving Medicare Post-Acute Care Transformation Act of 2014 (IMPACT Act) provided data reporting requirements for certain Post-Acute-Care (PAC) providers. If a SNF does not submit required quality data as required by the IMPACT Act, its payment rates are reduced by 2.0% for each such fiscal year, which may result in payment rates for a fiscal year being less than the preceding fiscal year.
The SNF QRP standardized patient assessment data elements. 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 continues to revise the calculation of its five-star ratings for the Nursing Home Compare website. 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. These six measures will be measured on a quarterly basis.
These six measures were included in the five-star rating starting in October 2022. In addition, CMS also implemented a planned increase to the quality measure reporting thresholds, increasing each threshold by one-half of the average improvement of quality measure scores since CMS last set quality measure thresholds. Going forward, CMS plans to implement similar rating threshold increases every six months.
CMS has also continued to refine the QRP, including various measurements such as the adoption of a process measure for influenza vaccination coverage among healthcare personnel within SNFs and a Discharge Function Score (DC Function) measure. The DC Function determines the functional condition of residents by examining the proportion of SNF residents who achieve or surpass a projected discharge functionality score. The assessment includes consideration of mobility and self-care, utilizing data from the Minimum Data Set (MDS). The DC Function replaces the current process and is in effect for the FY 2025 SNF QRP. The FY 2024 PPS also modified the SNF QRP's Healthcare Professional (HCP) Covid Vaccine Measure. The measure will track the proportion of healthcare staff vaccinated for COVID-19 and have kept their vaccination status current per the CDC recommendations. However, this measure may be removed in the future pending final rules published as a result of the FY 2027 PPS PR. The FY 2024 PPS also removed the Application of Functional Assessment/Care Plan measures from the SNF QRP.
Under the FY 2024 PPS, CMS adopted two measures for the SNF QRP starting in FY 2026. First, CMS raised the Data Completion Thresholds for the MDS. SNFs must report required quality measure data and standardized resident assessment data gathered using the MDS for at least 90% of the assessments they submit to CMS. SNFs who fail to meet this requirement will be subject to a 2.0% reduction on their applicable fiscal year payment starting in FY 2026. Second, CMS adopted the Patient/Resident COVID-19 Vaccine metric. This metric highlights the number of patient stays in which SNF patients received the COVID-19 vaccine. However, this measure may be removed in the future pending final rules published as a result of the FY 2027 PPS PR.
CMS's FY 2025 PPS adopted several updates to the SNF QRP aimed at enhancing the integration of Social Determinants of Health (SDOH) into patient assessments and ensuring the accuracy of reported data. Starting in FY 2027, CMS will introduce four new SDOH items related to living situation, food security, and utility access, and modify an existing item on transportation availability in the MDS. Additionally, CMS requires that SNFs participating in the SNF QRP undergo a data validation process similar to that already implemented in the SNF VBP Program.
Beginning in FY 2026, SNFs participating in the SNF QRP program are required to take part in a validation program similar to that used for SNFs participating in the SNF VBP Program. Each year, 1,500 SNFs will be randomly chosen to submit MDS records for review. Facilities selected for this audit must provide the requested medical chart documentation within 45 calendar days of notification; failure to do so will result in noncompliance and a 2% reduction in Medicare reimbursement for that fiscal year.
Additionally, as outlined in the FY 2026 PPS, four standardized patient assessment data elements within the SDOH category were modified for residents admitted on or after October 1, 2025, with implications for the FY 2027 SNF QRP. CMS also finalized changes to the reconsideration request policy and process, formally amending and codifying procedures related to QRP data and evaluations.
Home Health and Hospice Payment Rules Affecting SNFs - CMS's final payment rules for other modalities of care delivery also affect the operations of SNFs. Under the CY 2025 Home Health PPS, long-term care facilities, including SNFs, have been required to submit at least weekly reports to CMS on respiratory illnesses beginning January 1, 2025. These reports must include information such as facility census, resident vaccination status for specified respiratory illnesses, confirmed resident cases and residents hospitalized from such illnesses.
Sequestration of Medicare Rates - The Budget Control Act of 2011 requires a mandatory, across the board reduction in federal spending, called sequestration. Medicare FFS claims with dates of service or dates of discharge on or after April 1, 2013, incur a 2.0% reduction in Medicare payments through at least the end of 2025, unless Congress takes further action. The Consolidated Appropriations Act of 2023 (CAA 2023), waived a further 4.0% cut to Medicare spending that would have been required under the Statutory Pay-As-You-Go Act of 2010 (PAYGO) for fiscal years 2023 and 2024. Instead, the CAA 2023 deferred any further Medicare sequestration under PAYGO until fiscal year 2025. The CAA 2023 also offset planned Medicare sequestrations that would have been as high as 4.0% and instead maintained fee schedule cuts of approximately 2.0%. On October 29, 2024, the Medicare Patient Access and Stabilization Act of 2024 (MPASA) was introduced in the House of Representatives, seeking to increase the amount paid to physicians under Medicare by 4.73%. MPASA was referred to the House Ways and Means Committee and House Committee on Energy and Commerce on October 29, 2024, and referred to the Subcommittee on Health on December 17, 2024, with no further action taken on the bill, which did not pass into law before the end of the 118th Congress in December of 2024. As part of the Continuing Resolution that ended the federal government shutdown in late 2025 (CR), Congress reset the balances on PAYGO scorecard, which are used to determine whether a law creates a sufficient amount of budget deficit that it would require mandatory spending cuts like those to Medicare, to zero. Because the OBBB's requirements were likely to result in a deficit, the 4.0% deduction required by sequestration was expected to start in January of 2026 before the CR's passage. However, as the CR reset the PAYGO scorecards to zero, the expected 4.0% reduction of Medicare rates under sequestration will not materialize, further delaying the 4.0% reduction. On February 3, 2026, the CAA 2026 was passed and keeps the protections from the CR in place.
Skilled Nursing Facility Value-Based Purchasing (SNF-VBP) Program - The SNF-VBP Program incentivizes SNFs by awarding payments based on the quality of care provided to Medicare beneficiaries, primarily measured through hospital readmission rates. Each year, CMS adjusts its payment rules for SNFs using this program, which now includes additional quality measures such as sharing of health information and standardized patient assessment data elements that evaluate cognitive function and mental status, special services and social determinants of health. CMS regulations outline both the performance metrics and the required data reporting for SNFs. Reporting deadlines for baseline period and performance periods began with fiscal year 2023. The FY 2023 PPS expanded the SNF VBP program beyond the single hospital readmission measure, adding new metrics for fiscal year 2026, such as healthcare associated infections requiring hospitalization (SNF HAI) and total nursing hours per resident day, and in fiscal year 2027, the discharge to community post-acute care measure for SNFs, which tracks of successful transitions from SNFs to community settings.
In the FY 2024 PPS, CMS elected to replace the SNFRM measure with the SNF WS PPR measure starting in FY 2028. The PPR measure assesses the risk-standardized rate of unplanned, avoidable readmissions during SNF stays for Medicare fee-for-service beneficiaries. This new measure refines the previous 30-Day readmission metric by extending the observation period to the entire SNF stay and increasing the allowable gap between hospital discharge and the SNF admission to 30 days. These changes better align with the IMPACT Act and enhance the reliability of preventable readmissions tracking. The measure uses two years of Medicare claims data to calculate provider-specific risk-standardized readmission rate.
The FY 2025 PPS adopted several operational and administrative updates to the SNF VBP Program, including policies for selecting, updating and removing measurements to ensure ongoing relevance and effectiveness for assessing care quality. CMS also updated technical measures and procedures for reviewing and correcting data used to calculate its measures.
The FY 2026 PPS finalized several updates, including setting performance standards for the FY 2028 and FY 2029 program years to meet statutory notice requirements. CMS will apply the previously established scoring methodology to the SNF WS PPR measure starting in FY 2028. Additionally, CMS removed the Health Equity Adjustment to simplify scoring and clarify incentives for quality improvement. A new reconsideration process was also adopted, enabling SNFs to request a review if they are dissatisfied with CMS's decision on a correction request, beginning with the FY 2027 program year.
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. Part B services are limited by a payment cap as there is one amount for physical therapy (PT) services and speech-language pathology (SLP) services combined and a separate amount for occupational therapy (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 $2,410 for CY 2025 with the same threshold for OT services. The KX modifier is added to medical claims to indicate the providing clinician attests that the services corresponding to that claim were medically necessary and that the justification for those services is contained within the patient's medical records. This modifier is intended for use where the services will exceed the threshold for those services set by the BBA and updated by annual fee schedule rules, yet are still appropriate and medically necessary, and thus should be compensated by Medicare.
Consistent with CMS's "Patients over Paperwork" initiative, the agency has also been moving toward eliminating burdensome claims-based functional reporting requirements. Beginning in 2021, CMS rescinded 21 problematic National Correct Coding Initiative edits impacting outpatient therapy services, including services furnished under Medicare Part B primarily related to PT and OT services, removing a coding burden caused by requirements for additional documentation and claim modifier coding.
Additionally, the Multiple Procedure Payment Reduction (MPPR) continues at a 50.0% reduction, which is applied to therapy procedures by reducing payments for practice expense of the second and subsequent procedures when services provided beyond one unit of one procedure are provided on the same day. The implementation of MPPR includes (1) facilities that provide Medicare Part B speech-language pathology, occupational therapy and physical therapy services and bill under the same provider number; and (2) providers in private practice, including speech-language pathologists, who perform and bill for multiple services in a single day.
Certain of our Part B services provided through telehealth would qualify for Medicare reimbursement based on flexibility first provided under the emergency waivers first issued during PHE, which added physical therapy (PT), occupational therapy (OT) and speech-language pathology (SLP) to the list of approved telehealth Providers for the Medicare Part B programs provided by a SNF. 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. These flexibilities were most recently extended by the CAA 2026 through December 31, 2027.
The CY 2025 PFS adopted a regulatory change that allowed physical therapy assistants and occupational therapy assistants to be generally supervised by physical therapists and occupational therapists, respectively, in private practice, non-institutional settings, thus allowing greater flexibility in billing for those assistants' services. Additionally, the CY 2025 PFS excepted a therapist-established initial plan of care (POC) for PT, OT, or SLT services from the requirement for a physician or non-physician provider's (NPP's) signature, provided that (1) the patient's physician or NPP referred the patient to the therapist and (2) the therapist has evidence that the POC was transmitted to the patient's physician or NPP within 30 days of the patient's initial evaluation. This flexibility applies only to the initial certification of the POC. While the OBBB did not affect the CY 2025 PFS, the OBBB provided a one-year increase of 2.5% to the CF for services provided between January 1, 2026 and January 1, 2027.
Under the CY 2026 PFS, the 2.93% increase to the 2024 PFS Conversion Factor (CF) expired and CMS sought to impose an estimated 0.05% adjustment thereto based on changes in work relative value units (RVUs) for certain services. As a result, the CY 2025 PFS implemented a reimbursement reduction of 2.83%, with a CF of $32.35, which is a reduction from the 2024 CF of $33.29. The CY 2025 PFS adopts a 3.6% increase to the threshold for coding modifier requirements for PT and SLP combined, totaling $2,410 for 2025 with the same threshold for OT services. The threshold for targeted medical review for PT and OT (combined) and SLP is expected to remain at $3,000 through 2027.
In addition, the CY 2026 PFS contains numerous significant changes regarding payment and models, encourages care coordination, reduces collection and reporting of data measurements, and continues certain telehealth flexibilities that began during the PHE (see Medicare Part B Fee Schedule above).
Programs of All-Inclusive Care for the Elderly
The requirements under the Programs of All-Inclusive Care for the Elderly (PACE) provide greater operational flexibility and update information under the Medicare and Medicaid programs, including leniency in compliance with program requirements during and after a 3-year trial period and relieving restrictions placed on the team that assesses and provides for the needs of each PACE participant. 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. The purpose of these RADV audits is to maintain the accuracy of risk-adjusted payments made to Medicare Advantage organizations.
Decisions Regarding Skilled Nursing Facility Payment
Reimbursement rates and rules are subject to frequent change that, historically, have had a significant effect on our revenue. The federal government and state governments continue to focus on efforts to curb spending on healthcare programs such as Medicare and Medicaid. We are not able to predict the outcome of the legislative process. We also cannot predict the extent to which proposals will be adopted or, if adopted and implemented, what effect, if any, such proposals and existing new legislation will have on us. Efforts to impose reduced allowances, greater discounts and more stringent cost controls by government and other payors are expected to continue and could adversely affect our business, financial condition and results of operations.
These include statutory and regulatory changes, rate adjustments (including retroactive adjustments), administrative or executive orders and government funding restrictions influenced by budgetary or political pressures, which may materially adversely affect the rates at which Medicare reimburses us for our services. Implementation of these and other types of measures has in the past, and could in the future, result in substantial reductions in our revenue and operating margins. 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 (ACA)
Various healthcare reform provisions became law upon enactment of the ACA. The reforms contained in the ACA have affected our independent subsidiaries in some manner and are directed in large part at increased quality and cost reductions. Several of the reforms are very significant and could ultimately change the nature of our services, the methods of payment for our services and the underlying regulatory environment.
The IRA, which continued and expanded certain provisions of the ACA, extended the premium subsidies paid by the federal government, until the end of 2025, resulting in subsidies being available to offset or reduce the costs of private health insurance policies for qualifying individuals. This may aid older patients in obtaining or keeping their health insurance in order to pay for long-term care services.
On July 4, 2025, the OBBB was enacted into law and intends to be a budget reconciliation law that by 2028 may significantly change the automatic reenrollment process for ACA marketplace health plans and impose work requirements as a condition of Medicaid eligibility, among other things. The OBBB reflects broader legislative efforts to roll back provisions of the ACA, and its enactment along with ongoing executive actions that run counter to the ACA, could reduce the availability of insurance coverage and may affect the population and payer mix of our independent subsidiaries.
The changes in the Presidential Administration may significantly alter the current health care regulatory framework, payment activity, and impact our business and the health care industry, including any repeals, curtailments, extensions or expansions of certain ACA provisions, included, but not limited to recent rulemaking activity regarding ACA Section 1557's anti-discrimination provisions. 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. One such requirement of participation in the Medicare and Medicaid programs involves limitations around the use of pre-dispute, binding arbitration agreements by SNFs. CMS has historically issued guidance and direction around arbitration that must be satisfied for any admission agreement to be enforceable.
Phase 2 and 3 of the Requirements of Participation focus on: (1) resident abuse and neglect; (2) admission, transfer and discharge; (3) mental health and substance abuse disorders; (4) staffing sufficiency; (5) residents' rights; (6) potential inaccurate diagnoses or assessments; (7) prescription and use of pharmaceuticals; (8) infection prevention and control; (9) arbitration of disputes between facilities and residents; (10) psychosocial outcomes and related severity; and (11) the timeliness and completion of state investigations.
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. CMS "grandfathered" certain facilities and will allow SNFs that were participating in Medicare before July 5, 2016, and that previously used the Fire Safety Evaluation System (FSES) to continue using the 2001 FSES mandatory values when determining compliance with applicable standards. CMS also updated the Requirements of Participation to revise existing qualification requirements for directors of food and nutrition services in SNFs, while "grandfathering" in directors with two or more years of experience and certain minimum training in food safety so they may continue in that role without satisfying further educational requirements.
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. These updates provided more information for state surveyors to utilize when evaluating SNFs' compliance with the Medicare Requirements of Participation, as well as included guidance for facilities on operationalizing compliance with these requirements based on how surveyors would measure and evaluate facility performance.
CMS issued comprehensive updates to the Medicare State Operations Manual (Appendix PP) that took effect on April 28, 2025. These updates revised surveyor guidance across multiple areas, including infection control, staffing, PBJ reporting, psychotropic medication use, and medical director oversight responsibilities. These revisions are intended to enhance survey consistency and align with CMS's broader focus on care quality and resident outcomes.
Additionally, CMS issued guidance on March 24, 2025, clarifying that SNFs may not include pre-dispute, binding arbitration provisions or third-party financial guarantee requirements in admission agreements. If these provisions are not removed, they may result in survey citations and potential penalties for non-compliant SNFs.
Civil and Criminal Fraud and Abuse Laws and Enforcement
Various complex federal and state laws exist that govern a wide array of referrals, relationships and arrangements, and prohibit fraud by healthcare providers. Governmental agencies are devoting increasing attention and resources to such anti-fraud efforts. The Balanced Budget Act of 1997 expanded the penalties for healthcare fraud. Additionally, the government or those acting on its behalf may bring an action under the FCA, alleging that a healthcare provider has defrauded the government by submitting a claim for items or services not rendered as claimed, which may include coding errors, billing for services not provided and submitting false or erroneous cost reports. The FCA clarifies that if an item or service is provided in violation of the AKS, the claim submitted for those items or services is a false claim that may be prosecuted under the FCA as a false claim. 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. Many states also have a false claim prohibition that mirrors or closely tracks the federal FCA.
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. CMS can recover overpayments from health care providers up to six years following the year in which payment was made.
Over the years, the OIG has released the results of audit findings of Medicare overpayments, potentially affecting SNFs. These investigatory actions by OIG demonstrate its increased scrutiny into post-hospital SNF care provided to beneficiaries and may encourage additional oversight or stricter compliance standards. The DOJ has indicated that its healthcare enforcement trends would emphasize opioid prescribing, Medicare Advantage and managed care plan fraud, and COVID-19 related fraud, including under various relief programs available during and in conjunction with the pandemic. In November of 2023, OIG added to its work plan an audit of nursing homes' nurse staffing hours reported in CMS's payroll-based journal, for which OIG expected to issue a report in FY 2025. However, the report has not yet been issued. In addition, the OIG identified the following areas as its "key goals" for oversight: (1) protecting residents from fraud, abuse, neglect, and promoting quality of care; (2) promoting emergency preparedness and emergency response efforts; (3) strengthening frontline oversight; and (4) supporting federal monitoring of nursing homes to mitigate risks to residents.
In 2024, the OIG added to its work plan a series of studies that include: (a) the use of the National Background Check Program (NBCP) in conducting background checks of prospective long-term care provider employees to prepare a report regarding the cost of background checks, number of applicants who received background checks and disqualification of employees during and after NBCP participation; (b) the use of Medicaid supplemental payments for use in satisfying the state's obligations to pay nursing facilities any amounts due under the state's nursing facility upper payment limit; and (c) the assessment of the implementation of the Special Focus Facility Program for nursing facilities based on facilities that participated in the program from 2013 through 2022.
The OIG continues to increase its oversight of skilled nursing facility operations through its active Work Plan, with several new audits and studies that may impact SNFs. In June 2025, OIG announced a new evaluation of whether SNFs are properly engaging medical directors and accurately reporting medical directors' hours of service in CMS's PBJ reporting system. This review will examine whether medical directors are meeting regulatory expectations and whether reported hours reflect actual services provided, with potential implications for regulatory compliance and reimbursement oversight.
Separately, OIG announced an audit assessing whether SNFs are inappropriately billing Medicare Part D for prescription drugs provided during a Medicare Part A stay, as the OIG previously found potential overpayments of more than $465 million in Part D payments for drugs that were already covered under Part A. OIG is also reviewing state-level enforcement of minimum spending requirements for direct resident care in nursing facilities, which could affect state Medicaid reimbursement mechanisms and facility-level allocation of resources. In addition, a May 2025 OIG report identified deficiencies in how CMS shares PBJ staffing data with state survey agencies, limiting surveyors' ability to assess RN staffing compliance and potentially delaying corrective action.
In November of 2025, OIG announced that along with the State survey agencies it would begin assessing the effect of ownership changes on quality of care provided in nursing homes via onsite surveys, state monitoring visits, and requesting additional documentation. The OIG's Fall 2025 semiannual report to Congress described the OIG's ongoing focus on the standard of care provided within SNFs and enforcement actions based on those concerns, as well as identifying certain nursing facilities' noncompliance with the return of provider relief funds paid to facilities during the COVID-19 PHE and which were due to be repaid to HHS. OIG announced in February of 2026 that it would be studying the efficacy and performance of nursing home pharmacy services' internal controls to prevent the diversion, misuse, and over-use of opioids in the nursing home setting. Subsequently, on May 28, 2026, the OIG issued its Spring 2026 semiannual report to Congress, identifying an estimated $462 million in potential overpayments based on stroke diagnoses that were incorrectly submitted to CMS. The report also outlined recommendations and control measures intended to improve data accuracy and reduce risks of future overpayments resulting from inaccurate clinical reporting.
Our business model is based in part on serving higher acuity patients. Over time our overall patient mix has consistently shifted to higher acuity in most facilities we operate. Further scrutiny of high-acuity residents and the treatment they receive may affect our business and subject us to increased governmental oversight. We also use specialized care-delivery software that assists our caregivers in more accurately capturing and recording services in order to, among other things, increase reimbursement to levels appropriate for the care actually delivered. These efforts may place us under greater scrutiny with the OIG, CMS, our fiscal intermediaries, recovery audit contractors and others.
Other Federal Legislation and Healthcare Reform
Five-Star Quality Reporting Metrics - The Quality Payment Program (QPP) was created under the Medicare Access and Children's Health Insurance Program (CHIP) Reauthorization Act of 2015. This program was based on the Merit-based Incentive Payment System (MIPS) or the use of Alternative Payment Models (APM), which relied on quality data CMS gathered and evaluated using the Five-Star Quality Rating system, which includes a rating of one to five in various categories. These categories include (but are not limited to) the results of surveys conducted by state inspectors, other health inspection outcomes, staffing, spending, readmissions and stay durations; the data collected and its weighting in determining a rating on a scale of one to five stars is subject to periodic and ongoing revision, re-balancing and adjustment by CMS to reflect market conditions and CMS's priorities in patient care. Since 2020, CMS's measurement of the data reported by providers, including SNFs, has become more competitive and resulted in a reduction of four- and five-star rankings available under CMS's Five-Star Quality Rating system.
The Five-Star Quality reporting system for nursing homes is displayed on CMS's consumer-based Nursing Home Compare website, along with a consumer alert icon next to nursing homes that have been cited for incidents of abuse, neglect, or exploitation on the Nursing Home Compare website. The Nursing Home Compare website is updated monthly with CMS's refresh of survey inspection results on that website. Additionally, the Nursing Home Compare website publishes 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. The Five Star Quality Ratings incorporated staffing data such as staff tenure and SNF weekend staffing beginning with the October 2022 refresh of the Nursing Home Compare website.
In June 2025, CMS made changes to the Nursing Home Care Compare platform and the Five Star Quality Rating system. Under these changes, CMS discontinued the use of the third most recent standard health survey in calculating the health inspection rating, relying instead on only the two latest surveys. The most recent survey will be weighted at 75% of the total score, while the second most recent survey result will contribute to the remaining 25% of the score. Additionally, CMS will begin publishing aggregated five-star performance metrics for nursing home chains and will remove COVID-19 vaccination measures from facility profile pages.
CMS is updating the long-stay antipsychotic quality measure to incorporate additional data sources, including Medicare and Medicaid claims and Medicare Advantage encounter records. The updated measure, effective January 28, 2026, will assign providers to ten equal deciles for scoring purposes. CMS expects this methodology change to increase the reported national long-stay antipsychotic rate from approximately 14.6% to 17.0%. While the overall national rate is expected to increase, the impact on individual facility ratings will vary.
Additionally, starting July 30, 2025 until October 2025, updates to Nursing Home Care Compare were temporarily paused as CMS transitions to a cloud-based Internet Quality Improvement and Evaluation System (iQIES) for survey data management. This pause is intended to give CMS time to validate the accuracy and integrity of the data and ensure that publicly reported information meets quality standards before resuming updates to the five-star ratings. The move to iQIES, along with the other changes, may also result in further adjustments to the rating system and could prompt additional audits by CMS or state surveyors.
In April 2024, CMS froze four quality measures and three staffing measures to prevent changes until a subsequent date. It also updated the staffing rating methodology to assign the lowest score to facilities that fail to submit (or submit incorrect) staffing data. However, in January of 2025, CMS unfroze four of its quality measures that it previously froze with its April 2024 refresh. CMS updated these measures to reflect recent changes in the minimum data set collected from SNFs. First, the measure of percentage of SNF residents who are at or above an expected ability to care for themselves and move around at discharge replaced the measure of percentage of residents who made improvements in function during a short stay. Second, the following measures have been respecified: (1) percentage of residents whose need for help with activities of daily living has increased during a long stay, and (2) percentage of residents whose ability to walk independently worsened during a long stay. Finally, the measure of percentage of all residents with pressure ulcers (regardless of stay duration) will replace the measure of percentage of high-risk residents with pressure ulcers during a long stay. Additionally, CMS recalculated the scoring cut points for these four measures to obtain an even distribution of scores. Additionally, the quality measure rating cut points were also adjusted to maintain their same overall distribution of ratings across measured facilities.
In July 2024, CMS updated the Nursing Home Five-Star Quality Rating System to reflect several key changes. The staffing case-mix methodology now uses the PDPM model, replacing measures that were previously frozen in April. CMS also extended the definition of staffing turnover. Employees are now considered "turned over" if they haven't worked for 90 consecutive days, up from 60. Additionally, CMS revised risk-adjustment models for claims-based measures to focus on residents' functional abilities and goals, rather than just their status. To maintain consistency in star ratings, CMS adjusted thresholds so the distribution of 4- and 5-star ratings remains stable.
Ownership Transparency Final Rule - In November 2023, CMS finalized a rule requiring SNFs to publicly disclose information regarding their ownership and management structure. SNFs must identify 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 facility that includes its policies and procedures or cash management services; (2) leases or subleases real property to the facility, or owns at least 5% of the real property's total value; and (3) provides any management or administrative services (or consult regarding the same), or provides accounting or financial services to SNFs. The rule also requires disclosures of governing body members, officers, directors or managing employees, plus a comprehensive breakdown of the organizational structure of any additional disclosable party that is not a natural person along with a description of their relationships with the facility. Starting in November of 2024, all SNFs must comply with these requirements by submitting a new "SNF Attachment" with CMS form 855A during revalidation. Although CMS initially required all SNFs to complete revalidation using this new attachment by January 1, 2026, this deadline was indefinitely suspended in December 2025 by CMS until further notice. On February 24, 2026, CMS provided further guidance regarding SNF revalidation, which further confirmed the January 1, 2026, deadline for revalidation with new information required by the Ownership Transparency Final Rule remained indefinitely suspended.
Certain states have adopted laws reflecting their concerns regarding ownership transparency. For example, Iowa adopted laws requiring disclosure of ownership information not previously required for licensure to promote transparency in 2023. In California, the California Department of Health Care Access and Information of the California Health and Human Services Agency issued its notice of approval of regulatory action in March 2024, establishing policies and procedures that implement financial and ownership transparency requirements for California-licensed SNFs that are required by California law passed in 2021. Additionally, the State of Washington enacted H.B. 1686 in July 2025, directing state agencies to develop a plan and recommendations for creating a registry of health care entities, including SNFs.
State-level Legislation and Healthcare Reform
The states where we operate have varied legislative priorities and accordingly legislation. These different legislative priorities vary for many reasons but ultimately result in the operations of our independent subsidiaries having different profiles for risk, regulatory burden, taxation and benefits based on the state in which the facility operates. By way of example, in 2022, California's Governor signed into law the Skilled Nursing Facility Ownership and Management Reform Act of 2022. This law increased the authority of the California Department of Public Health and changed several provisions regarding SNF licensing in the State of California. These changes include eliminating previous regulatory provisions that permitted SNFs to operate in advance of receiving their formal license from the State. This law also requires SNF license applicants to disclose additional information in connection with a license application and evaluates more data regarding the applicant's prior operations, including prior citations, CMS sanctions and legal proceedings against the applicant or other facilities owned or managed by the applicant before issuing a license. In contrast, on June 20, 2025, Texas passed SB 457 which will allow a new operator to receive uninterrupted Medicaid payments during the change of ownership process beginning on September 1, 2025. These examples highlight the varied approaches that occur from state to state, with different approaches making it either easier or harder for our independent subsidiaries to operate. In addition, the impacts of the OBBB, as discussed above, will create varying approaches by state legislatures to address the provisions of such bill. We continue to monitor and advocate for positions that protect the interests of our employees, residents and those of our independent subsidiaries at all levels of government, particularly at the state and local levels.
The Impact of United States Supreme Court Decisions
On June 28, 2024, the United States Supreme Court issued its opinion in Loper Bright Enterprises v. Raimondo, deciding to vacate and remand decisions by the United States Courts of Appeals that relied on the Supreme Court's own 1984 precedent in Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., which sometimes required courts to defer to "permissible" agency interpretations of the statutes those agencies administered and enforced-a legal doctrine known as the "Chevron doctrine." In Loper, the Supreme Court had to decide whether it should overrule or clarify the Chevron doctrine based on its application more than 40 years after its creation, and the Supreme Court chose to overrule it.
The Chevron doctrine required courts to use a two-step process to interpret statutes administered by federal agencies. After determining that the Chevron doctrine may apply to a dispute before it, a federal court must assess whether Congress has directly spoken to the precise question at issue. If (and only if) the congressional intent of the statute is clear, that is the end of the inquiry as to the statute's meaning. If the court determines that the statute is silent or ambiguous regarding the issue at hand, then the Chevron doctrine requires the court to defer to the agency's interpretation if it "is based on a permissible construction of the statute."
The Supreme Court's Loper decision found that the Chevron doctrine is incompatible with the federal Administrative Procedure Act's requirement for courts to exercise their independent judgment in deciding whether a federal agency has acted within its statutory authority. It further held that courts may not defer to an agency's interpretation of a statute merely because the statute is ambiguous, as it is the responsibility of the court, rather than an agency that administers or acts under a statute, to discern the statute's meaning. The Supreme Court reasoned that allowing agencies to interpret the laws they enforce or act under, rather than reserving that activity for the courts, was an impermissible delegation of an activity reserved to the courts.
While the decisions at issue in Loper pertained to fishing regulations promulgated by the Department of Commerce, the Chevron doctrine's significance to the highly regulated field of healthcare is profound. The Chevron doctrine is frequently implicated in litigation over healthcare regulation, ranging from rules concerning staffing requirements and the validity of arbitration provisions, to requirements for healthcare workers to be vaccinated. Subsequent analysis has focused on the limits of the Loper decision, including any deference that courts may still afford to administrative agencies when based on agency fact-finding and policymaking, particularly where such power is expressly delegated to the agency by statute. The Loper decision likely will have significant and lasting consequences for the promulgation and enforcement of federal regulations by HHS and CMS, and may bear on the depth and detail of future legislation that is passed and enacted as statutes by Congress so that such laws can be enforced without administrative rulemaking or agency enforcement mechanisms.
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. Facilities must pass these inspections to maintain licensure under state law, to obtain or maintain certification under the Medicare and Medicaid programs, to continue participation in the Veterans Administration program at some facilities, and to comply with provider contracts with managed care clients at many facilities. From time to time, our independent subsidiaries, like others in the healthcare industry, may receive notices from federal and state regulatory agencies of an alleged failure to substantially comply with applicable standards, rules or regulations. These notices may require corrective action, may impose civil monetary penalties for noncompliance, and may threaten or impose other operating restrictions on SNFs such as admission holds, provisional skilled nursing license, or increased staffing requirements. If our independent subsidiaries fail to comply with these directives or otherwise fail to comply substantially with licensure and certification laws, rules and regulations, the facility could lose its certification as a Medicare or Medicaid provider or lose its license permitting operation in the State.
Facilities with otherwise acceptable regulatory histories generally are given an opportunity to correct deficiencies and continue their participation in the Medicare and Medicaid programs by a certain date, usually within six months of inspection; however, although where denial of payment remedies are asserted, such interim remedies go into effect much sooner. Facilities with deficiencies that immediately jeopardize patient health and safety and those that are classified as poor performing facilities, however, may not be given an opportunity to correct their deficiencies prior to the imposition of remedies and other enforcement actions. Moreover, facilities with poor regulatory histories continue to be classified by CMS as poor performing facilities notwithstanding any intervening change in ownership, unless the new owner obtains a new Medicare provider agreement instead of assuming the facility's existing agreement. However, new owners nearly always assume the existing Medicare provider agreement due to the difficulty and time delays generally associated with obtaining new Medicare certifications, especially in previously certified locations with sub-par operating histories. Accordingly, facilities that have poor regulatory histories before acquisition by our independent subsidiaries and that develop new deficiencies after acquisition are more likely to have sanctions imposed upon them by CMS or state regulators.
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. A facility "graduates" from the SFF program once it demonstrates significant improvements in quality of care that are continued over a defined period of time.
In October 2022, CMS increased penalties for SFFs that fail to improve their performance upon further inspection by CMS, increasing the standards SFFs must meet to graduate from the SFF program, maintaining heightened oversight of any SFF for a period of three years after it graduates and increasing the technical assistance CMS provides to SFFs.
On October 24, 2025, OIG issued a report titled "CMS's Special Focus Facility Program for Nursing Homes Has Not Yielded Lasting Improvements." Within this report, OIG set out its observation that, from 2013 to 2022, SNFs that graduated from the SFF program failed to maintain the improvements achieved while in the SFF program. The report also addresses OIG's findings on the impact of staffing on sustaining the gains seen in the SFF program and additional factors to consider such as facility ownership, and its recommendations for improving the program. OIG recommended that CMS (1) impose more non-financial enforcement remedies to promote compliance; (2) examine the extent to which it took enhanced enforcement actions for facilities that graduated the SFF program. In January of 2026, CMS issued new guidance updating the SFF program to place a greater emphasis on resident falls, increase the frequency of inspections, and decrease notice to facilities in advance of inspections to enhance the oversight powers of CMS and state survey agencies in monitoring facilities that are recommended to or participating in the SFF program.
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. However, if they determine that the facility is not in compliance, the denial of payment goes into effect retroactive to the date given in the original notice, leaving operators with the task of deciding whether to continue accepting patients after the potential denial of payment date--risking the retroactive denial of revenue. Some of our independent subsidiaries have been or will be in denial of payment status due to findings of continued regulatory deficiencies, resulting in an actual loss of revenue associated with patients admitted after the denial of payment date. Additional sanctions could ensue and, if imposed, could include various remedies up to and including decertification.
CMS has undertaken several initiatives to increase or intensify Medicaid and Medicare survey and enforcement activities, including federal oversight of state surveyors. CMS is taking steps to focus more survey and enforcement efforts on facilities with findings of substandard care or repeat violations of Medicaid and Medicare standards and to identify multi-facility providers with patterns of noncompliance. CMS is also increasing its oversight of state survey agencies and requiring state agencies to use enforcement sanctions and remedies more promptly when substandard care or repeat violations are identified, to investigate complaints more promptly, and to survey facilities more consistently.
Regulations Regarding Financial Arrangements
We are also subject to federal and state laws that regulate financial arrangements by and between healthcare providers, such as the federal and state anti-kickback laws, the Stark laws, and various state anti-referral laws.
The Social Security Act prohibits the knowing and willful offer, payment, solicitation, or receipt of any remuneration, directly or indirectly, overtly or covertly, in cash or in kind, to induce the referral of an individual, in return for recommending, or to arrange for, the referral of an individual for any item or service payable under any federal healthcare program, including Medicare or Medicaid. The OIG has issued regulations that create "safe harbors" for certain conduct and business relationships that are deemed protected under the Social Security Act. In order to receive safe harbor protection, all of the requirements of a safe harbor must be met. The fact that a given business arrangement does not fall within one of these safe harbors does not render the arrangement per se illegal. Business arrangements of healthcare service providers that fail to satisfy the applicable safe harbor criteria, if investigated, will be evaluated on a case-by-case basis based upon all facts and circumstances and risk increased scrutiny and possible sanctions by enforcement authorities.
Violations of the Social Security Act can result in inflation-adjusted criminal penalties of more than $0.1 million and ten years' imprisonment. It can also result in inflation-adjusted civil monetary penalties of more than $0.1 million per violation and an assessment of up to three times the total amount of remuneration offered, paid, solicited, or received. It may also result in an individual's or organization's exclusion from future participation in federal healthcare programs. 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.
Additionally, the "Stark Law" of the Social Security Act provides that a physician may not refer a Medicare or Medicaid patient for a "designated health service" to an entity with which the physician or an immediate family member has a financial relationship unless the financial arrangement meets an exception under the Stark Law or its regulations. Designated health services include, in relevant part, inpatient and outpatient hospital services, PT, OT, SLP, durable medical equipment, prosthetics, orthotics and supplies, diagnostic imaging, and home health services. Under the Stark Law, a "financial relationship" is defined as an ownership or investment interest or a compensation arrangement. If such a financial relationship exists and does not meet a Stark Law exception, the entity is disallowed from seeking payment under the Medicare or Medicaid programs or from collecting from the patient or other payor. Statutory and regulatory exceptions and exemptions to this exist and have specific rules that must be followed to qualify for such exception or exemption. Any funds collected for an item or service resulting from a referral that violates the Stark Law are not eligible for payment by federal healthcare programs and must be repaid. Violations of the Stark Law may result in the imposition of civil monetary penalties, including treble damages. Individuals and organizations may also be excluded from participation in federal healthcare programs for Stark Law violations. Many states have enacted healthcare provider referral laws that go beyond physician self-referrals or apply to a greater range of services than just the designated health services under the Stark Law.
Regulations Regarding Patient Record Confidentiality
Health care providers are also subject to laws and regulations enacted to protect the confidentiality of patient health information and patients' right to access such information. For example, HHS has issued rules pursuant to HIPAA, including the Health Information Technology for Economic and Clinical Health (HITECH) Act which governs our use and disclosure of protected health information of patients. We and our independent subsidiaries have established policies and procedures to comply with HIPAA privacy and security requirements and our independent subsidiaries have adopted and implemented HIPAA compliance plans, which we believe comply with the HIPAA privacy and security regulations, which impose significant costs for ongoing compliance activities.
On February 8, 2024, HHS through the Substance Abuse and Mental Health Services Administration (SAMHSA) finalized rules that align the confidentiality of substance use disorder records (i.e., 42 CFR Part 2, also known as "Part 2") with HIPAA; the compliance deadline for such rules was February 16, 2026. Such rules align many Part 2 requirements with HIPAA, extend HIPAA's breach notification and enforcement regime to records subject to Part 2, and permit broader care coordination of such records while preserving heightened protections under Part 2. In addition, such rules require us and our independent subsidiaries to include information regarding Part 2 uses and disclosures in applicable "Notice of Privacy Practices" that inform individuals of the uses and disclosures of certain health information.
There are numerous other laws and legislative and regulatory initiatives at the federal and state levels addressing privacy and security concerns. Our independent subsidiaries are also subject to any federal or state privacy-related laws that are more restrictive than the privacy regulations issued under HIPAA.
On January 17, 2024, CMS published the CMS Interoperability and Prior Authorization Final Rule (Interoperability Final Rule), which affects the data standards and application programming interfaces (APIs) used by entities that are payors for our services, including but not limited to Medicare Advantage organizations, Medicaid fee-for-service providers, and MCOs. This new rule requires these payor entities to adopt new patient access APIs beginning January 1, 2026, and to complete implementation of both patient and provider access APIs by January 1, 2027, to facilitate the sharing of payor information with payors and providers. While the purpose of this final rule is predominantly oriented to sharing information in the clinical setting and expediting the exchange of prior authorization data, this new rule may have implications for our business and how information is shared among our independent subsidiaries that participate in these programs, the payors, residents, and residents' families involved in their care.
Antitrust Laws
We are also subject to federal and state antitrust laws. Enforcement of the antitrust laws against healthcare providers is common, and antitrust liability may arise in a wide variety of circumstances, including third party contracting, physician relations, joint venture, merger, affiliation and acquisition activities. On February 3, 2023, the DOJ's Antitrust Division withdrew its support for three policies that had been jointly created by the DOJ and the Federal Trade Commission (FTC) in 1993, 1996, and 2011, announcing instead, without providing further alternative guidance, that the DOJ would take a case-by-case enforcement approach to evaluate conduct in the healthcare industry, citing that the previous policies were outdated and overly permissive. Similarly, on July 14, 2023, the FTC withdrew two antitrust policy statements related to enforcement in healthcare markets. Moving forward, the FTC will evaluate mergers and conduct in healthcare markets on a case-by-case basis using principles of antitrust enforcement and competition policy.
On July 19, 2023, the DOJ and FTC released a draft joint statement of antitrust policy that outlines 13 guidelines to be used when determining if a merger is unlawfully anticompetitive under antitrust laws. These guidelines cover various aspects of antitrust enforcement relevant to SNF and senior living facilities, such as market concentration, competition between firms, risk of coordination, elimination of potential entrants, control of products or services, vertical mergers, dominant positions, trends toward concentration, series of multiple acquisitions, multi-sided platforms, competing buyers, partial ownership or minority interests and overall impact on competition. The draft joint statement also includes detailed sections on the application of the guidelines, defining relevant markets and approaches to rebuttal evidence. These proposed statements are not exhaustive, and the DOJ and FTC may focus on one or multiple guidelines depending on the specific circumstances of each merger. These proposed general statements of antitrust policy, once finalized, may be a prelude to a new joint statement of healthcare antitrust policy of the DOJ and FTC, with the agencies' finalized general statements providing insight into whether healthcare-specific statements will be issued. This development and potential new guidance regarding DOJ and FTC antitrust policy increases risk and uncertainty regarding transactions that may be subject to criminal and civil enforcement by federal and state agencies, as well as by private litigants.
Further change is expected with respect to the DOJ and FTC's antitrust policies due to the outcome of the 2024 presidential election, including as to how they relate to healthcare. As a result, these changes to the DOJ and FTC's antitrust policies may be changed materially, not implemented, or reverted to prior statements that were withdrawn in February of 2023.
Several states in which we operate have enacted laws that mirror the Federal Hart-Scott-Rodino (HSR) Act. The HSR Act mandates that parties involved in certain transactions must provide advance notice to the Department of Justice (DOJ) and the Federal Trade Commission (FTC) to obtain clearance, ensuring the transaction complies with federal antitrust regulations. Similarly, the state-level HSR analogues require parties to notify state authorities and secure approval before finalizing mergers or acquisitions.
This regulatory trend has accelerated in 2025 and 2026, with more states actively considering or enacting such legislation. In some cases, state requirements align closely with the federal HSR Act, simply requiring that a copy of the federal HSR filing be submitted to a designated state agency. However, other states have established distinct or more rigorous standards, sometimes necessitating state approval for transactions that would not trigger federal reporting obligations under the HSR Act.
Several states in which we operate, including California, Washington, Nevada, Oregon, and Colorado, have implemented or expanded healthcare transaction review and notification requirements. These evolving regulations may increase the timing, complexity, and compliance obligations associated with healthcare mergers and acquisitions, including certain skilled nursing facility transactions.
California Office of Health Care Affordability
The California Office of Health Care Affordability (OHCA) requires for-profit healthcare entities to provide OHCA with written notice of proposed qualifying agreements or transactions (referred to as a "Material Change Notice") at least 90 days prior to entering into the agreement or transaction. Reportable transactions are determined based on a variety of factors outlined in the applicable regulations.
If OHCA determines, on its own or in conjunction with other state agencies, that a proposed agreement or transaction may have a risk of significant impact on certain aspects of the healthcare market, OHCA will conduct a Cost and Market Impact Review (CMIR) to analyze the transaction in more detail. This CMIR process involves a deeper analysis than OHCA's initial review of the information contained in a reporting party's Material Change Notice. OHCA's CMIR process has the potential to result in findings of anti-competitive effects. If such an impact is identified, OHCA may refer the matter to the California Attorney General for further action.
Between March and September 2025, we provided OHCA with requested information regarding specific components of a proposed transaction. Despite our ongoing cooperation, on October 10, 2025, OHCA issued an investigatory subpoena to us to produce (among other things) certain confidential and proprietary documents. We timely responded to the investigatory subpoena and asserted objections. We have been unable to effect resolution including attempts to narrow the scope, and limit the requests to our independent subsidiaries operating in California. We have filed a Petition in the Superior Court of the State of California, County of Orange, seeking a declaration that the CMIR regulations violate the United States Constitution and/or the California Constitution, and is void and unenforceable as applied to us. We have also requested that OHCA be ordered to withdraw the subpoena and close the inquiry, so the underlying transaction can be completed.
California Department of Justice - Office of the Attorney General
Under the California Corporations Code, any sale, transfer, or change of control of a nonprofit health facility (e.g., general acute care hospitals or skilled nursing facilities licensed for 24-hour care) to a for-profit entity requires prior written notice to and approval/consent from the California Attorney General (AG).
The AG reviews the transaction to determine if it is in the public interest. Key factors considered include: whether the deal is fair and reasonable to the nonprofit and at fair market value; no private inurement or breach of trust; impact on the availability, affordability, accessibility, and quality of healthcare services in the affected community; and potential effects on competition and any cultural interests served by the facility.
The process typically includes: public notice and opportunity for comments; a public meeting; and possible independent health care impact statements. The AG may approve the transaction unconditionally, approve it with conditions (e.g., commitments to maintain services, charity care levels, or community benefits), or deny the transaction if it fails the public interest test.
Americans with Disabilities Act (ADA)
Our independent subsidiaries must also comply with the ADA, and similar state and local laws to the extent that the facilities are "public accommodations" as defined in those laws. The obligation to comply with the ADA and other similar laws is an ongoing obligation, and the independent subsidiaries continue to assess their facilities relative to ADA compliance and make appropriate modifications as needed.
Civil Rights
The Office for Civil Rights (OCR) for HHS issued guidance to hospitals and long-term care facilities, emphasizing their obligation under CMS regulations to ensure non-discriminatory visitation policies, especially during public health emergencies. This guidance, part of the U.S. National Strategy to Counter Antisemitism, clarifies that these facilities cannot discriminate based on religion or other classes or characteristics protected against discrimination under federal civil rights laws. The guidance includes examples where non-compliance occurred, such as unequal treatment based on religious affiliation or dietary restrictions, and stricter screening processes for certain religious groups. OCR offers assistance to facilities to obtain compliance with these standards and encourages residents and other affected individuals to file complaints with OCR for potential administrative or civil action in cases of civil rights violations. OCR has been increasingly involved in the monitoring and enforcement of patient and resident rights, particularly under rulemaking completed under Section 1557 of the ACA. However, recent litigation and political efforts have seen a reduction in enforcement of Section 1557. Specifically, HHS announced that it would not enforce certain regulations promulgated under Section 1557 related to discrimination based on sex, gender identity, and pregnancy status.
Real Estate Investment Trust (REIT) Qualification
We elected for Standard Bearer to be taxed as a REIT for U.S. federal income tax purposes. Standard Bearer's qualification as a REIT will depend upon its ability to meet, on a continuing basis, various complex requirements under the Internal Revenue Code, relating to, among other things, the sources of its gross income, the composition and value of its assets, distribution levels to its stockholders and the concentration of ownership of its capital stock. We believe that Standard Bearer is organized in conformity with the requirements for qualification and taxation as a REIT under the Code and that its manner of operation has and will enable it to continue to meet the requirements for qualification and taxation as a REIT.
REGULATIONS SPECIFIC TO SENIOR LIVING COMMUNITIES AND ANCILLARY SERVICES
As previously mentioned, senior living services revenue, which accounted for 2.2% 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.
A majority of states provide, or are approved to provide, Medicaid payments for personal care and medical services to some residents in licensed senior living communities. As rates paid to senior living community operators are generally lower than rates paid to SNF operators, some states use Medicaid funding of senior living services as a means of lowering the cost of services for residents who may not need the higher level of health services provided in SNFs. States that administer Medicaid programs for services in senior living communities are responsible for monitoring the participating communities and, as a result of the growth of senior living in recent years, these states have adopted licensing standards applicable to senior living communities. Similarly, states that elect to provide Medicaid coverage for an expanded range of HCBS services for individuals who do not require institutional care may also offer lower rates of reimbursement for those HCBS services than services provided in SNFs. This cost differential may make those HCBS services more attractive to Medicaid programs than SNF-based care.
CMS has continued to commence a series of actions to increase its oversight of state quality assurance programs for senior living communities and has provided guidance and technical assistance to states to improve their ability to monitor and improve the quality of services paid through Medicaid waiver programs. CMS is encouraging state Medicaid programs to expand their use of home and community-based services as alternatives to facility-based services, pursuant to provisions of the ACA, and other authorities, through the use of several programs.
The types of laws and statutes affecting the regulatory landscape of the post-acute industry continue to expand and the pressure to enforce those laws by federal and state authorities continues to grow as well. In order to operate our businesses, we and our independent subsidiaries must comply with federal, state and local laws from healthcare including provisions regarding patient safety, staffing, and prescription drugs to environmental issues. Changes in the law or new interpretations of existing laws may have an adverse impact on our methods and costs of doing business.
RESULTS OF OPERATIONS
Our total revenue for the three months ended June 30, 2026 increased $212.7 million, or 17.3%, compared to the three months ended June 30, 2025, while our diluted GAAP earnings per share grew by 16.7%, from $1.44 to $1.68, compared to the three months ended June 30, 2025. Our Same Facilities occupancy increased by 2.7% to 84.1% during the three months ended June 30, 2026 compared to the same period in 2025, demonstrating the increase in demand in our services and our ability to gain additional market share at our more mature operations. Further, our Transitioning Facilities occupancy increased by 2.3% to 84.7% compared to the same period in 2025, highlighting our ability to organically grow and transform underperforming operations that we have acquired.
Throughout most of our history, operating results have been influenced by seasonal fluctuations in occupancy and patient acuity, most notably between the summer and winter months. Skilled nursing occupancy and skilled mix are typically strongest in the first and fourth quarters and softer in the second and third quarters. As expected, sequential seasonal trends resulted in lower occupancy and skilled mix during the period. Despite seasonal trends, both metrics exceeded our expectations, reflecting the strength of our clinical programs, local leadership teams, and disciplined operating model.
The resulting period over period progress, demonstrates our continued execution on targeted initiatives related to increasing occupancy and the level of acuity and complexity of the patients we serve in our facilities. We believe these capabilities, combined with our continued investment in people and our proven approach to acquiring and improving underperforming operations, position us well for sustained long-term growth.
Because Recently Acquired Facilities typically operate at lower occupancy and skilled mix levels, acquisition activity may temporarily reduce our overall metrics. These metrics tend to improve over time as they become operations of choice within their local healthcare markets. Accordingly, occupancy and skilled mix may vary from period to period based on the number, size, and operating characteristics of facilities we acquire.
During the six months ended June 30, 2026, we added 23 new operations. We continue to generate healthy growth in both revenue and overall results as we continue to work diligently with existing and recently acquired operations, so that each operation can reach its full clinical and financial potential. We believe our ability to consistently improve clinical outcomes, enhance operational performance, and successfully integrate acquisitions supports our mission of delivering high-quality care while creating sustainable long-term value.
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. As we continue to execute on core fundamentals, we continue to see positive trends on both turnover and agency usage across our operations.
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:
Three Months Ended June 30, Six Months Ended June 30,
2026 2025 2026 2025
REVENUE:
Service revenue 99.4 % 99.5 % 99.5 % 99.5 %
Rental revenue 0.6 0.5 0.5 0.5
TOTAL REVENUE 100.0 % 100.0 % 100.0 % 100.0 %
Expenses:
Cost of services 78.7 79.2 78.8 79.1
Rent-cost of services 4.6 4.7 4.7 4.8
General and administrative expense 6.0 5.6 5.7 5.5
Depreciation and amortization 2.2 2.0 2.1 2.0
TOTAL EXPENSES 91.5 % 91.5 % 91.3 % 91.4 %
Income from operations 8.5 8.5 8.7 8.6
Other income (expense):
Interest expense (0.1) (0.2) (0.1) (0.2)
Interest income 0.3 0.4 0.4 0.5
Other expense
0.6 0.5 0.2 0.3
OTHER INCOME, NET 0.8 % 0.7 % 0.5 % 0.6 %
Income before provision for income taxes 9.3 9.2 9.2 9.2
Provision for income taxes 2.4 2.3 2.2 2.3
NET INCOME 6.9 % 6.9 % 7.0 % 6.9 %
Less: net income attributable to noncontrolling interests - - - -
Net income attributable to The Ensign Group, Inc. 6.9 % 6.9 % 7.0 % 6.9 %
Three Months Ended June 30, Six Months Ended June 30,
2026 2025 2026 2025
SEGMENT INCOME(1)
(In thousands)
Skilled services $ 179,621 $ 150,004 $ 353,638 $ 293,935
Standard Bearer(2)
12,070 9,126 22,879 17,709
NON-GAAP FINANCIAL MEASURES:
PERFORMANCE METRICS
Adjusted EBT $ 152,539 $ 124,520 $ 299,590 $ 243,250
Adjusted Net Income
114,308 93,320 224,508 182,292
Adjusted Earnings Per Share
1.92 1.59 3.77 3.11
EBITDA 162,284 134,858 314,965 260,704
Adjusted EBITDA 181,149 146,611 352,309 283,996
FFO for Standard Bearer
24,746 18,391 46,338 35,450
VALUATION METRICS
Adjusted EBITDAR $ 247,561 $ 484,227
(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. Included in segment income for Standard Bearer are expenses for intercompany management fees between Standard Bearer and the Service Center and intercompany interest expense. Segment income is reconciled to the Condensed Consolidated Statement of Income in Note 7, Business Segments in Notes to Interim Financial Statements of this Quarterly Report on Form 10-Q.
(2) Standard Bearer segment income includes rental revenue and expenses from our independent subsidiaries.
The following discussion includes references to Adjusted EBT, Adjusted net income, Adjusted earnings per share, EBITDA, Adjusted EBITDA, Adjusted EBITDAR and Funds from Operations (FFO) which are non-GAAP financial measures (collectively, the Non-GAAP Financial Measures). Regulation G, Conditions for Use of Non-GAAP Financial Measures, and other provisions of the Securities Exchange Act of 1934, as amended (the Exchange Act), define and prescribe the conditions for use of certain non-GAAP financial information. These Non-GAAP Financial Measures are used in addition to and in conjunction with results presented in accordance with GAAP. These Non-GAAP Financial Measures should not be relied upon to the exclusion of GAAP financial measures. These Non-GAAP Financial Measures reflect an additional way of viewing aspects of our operations that, when viewed with our GAAP results and the accompanying reconciliations to corresponding GAAP financial measures, provide a more complete understanding of factors and trends affecting our business.
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.
We use the Non-GAAP Financial Measures:
•as measurements of our operating performance to assist us in comparing our operating performance on a consistent basis;
•to allocate resources to enhance the financial performance of our business;
•to assess the value of a potential acquisition;
•to assess the value of a transformed operation's performance;
•to evaluate the effectiveness of our operational strategies; and
•to compare our operating performance to that of our competitors.
We use certain Non-GAAP Financial Measures to compare the operating performance of each operation. These measures are useful in this regard because they do not include such costs as other expense, income taxes, depreciation and amortization expense, which may vary from period-to-period depending upon various factors, including the method used to finance operations, the amount of debt that we have incurred, whether an operation is owned or leased, the date of acquisition of a facility or business, and the tax law of the state in which a business unit operates.
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. Therefore, certain of our Non-GAAP Financial Measures have limitations as analytical tools, and they should not be considered in isolation, or as a substitute for analysis of our results as reported in accordance with GAAP. Some of these limitations are:
•they do not reflect our current or future cash requirements for capital expenditures or contractual commitments;
•they do not reflect changes in, or cash requirements for, our working capital needs;
•they do not reflect the interest expense, or the cash requirements necessary to service interest or principal payments, on our debt;
•they do not reflect rent expenses, which are necessary to operate our leased operations, in the case of Adjusted EBITDAR;
•they do not reflect any income tax payments we may be required to make;
•although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and do not reflect any cash requirements for such replacements; and
•other companies in our industry may calculate these measures differently than we do, which may limit their usefulness as comparative measures.
We compensate for these limitations by using them only to supplement net income on a basis prepared in accordance with GAAP in order to provide a more complete understanding of the factors and trends affecting our business. Management strongly encourages investors to review our consolidated financial statements in their entirety and to not rely on any single financial measure. Because these Non-GAAP Financial Measures are not standardized, it may not be possible to compare these financial measures with other companies' Non-GAAP financial measures having the same or similar names. These Non-GAAP Financial Measures should not be considered a substitute for, nor superior to, financial results and measures determined or calculated in accordance with GAAP. We strongly urge you to review the reconciliation of income from operations to the Non-GAAP Financial Measures in the table below, along with our Interim Financial Statements and related notes included elsewhere in this document.
We use the following Non-GAAP financial measures that we believe are useful to investors as key valuation and operating performance measures:
PERFORMANCE MEASURES
Adjusted EBT
We adjust income before provision for income taxes (Adjusted EBT) when evaluating our performance because we believe that the exclusion of certain additional items described below provides useful supplemental information to investors regarding our ongoing operating performance. We believe that the presentation of Adjusted EBT, when combined with income before provision for income taxes and GAAP net income attributable to The Ensign Group, Inc., is beneficial to an investor's complete understanding of our operating performance. We use this performance measure as an indicator of business performance, as well as for operational planning, decision-making purposes and to determine compensation in our executive compensation plan.
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;
•acquisition related costs;
•costs incurred related to system implementations;
•loss (gain) on long-lived assets and business interruption recoveries; and
•amortization of patient base intangible assets.
These items are generally infrequent or variable in nature, or do not represent current operating activities.
Adjusted Net Income and Adjusted Earnings Per Share
We adjust net income attributable to The Ensign Group, Inc. (adjusted net income) and diluted earnings per share (adjusted earnings per share) when evaluating our performance because we believe these measures provide useful supplemental information to management and investors regarding our ongoing operating performance. We believe that the presentation of adjusted net income and adjusted earnings per share, when considered together with GAAP net income attributable to The Ensign Group, Inc. and GAAP diluted earnings per share, enhances an investor's understanding of our results of operations. Management uses these measures for performance evaluation, operational planning and decision-making purposes.
Adjusted net income is net income adjusted for non-core business items as listed in adjusted EBT, as well as the related income tax effects of these adjustments.
Adjusted earnings per share is calculated by dividing adjusted net income by the weighted-average diluted shares outstanding for the applicable period.
EBITDA
We believe EBITDA is useful to investors in evaluating our operating performance because it helps investors evaluate and compare the results of our operations from period to period by removing the impact of our asset base (depreciation and amortization expense) from our operating results.
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.
Adjusted EBITDA
We adjust EBITDA when evaluating our performance because we believe that the exclusion of certain additional items described below provides useful supplemental information to investors regarding our ongoing operating performance, in the case of Adjusted EBITDA. We believe that the presentation of Adjusted EBITDA, when combined with EBITDA and GAAP net income attributable to The Ensign Group, Inc., is beneficial to an investor's complete understanding of our operating performance.
Adjusted EBITDA is EBITDA adjusted for the same non-core business items as listed in Adjusted EBT, except for amortization of patient base intangible assets.
Funds from Operations (FFO)
We consider FFO to be a useful supplemental measure of the operating performance of Standard Bearer. Historical cost accounting for real estate assets in accordance with U.S. GAAP implicitly assumes that the value of real estate assets diminishes predictably over time as evidenced by the provision for depreciation. However, since real estate values have historically risen or fallen with market conditions, many real estate investors and analysts have considered presentations of operating results for real estate companies that use historical cost accounting to be insufficient. In response, the National Association of Real Estate Investment Trusts (NAREIT) created FFO as a supplemental measure of operating performance for REITs, which excludes historical cost depreciation from net income. 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.
VALUATION MEASURE
Adjusted EBITDAR
We use Adjusted EBITDAR as one measure in determining the value of prospective acquisitions. It is also a commonly used measure by our management, research analysts and investors, to compare the enterprise value of different companies in the healthcare industry, without regard to differences in capital structures and leasing arrangements. Adjusted EBITDAR is a financial valuation measure that is not specified in GAAP. This measure is not displayed as a performance measure as it excludes rent expense, which is a normal and recurring operating expense, and is therefore presented only for the current period.
The adjustments made and previously described in the computation of Adjusted EBITDA are also made when computing Adjusted EBITDAR. We calculate Adjusted EBITDAR by excluding rent-cost of services from Adjusted EBITDA.
We believe the use of Adjusted EBITDAR allows the investor to compare operational results of companies who have operating and capital leases. A significant portion of capital lease expenditures are recorded in interest, whereas operating lease expenditures are recorded in rent expense.
The table below reconciles income before provision for income taxes to Adjusted EBT for the periods presented:
Three Months Ended June 30, Six Months Ended June 30,
2026 2025 2026 2025
Consolidated statements of income data:
(In thousands)
Income before provision for income taxes $ 133,674 $ 112,358 $ 262,246 $ 218,938
Stock-based compensation expense
16,166 11,662 30,061 22,386
Costs incurred related to system implementations
2,180 437 5,199 771
Loss (gain) on long-lived assets and business interruption recoveries - (1,000) 1,284 (1,000)
Acquisition related costs(1)
519 654 800 1,135
Depreciation and amortization - patient base(2)
- 409 - 1,020
ADJUSTED EBT
$ 152,539 $ 124,520 $ 299,590 $ 243,250
(1) Represents costs incurred to acquire operations that are not capitalizable.
(2) Represents amortization expenses related to patient base intangible assets at newly acquired skilled nursing and senior living facilities.
The table below reconciles net income to adjusted net income and diluted earnings per share to adjusted earnings per share for the periods presented:
Three Months Ended June 30, Six Months Ended June 30,
2026 2025 2026 2025
Net income attributable to The Ensign Group, Inc. $ 99,738 $ 84,396 $ 199,406 $ 164,673
Adjustments:
Stock-based compensation expense
16,166 11,662 30,061 22,386
Costs incurred related to system implementations 2,180 437 5,199 771
Loss (gain) on long-lived assets and business interruption recoveries - (1,000) 1,284 (1,000)
Acquisition related costs(1)
519 654 800 1,135
Depreciation and amortization - patient base(2)
- 409 - 1,020
Provision for income taxes on Non-GAAP adjustments(3)
(4,295) (3,238) (12,242) (6,693)
Adjusted Net Income $ 114,308 $ 93,320 $ 224,508 $ 182,292
Average number of diluted shares outstanding 59,483 58,602 59,527 58,560
Diluted Earnings Per Share $ 1.68 $ 1.44 $ 3.35 $ 2.81
Adjusted Earnings Per Share $ 1.92 $ 1.59 $ 3.77 $ 3.11
(1) Represents costs incurred to acquire operations that are not capitalizable.
(2) Represents amortization expenses related to patient base intangible assets at newly acquired skilled nursing and senior living facilities.
(3) Represents an adjustment to the provision for income tax to our historical effective tax rate of 25.0%.
The table below reconciles net income to EBITDA, Adjusted EBITDA and Adjusted EBITDAR for the periods presented:
Three Months Ended June 30, Six Months Ended June 30,
2026 2025 2026 2025
Consolidated statements of income data:
(In thousands)
Net income $ 99,834 $ 84,466 $ 199,590 $ 164,819
Less: Net income attributable to noncontrolling interests
96 70 184 146
Interest income
4,633 5,240 11,169 12,123
Add: Provision for income taxes
33,840 27,892 62,656 54,119
Depreciation and amortization
31,406 25,785 60,207 49,973
Interest expense 1,933 2,025 3,865 4,062
EBITDA $ 162,284 $ 134,858 $ 314,965 $ 260,704
Adjustments to EBITDA:
Stock-based compensation expense 16,166 11,662 30,061 22,386
Costs incurred related to system implementations 2,180 437 5,199 771
Loss (gain) on long-lived assets and business interruption recoveries - (1,000) 1,284 (1,000)
Acquisition related costs(1)
519 654 800 1,135
ADJUSTED EBITDA
$ 181,149 $ 146,611 $ 352,309 $ 283,996
Rent-cost of services 66,412 57,195 131,918 114,271
ADJUSTED EBITDAR
$ 247,561 $ 484,227
(1) Represents costs incurred to acquire operations that are not capitalizable.
Three Months Ended June 30, 2026 Compared to the Three Months Ended June 30, 2025
The following tables set forth details of operating results for our revenue and earnings, and their respective components, by our reportable segments for the periods indicated:
Three Months Ended June 30, 2026
Skilled services Standard Bearer All Other Eliminations Consolidated
Total revenue
$ 1,379,912 $ 44,133 $ 64,268 $ (47,832) $ 1,440,481
Total expenses, including other income, net
1,200,291 32,063 122,285 (47,832) 1,306,807
Segment income (loss) 179,621 12,070 (58,017) - 133,674
Income before provision for income taxes $ 133,674
Three Months Ended June 30, 2025
Skilled services Standard Bearer All Other Eliminations Consolidated
Total revenue
$ 1,173,576 $ 31,468 $ 57,332 $ (34,607) $ 1,227,769
Total expenses, including other income, net
1,023,572 22,342 104,104 (34,607) 1,115,411
Segment income (loss) 150,004 9,126 (46,772) - 112,358
Income before provision for income taxes $ 112,358
Our total revenue increased by $212.7 million, or 17.3%, compared to the three months ended June 30, 2025. The increase in revenue was primarily driven by occupancy growth of 2.7% and 2.3% from our skilled services in Same Facilities and Transitioning Facilities, respectively, as well as higher patient acuity. In addition, contributions from our acquisitions increased our Recently Acquired Facilities revenue by $133.5 million, when compared to the same period in 2025.
Skilled Services
REVENUE
The following tables present the skilled services revenue and key performance metrics by category during the three months ended June 30, 2026 and 2025:
Three Months Ended June 30,
2026 2025 Change % Change
TOTAL FACILITY RESULTS: (Dollars in thousands)
Skilled services revenue
$ 1,379,912 $ 1,173,576 $ 206,336 17.6 %
Number of facilities at period end 348 304 44 14.5 %
Number of campuses at period end(1)
32 30 2 6.7 %
Actual patient days 3,017,641 2,615,490 402,151 15.4 %
Occupancy percentage - Operational beds 82.9 % 81.3 % 1.6 % 2.0 %
Skilled mix by nursing days 31.0 % 30.8 % 0.2 % 0.6 %
Skilled mix by nursing revenue 50.0 % 49.2 % 0.8 % 1.6 %
Three Months Ended June 30,
2026 2025 Change % Change
SAME FACILITY RESULTS:(2)
(Dollars in thousands)
Skilled services revenue
$ 988,337 $ 926,850 $ 61,487 6.6 %
Number of facilities at period end 234 234 - - %
Number of campuses at period end(1)
25 25 - - %
Actual patient days 2,164,347 2,091,332 73,015 3.5 %
Occupancy percentage - Operational beds 84.1 % 81.9 % 2.2 % 2.7 %
Skilled mix by nursing days 32.2 % 31.3 % 0.9 % 2.9 %
Skilled mix by nursing revenue 51.0 % 50.1 % 0.9 % 1.8 %
Three Months Ended June 30,
2026 2025 Change % Change
TRANSITIONING FACILITY RESULTS:(3)
(Dollars in thousands)
Skilled services revenue
$ 197,371 $ 185,981 $ 11,390 6.1 %
Number of facilities at period end 50 50 - - %
Number of campuses at period end(1)
4 4 - - %
Actual patient days 405,468 393,063 12,405 3.2 %
Occupancy percentage - Operational beds 84.7 % 82.8 % 1.9 % 2.3 %
Skilled mix by nursing days 29.7 % 28.0 % 1.7 % 6.1 %
Skilled mix by nursing revenue 49.7 % 47.0 % 2.7 % 5.7 %
Three Months Ended June 30,
2026 2025 Change % Change
RECENTLY ACQUIRED FACILITY RESULTS:(4)
(Dollars in thousands)
Skilled services revenue
$ 194,204 $ 60,745 $ 133,459 NM
Number of facilities at period end 64 20 44 NM
Number of campuses at period end(1)
3 1 2 NM
Actual patient days 447,826 131,095 316,731 NM
Occupancy percentage - Operational beds 76.6 % 69.9 % NM NM
Skilled mix by nursing days 26.9 % 30.4 % NM NM
Skilled mix by nursing revenue 45.1 % 43.0 % NM NM
(1)Campus represents a facility that offers both skilled nursing and senior living services. 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 acquired prior to January 1, 2023.
(3)Transitioning Facility results represent all facilities acquired from January 1, 2023 to December 31, 2024.
(4)Recently Acquired Facility results represent all facilities acquired on or subsequent to January 1, 2025.
Skilled services revenue increased by $206.3 million, or 17.6%, compared to the three months ended June 30, 2025. The increases in skilled services revenue were across all payer types, primarily driven by strong occupancy across our skilled services operations. Our consolidated occupancy increased by 2.0% to 82.9%, during the three months ended June 30, 2026 compared to the same period in 2025, with an increase in skilled days from our operations within Same Facilities and Transitioning Facilities.
Revenue in our Same Facilities increased by $61.5 million, or 6.6%, compared to the three months ended June 30, 2025, due to increased occupancy from skilled days and revenue per patient day. Our continuous efforts to strengthen our partnerships with various managed care organizations, hospitals and local communities, increased our managed care revenue by 6.1%, resulting from an increase in managed care days and revenue per patient day. In addition to our growing Medicare Advantage market, we experienced meaningful growth in our Medicare patient base.
Revenue in our Transitioning Facilities increased by $11.4 million, or 6.1%, compared to the three months ended June 30, 2025, due to improved occupancy growth, increases in skilled mix days and revenue per patient day, across all payors. The increases reflect our operational fundamentals as we continue to transition and integrate these facilities.
Revenue in our Recently Acquired Facilities increased by approximately $133.5 million compared to three months ended June 30, 2025. The 46 operational expansions between July 1, 2025 and June 30, 2026 across 10 states contributed $120.1 million of the total increase. Recently Acquired Facilities generally have lower occupancy and skilled mix levels, which may temporarily reduce our overall operating metrics following an acquisition.
The following table reflects the change in skilled nursing average daily revenue rates by payor source, excluding services that are not covered by the daily rate(1):
Three Months Ended June 30,
Same Facility Transitioning Acquisitions Total
2026 2025 2026 2025 2026 2025 2026 2025
SKILLED NURSING AVERAGE DAILY REVENUE RATES:
Medicare $ 814.66 $ 779.77 $ 890.48 $ 854.83 $ 784.73 $ 701.40 $ 822.24 $ 789.43
Managed care
599.06 575.29 658.87 609.88 630.25 555.77 609.07 578.40
Other skilled 649.37 647.61 678.38 685.81 683.77 711.96 655.51 655.04
Total skilled revenue 685.04 661.18 776.70 745.39 713.52 652.03 700.39 672.15
Medicaid 310.64 302.36 326.89 321.75 316.83 374.44 313.78 308.87
Private and other payors 317.27 288.43 362.96 357.18 330.50 392.10 326.20 305.96
Total skilled nursing revenue
$ 431.71 $ 413.41 $ 464.31 $ 444.50 $ 425.26 $ 460.83 $ 435.10 $ 420.43
(1) The rates are based on contractually agreed-upon amounts or rates, excluding the estimates of variable consideration under the revenue recognition standard, Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 606.
Our Medicare daily rates at Same Facilities and Transitioning Facilities increased by 4.5% and 4.2%, respectively, compared to the three months ended June 30, 2025. The increase is attributable to the 3.2% net market basket increase that became effective in October 2025 as well as a shift toward higher acuity patients. As hospitals continue to discharge individuals with more complex medical conditions to skilled nursing facilities, we are experiencing a greater proportion of higher acuity patients, which necessitates more advanced and specialized care.
Our managed care daily rates at Same Facilities and Transitioning Facilities increased by 4.1% and 8.0%, respectively, compared to the three months ended June 30, 2025. The increase in managed care daily rates was primarily driven by our continued focus on developing strong relationships as well as the achievement of clinical outcomes, resulting in a shift to high acuity patients.
Our Medicaid daily rates at Same Facilities and Transitioning Facilities increased by 2.7% and 1.6%, respectively, compared to the three months ended June 30, 2025, due to state reimbursement increases and our participation in Medicaid supplemental payment and quality improvement programs in various states.
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 affiliated skilled nursing facilities over various periods.
The following tables set forth our percentage of skilled nursing patient revenue and days by payor source:
Three Months Ended June 30,
Same Facility Transitioning Acquisitions Total
2026 2025 2026 2025 2026 2025 2026 2025
PERCENTAGE OF SKILLED NURSING REVENUE
Medicare 21.2 % 20.9 % 28.3 % 27.8 % 24.1 % 19.1 % 22.6 % 21.9 %
Managed care 19.6 19.9 15.1 14.0 14.4 13.0 18.2 18.6
Other skilled 10.2 9.3 6.3 5.2 6.6 10.9 9.2 8.7
Skilled Mix 51.0 % 50.1 % 49.7 % 47.0 % 45.1 % 43.0 % 50.0 % 49.2 %
Private and other payors 7.1 6.9 8.4 9.2 10.6 10.0 7.7 7.5
Medicaid 41.9 43.0 41.9 43.8 44.3 47.0 42.3 43.3
TOTAL SKILLED NURSING
100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %
Three Months Ended June 30,
Same Facility Transitioning Acquisitions Total
2026 2025 2026 2025 2026 2025 2026 2025
PERCENTAGE OF SKILLED NURSING DAYS
Medicare 11.2 % 11.1 % 14.7 % 14.5 % 13.1 % 12.6 % 12.0 % 11.6 %
Managed care 14.1 14.3 10.6 10.2 9.7 10.8 13.0 13.5
Other skilled 6.9 5.9 4.4 3.3 4.1 7.0 6.0 5.7
Skilled Mix 32.2 % 31.3 % 29.7 % 28.0 % 26.9 % 30.4 % 31.0 % 30.8 %
Private and other payors 9.6 9.9 10.7 11.5 13.7 11.8 10.4 10.2
Medicaid 58.2 58.8 59.6 60.5 59.4 57.8 58.6 59.0
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):
Three Months Ended June 30, Change
2026 2025 $ %
Cost of services
$ 1,089,109 $ 932,823 $ 156,286 16.8 %
Revenue percentage 78.9 % 79.5 % (0.6) %
Cost of services related to our skilled services segment increased by $156.3 million, or 16.8%, from the same period in 2025, primarily due to growth in operations, including acquisitions, and higher patient volumes. Cost of services as a percentage of revenue decreased by 0.6% to 78.9%, primarily reflecting ancillary cost efficiencies achieved through our integrated clinical and therapy model and improved labor costs, including lower agency expenses. Cost of services as a percentage of revenue may fluctuate from period to period based on the timing and volume of acquisitions, as newly acquired operations typically experience higher costs during their initial transition period. In addition, cost of services for the three months ended June 30, 2026 includes $3.9 million of expenses associated with our deferred compensation plan, which directly offsets the corresponding investment gains recorded in Other income, net. Without the deferred compensation plan expense, cost of services expense as a percentage of revenue would be 78.6%.
Standard Bearer
Three Months Ended June 30, Change
2026 2025 $ %
(Dollars in thousands)
Rental revenue generated from third-party tenants $ 6,348 $ 4,712 $ 1,636 34.7 %
Rental revenue generated from Ensign's independent subsidiaries
37,785 26,756 11,029 41.2
TOTAL RENTAL REVENUE
$ 44,133 $ 31,468 $ 12,665 40.2 %
Segment income 12,070 9,126 2,944 32.3
Depreciation and amortization 12,676 9,265 3,411 36.8
FFO
$ 24,746 $ 18,391 $ 6,355 34.6 %
Rental revenue - Our rental revenue, including revenue generated from our independent subsidiaries, increased by $12.7 million, or 40.2%, to $44.1 million, compared to the three months ended June 30, 2025. The increase in revenue is primarily attributable to 37 real estate purchases, as well as annual rent increases since the three months ended June 30, 2025. For the three months ended June 30, 2026, rental revenue generated from third-party tenants included $1.0 million of rental income earned from acquired real estate properties during the period prior to their lease to our independent operating subsidiaries on May 1, 2026.
FFO - Our FFO increased by $6.4 million, or 34.6%, to $24.7 million, compared to the three months ended June 30, 2025. The increase in rental revenue of $12.7 million was offset by increases in interest expense of $5.1 million associated with the debt agreements between Standard Bearer and us as Standard Bearer continues to grow its real estate portfolio.
All Other Revenue
Our other revenue increased by $6.9 million, or 12.1%, to $64.3 million, compared to the three months ended June 30, 2025. Other revenue includes senior living revenue of $31.2 million, revenue from other ancillary services of $29.9 million and rental income of $3.2 million. The increase in other revenue is primarily attributable to the growth in our other ancillary services.
Consolidated Financial Expenses
Rent-cost of services - Our rent-cost of services as a percentage of revenue decreased by 0.1% to 4.6%, as the expansions in our footprint have resulted from more real estate purchases than leased properties.
General and administrative expense - General and administrative expense increased $16.8 million or 24.3%, to $85.9 million. The increase was also driven by costs incurred in connection with our system implementation. General and administrative expense as a percentage of revenue increased by 0.4% to 6.0%. General and administrative expense for the three months ended June 30, 2026 includes $3.9 million of expenses associated with our deferred compensation plan, which directly offsets the corresponding investment gains recorded in Other income, net. Without the deferred compensation plan expense, general and administrative expense as a percentage of revenue would be 5.7%.
Depreciation and amortization - Depreciation and amortization expense increased $5.6 million, or 21.8%, to $31.4 million. This increase was primarily related to additional depreciation incurred as a result of our newly acquired operations, which have a greater mix of real estate purchases than leases, and capital investments. Depreciation and amortization increased 0.2%, to 2.2%, as a percentage of revenue.
Other income, net - Other income, net primarily includes interest income from our investments, interest expense related to our debt and deferred compensation gains and losses. During the three months ended June 30, 2026 and 2025, the deferred compensation plan had gains of $7.6 million and $4.5 million, respectively, with an offsetting expense allocated between cost of services and general and administrative expenses. Other income, net increased primarily due to an increase in the gain on our deferred compensation plan offset by a decrease in interest income of $0.6 million as we utilized our cash on hand to fund more real estate purchases during the period. Changes in our deferred compensation plan are a result of gains or losses depending on market performance. Other income, net as a percentage of revenue increased by 0.1%.
Provision for income taxes - Our effective tax rate was 25.3% for the three months ended June 30, 2026, compared to 24.8% for the same period in 2025. 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 12, Income Taxes, in the Notes to the Interim Financial Statements for further discussion.
Six Months Ended June 30, 2026 Compared to the Six Months Ended June 30, 2025
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.
Six Months Ended June 30, 2026
Skilled Services Standard Bearer All Other Eliminations Consolidated
Total revenue $ 2,710,747 $ 80,235 $ 126,524 $ (87,829) $ 2,829,677
Total expenses, including other income, net
2,357,109 57,356 240,795 (87,829) 2,567,431
Segment income (loss) 353,638 22,879 (114,271) - 262,246
Income before provision for income taxes $ 262,246
Six Months Ended June 30, 2025
Skilled Services Standard Bearer All Other Eliminations Consolidated
Total revenue $ 2,297,130 $ 59,869 $ 109,758 $ (65,947) $ 2,400,810
Total expenses, including other income, net
2,003,195 42,160 202,464 (65,947) 2,181,872
Segment income (loss) 293,935 17,709 (92,706) - 218,938
Income before provision for income taxes $ 218,938
Our total revenue increased by $428.9 million, or 17.9%, compared to the six months ended June 30, 2025. The increase in revenue was primarily driven by an increase in occupancy of 2.6% and 3.0% from our skilled services in Same Facilities and Transitioning Facilities, respectively, as well as higher patient acuity. In addition, contributions from our acquisitions increased our Recently Acquired Facilities revenue by $261.5 million, when compared to the same period in 2025.
Revenue
The following tables present the skilled services revenue and key performance metrics by category during the six months ended June 30, 2026 and 2025:
Six Months Ended June 30,
2026 2025 Change % Change
TOTAL FACILITY RESULTS: (Dollars in thousands)
Skilled services revenue $ 2,710,747 $ 2,297,130 $ 413,617 18.0 %
Number of facilities at period end 348 304 44 14.5 %
Number of campuses at period end(1)
32 30 2 6.7 %
Actual patient days 5,913,675 5,153,626 760,049 14.7 %
Occupancy percentage - Operational beds 83.4 % 81.6 % 1.8 % 2.2 %
Skilled mix by nursing days 31.5 % 31.1 % 0.4 % 1.3 %
Skilled mix by nursing revenue 50.3 % 49.7 % 0.6 % 1.2 %
Six Months Ended June 30,
2026 2025 Change % Change
SAME FACILITY RESULTS:(2)
(Dollars in thousands)
Skilled services revenue
$ 1,967,545 $ 1,843,338 $ 124,207 6.7 %
Number of facilities at period end 234 234 - - %
Number of campuses at period end(1)
25 25 - - %
Actual patient days 4,309,728 4,170,184 139,544 3.3 %
Occupancy percentage - Operational beds 84.2 % 82.1 % 2.1 % 2.6 %
Skilled mix by nursing days 32.4 % 31.8 % 0.6 % 1.9 %
Skilled mix by nursing revenue 51.1 % 50.6 % 0.5 % 1.0 %
Six Months Ended June 30,
2026 2025 Change % Change
TRANSITIONING FACILITY RESULTS:(3)
(Dollars in thousands)
Skilled services revenue
$ 392,857 $ 364,903 $ 27,954 7.7 %
Number of facilities at period end 50 50 - - %
Number of campuses at period end(1)
4 4 - - %
Actual patient days 807,732 778,169 29,563 3.8 %
Occupancy percentage - Operational beds 84.9 % 82.4 % 2.5 % 3.0 %
Skilled mix by nursing days 29.9 % 28.4 % 1.5 % 5.3 %
Skilled mix by nursing revenue 49.7 % 47.6 % 2.1 % 4.4 %
Six Months Ended June 30,
2026 2025 Change % Change
RECENTLY ACQUIRED FACILITY RESULTS:(4)
(Dollars in thousands)
Skilled services revenue
$ 350,345 $ 88,889 $ 261,456 NM
Number of facilities at period end 64 20 44 NM
Number of campuses at period end(1)
3 1 2 NM
Actual patient days 796,215 205,273 590,942 NM
Occupancy percentage - Operational beds 78.3 % 70.0 % NM NM
Skilled mix by nursing days 28.5 % 27.7 % NM NM
Skilled mix by nursing revenue 46.8 % 39.9 % NM NM
(1)Campus represents a facility that offers both skilled nursing and senior living services. 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 acquired prior to January 1, 2023.
(3)Transitioning Facility results represent all facilities acquired from January 1, 2023 to December 31, 2024.
(4)Recently Acquired Facility results represent all facilities acquired on or subsequent to January 1, 2025.
Skilled services revenue increased $413.6 million, or 18.0%, compared to the six months ended June 30, 2025. The increases in skilled services revenue were across all payer types, primarily driven by strong occupancy across our skilled services operations. Our consolidated occupancy increased by 2.2% to 83.4% during the six months ended June 30, 2026 compared to the same period in 2025, compounded by a shift to skilled days for our Same Facilities and Transitioning Facilities.
Revenue in our Same Facilities increased $124.2 million, or 6.7%, compared to the six months ended June 30, 2025, due to increased occupancy from strong skilled days and revenue per patient day.
Revenue in our Transitioning Facilities increased $28.0 million, or 7.7%, compared to the six months ended June 30, 2025, due to improved occupancy growth, increases in skilled mix days and revenue per patient day, across all payors. The increases reflect our operational fundamentals as we continue to transition and integrate these facilities.
Revenue in our Recently Acquired Facilities increased $261.5 million, compared to the six months ended June 30, 2025. The 46 operational expansions between July 1, 2025 and June 30, 2026 across 10 states contributed $206.8 million of the total increase. Recently Acquired Facilities generally have lower occupancy and skilled mix levels, which may temporarily reduce our overall operating metrics following an acquisition.
The following table reflects the change in skilled nursing average daily revenue rates by payor source, excluding services that are not covered by the daily rate (1):
Six Months Ended June 30,
Same Facility Transitioning Acquisitions Total
2026 2025 2026 2025 2026 2025 2026 2025
SKILLED NURSING AVERAGE DAILY REVENUE RATES
Medicare $ 812.17 $ 777.70 $ 885.86 $ 848.13 $ 796.67 $ 667.40 $ 822.04 $ 786.58
Managed care 594.97 570.02 652.52 605.80 627.83 522.15 604.67 572.51
Other skilled 646.93 645.85 680.76 668.45 659.88 714.24 651.51 650.67
Total skilled revenue 682.14 657.16 773.10 739.60 714.40 621.17 697.78 667.17
Medicaid 311.49 299.67 328.56 316.93 318.27 356.51 314.77 304.65
Private and other payors 314.74 289.10 365.97 354.74 348.25 364.34 327.66 303.52
Total skilled nursing revenue
$ 431.75 $ 412.14 $ 465.42 $ 441.17 $ 434.75 $ 430.70 $ 436.73 $ 417.23
(1) The rates are based on contractually agreed-upon amounts or rates, excluding the estimates of variable consideration under the revenue recognition standard, Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 606.
Our Medicare daily rates at Same Facilities and Transitioning Facilities both increased by 4.4% compared to the six months ended June 30, 2025. The increases are attributable to the 3.2% net market basket increase that became effective October 2025 as well as a shift toward higher acuity patients. As hospitals continue to discharge individuals with more complex medical conditions to skilled nursing facilities, we are experiencing a greater proportion of higher acuity patients, which necessitates more advanced and specialized care.
Our managed care daily rates at Same Facilities and Transitioning Facilities increased by 4.4% and 7.7%, respectively, compared to the six months ended June 30, 2025. The increase in managed care daily rates was primarily driven by our continued focus on clinical outcomes, resulting in shift to higher acuity patients.
Our Medicaid daily rates at Same Facilities and Transitioning Facilities increased by 3.9% and 3.7%, respectively, compared to the six months ended June 30, 2025, due to state reimbursement increases, our participation in Medicaid supplemental payment and quality improvement programs in various states.
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:
Six Months Ended June 30,
Same Facility Transitioning Acquisitions Total
2026 2025 2026 2025 2026 2025 2026 2025
PERCENTAGE OF SKILLED NURSING REVENUE
Medicare 21.4 % 21.1 % 28.4 % 28.4 % 25.2 % 18.2 % 23.0 % 22.2 %
Managed care 19.7 20.4 14.9 14.0 14.9 12.8 18.4 19.1
Other skilled 10.0 9.1 6.4 5.2 6.7 8.9 8.9 8.4
Skilled mix 51.1 % 50.6 % 49.7 % 47.6 % 46.8 % 39.9 % 50.3 % 49.7 %
Private and other payors 7.0 6.9 8.3 9.0 9.9 10.3 7.6 7.4
Medicaid 41.9 42.5 42.0 43.4 43.3 49.8 42.1 42.9
TOTAL SKILLED NURSING 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %
Six Months Ended June 30,
Same Facility Transitioning Acquisitions Total
2026 2025 2026 2025 2026 2025 2026 2025
PERCENTAGE OF SKILLED NURSING DAYS
Medicare 11.4 % 11.2 % 14.9 % 14.8 % 13.8 % 11.8 % 12.2 % 11.8 %
Managed care 14.3 14.7 10.6 10.2 10.4 10.5 13.3 13.9
Other skilled 6.7 5.9 4.4 3.4 4.3 5.4 6.0 5.4
Skilled mix 32.4 % 31.8 % 29.9 % 28.4 % 28.5 % 27.7 % 31.5 % 31.1 %
Private and other payors 9.5 9.8 10.6 11.2 12.4 12.2 10.0 10.1
Medicaid 58.1 58.4 59.5 60.4 59.1 60.1 58.5 58.8
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):
Six Months Ended June 30, Change
2026 2025 $ %
Cost of services $ 2,141,833 $ 1,824,678 $ 317,155 17.4 %
Revenue percentage 79.0 % 79.4 % (0.4) %
Cost of services related to our skilled services segment increased by $317.2 million, or 17.4%, from the same period in 2025, primarily due to growth in operations, including acquisitions, and higher patient volumes. Cost of services as a percentage of revenue decreased by 0.4% to 79.0%, primarily reflecting ancillary cost efficiencies achieved through our integrated clinical and therapy model and improved labor costs, including lower agency expenses. Cost of services as a percentage of revenue may fluctuate from period to period based on the timing and volume of acquisitions, as newly acquired operations typically experience higher costs during their initial transition period. In addition, cost of services for the six months ended June 30, 2026 includes $3.1 million of expenses associated with our deferred compensation plan, which directly offsets the corresponding investment gains recorded in Other income, net. Without the deferred compensation plan expense, cost of services expense as a percentage of revenue would be 78.7%.
Standard Bearer
Six Months Ended June 30, Change
2026 2025 $ %
(Dollars in thousands)
Rental revenue generated from third-party tenants $ 11,618 $ 9,209 $ 2,409 26.2 %
Rental revenue generated from Ensign's independent subsidiaries
68,617 50,660 17,957 35.4
TOTAL RENTAL REVENUE $ 80,235 $ 59,869 $ 20,366 34.0 %
Segment income 22,879 17,709 5,170 29.2
Depreciation and amortization 23,459 17,741 5,718 32.2
FFO $ 46,338 $ 35,450 $ 10,888 30.7 %
Rental revenue - Our rental revenue, including revenue generated from our independent subsidiaries, increased by $20.4 million, or 34.0%, to $80.2 million, compared to the six months ended June 30, 2025. The increase in revenue is primarily attributable to 37 real estate purchases, as well as annual rent increases since the six months ended June 30, 2025. For the six months ended June 30, 2026, rental revenue generated from third-party tenants included $1.0 million of rental income earned from acquired real estate properties during the period prior to their lease to our independent operating subsidiaries on May 1, 2026.
FFO - Our FFO increased by $10.9 million, or 30.7%, to $46.3 million, compared to the six months ended June 30, 2025. The increase in rental revenue of $20.4 million is offset by increases in interest expense of $7.9 million associated with the debt arrangements between Standard Bearer and us as Standard Bearer continues to grow its real estate portfolio.
All Other Revenue
Our other revenue increased by $16.8 million, or 15.3%, to $126.5 million, compared to the six months ended June 30, 2025. Other revenue for the six months ended June 30, 2026 includes senior living revenue of $61.8 million, revenue from other ancillary services of $58.3 million and rental income of $6.4 million. The increase in other revenue is primarily attributable to growth in our other ancillary services.
Consolidated Financial Expenses
Rent-cost of services - Our rent-cost of services as a percentage of revenue decreased by 0.1% to 4.7%, as the expansions in our footprint have resulted from more real estate purchases than leased properties.
General and administrative expense - General and administrative expense increased by $28.5 million or 21.6%, to $160.1 million. The increase was also driven by costs incurred related to our system implementation. General and administrative expense as a percentage of revenue increased by 0.2% to 5.7%. General and administrative expense for the six months ended June 30, 2026 includes $3.1 million of expenses associated with our deferred compensation plan, which directly offsets the corresponding investment gains recorded in Other income, net. Without the deferred compensation plan expense, general and administrative expense as a percentage of revenue would be 5.6%.
Depreciation and amortization - Depreciation and amortization expense increased by $10.2 million, or 20.5%, to $60.2 million. This increase was primarily related to the additional depreciation and amortization incurred as a result of our newly acquired operations, which have a greater mix of real estate purchases than leases, and capital investments. Depreciation and amortization increased 0.1%, to 2.1%, as a percentage of revenue.
Other income, net - Other income primarily includes interest income from our investments, interest expense related to our debt and deferred compensation gains and losses. During the six months ended June 30, 2026 and 2025, the deferred compensation investment program had a gains of $5.9 million and $4.2 million, respectively, with an offsetting expenses or reduction in expenses are allocated between cost of services and general and administrative expenses. Other income, net increased by $1.2 million primarily due to an increase in the gain on our deferred compensation plan offset by a decrease in interest income of $1.0 million as we utilized our cash on hand to fund more real estate purchases during the period. Changes in our deferred compensation plan are a result of gains or losses depending on market performance. Other income, net as a percentage of revenue decreased by 0.1%.
Provision for income taxes - Our effective tax rate was 23.9% for the six months ended June 30, 2026, compared to 24.7% for the same period in 2025. 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 12, Income Taxes, in the Interim Financial Statements for further discussion.
Liquidity and Capital Resources
Our principal sources of liquidity have historically been derived from our cash flows from operations, long-term debt secured by our real property and borrowings under our Credit Facility (defined below). Our liquidity as of June 30, 2026 is impacted by cash generated from strong operational performance offset by our real estate acquisitions, as well as capital expenditures to improve the quality of care at our existing operations.
Historically, we have primarily financed the majority of our acquisitions through cash generated from operations, mortgages on our properties and our Credit Facility. Cash paid to fund acquisitions was $376.0 million for the six months ended June 30, 2026 compared to $213.6 million for the six months ended June 30, 2025. Total capital expenditures for property and equipment were $88.3 million and $92.5 million for the six months ended June 30, 2026 and 2025, respectively. We currently have approximately $175.0 million budgeted for renovation projects in 2026.
Our cash and cash equivalents of $262.3 million as of June 30, 2026 consisted of bank deposits and money market funds. In addition, as of June 30, 2026, we held investments of $268.6 million. We believe our investments that were in an unrealized loss position as of June 30, 2026 do not require an allowance for expected credit losses, nor has any event occurred subsequent to that date that would indicate so. 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 primary source of cash is from our ongoing operations. 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 June 30, 2026, along with projected operating cash flows and available financing, will support our normal business operations for the foreseeable future.
Share Repurchases
On May 13, 2026, the Board of Directors approved a stock repurchase program pursuant to which we are authorized to repurchase up to $40.0 million of our common stock under the program for a period of approximately 12 months from June 12, 2026. On June 12, 2026, the Board of Directors approved an amendment to the stock repurchase program pursuant to which we are authorized to repurchase an additional $60.0 million of our common stock under the program. During the three months ended June 30, 2026, we repurchased 257 shares of our common stock for $40.0 million. As of June 30, 2026, $60.0 million remains authorized and available for repurchase under the stock repurchase program.
On May 15, 2025, the Board of Directors approved a stock repurchase program pursuant to which we are authorized to repurchase up to $20.0 million of our common stock under the program for a period of approximately 12 months from June 16, 2025. The stock repurchase program expired on June 16, 2026 and is no longer in effect. We did not repurchase any shares pursuant to this stock repurchase program.
Under each of our 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 program does not obligate us to acquire any specific number of shares. 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.
The following table presents selected data from our condensed consolidated statement of cash flows for the periods presented:
Six Months Ended June 30,
2026 2025
NET CASH PROVIDED BY (USED IN):
(In thousands)
Operating activities $ 272,108 $ 227,950
Investing activities (478,893) (311,924)
Financing activities (34,796) (16,655)
Net decrease in cash and cash equivalents $ (241,581) $ (100,629)
Cash and cash equivalents beginning of period 503,881 464,598
Cash and cash equivalents at end of period $ 262,300 $ 363,969
Operating Activities
Cash provided by operating activities is net income adjusted for certain non-cash items and changes in operating assets and liabilities.
The $44.2 million increase in cash provided by operating activities for the six months ended June 30, 2026 compared to the same period in 2025 was due to an increase in operational performance offset by timing of payments.
Investing Activities
Investing cash flows consist primarily of capital expenditures, investment activities, insurance proceeds and cash used for acquisitions.
The $167.0 million increase in cash used in investing activities for the six months ended June 30, 2026 compared to the same period in 2025 was primarily used for acquisitions, partially offset by maturities of our investments and reduced capital expenditures.
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 and payment for share repurchases.
The $18.1 million increase in cash used in financing activities for the six months ended June 30, 2026 compared to the same period in 2025, was primarily driven by higher common stock repurchases, which totaled $40.0 million in 2026 versus $20.0 million in 2025.
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. 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). In addition, there is a commitment fee on the unused portion of the commitments that ranges from 0.20% to 0.40% per annum, depending on the Consolidated Total Net Debt to Consolidated EBITDA ratio.
Mortgage Loans and Promissory Note
As of June 30, 2026, 23 of our subsidiaries had mortgage loans insured with HUD for an aggregate amount of $141.7 million, which subjects these subsidiaries to HUD oversight and periodic inspections. The mortgage loans bear effective interest rates at a range of 3.1% to 4.2%, including fixed interest rates at a range of 2.4% to 3.3% per annum. In addition to the interest rate, we incur other fees for HUD placement, including but not limited to audit fees. Amounts borrowed under the mortgage loans may be prepaid, subject to prepayment fees of the principal balance on the date of prepayment. For the majority of the loans, during the first three years, the prepayment fee is 10.0%, and is reduced by 3.0% in the fourth year of the loan, and reduced by 1.0% per year for years five through ten of the loan. There is no prepayment penalty after year ten. 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 note, which was used for an acquisition, is secured by the real property comprising the facility and the rent, issues and profits thereof, as well as all personal property used in the operation of the facility.
While the mortgage loans and promissory note require ongoing principal and interest payments over their respective terms, we currently expect these obligations to be satisfied through cash from ongoing operations.
Operating Leases
As of June 30, 2026, 254 of our facilities have long-term lease arrangements, of which 103 of the operations are under eight triple-net Master Leases 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. Under each master lease, our individual subsidiaries that operate those properties are the tenants and CareTrust's individual subsidiaries that own the properties subject to the Master Leases are the landlords. The rent structure under the Master Leases includes a fixed component, subject to annual escalation equal to the lesser of the percentage change in the Consumer Price Index (but not less than zero) or 2.5%. At our option, we can extend the Master Leases for two or three five-year renewal terms beyond the initial term, on the same terms and conditions. If we elect to renew the term of a Master Lease, the renewal will be effective as to all, but not less than all, of the leased property then subject to the Master Lease.
We also lease certain facilities under non-cancelable operating leases, most of which have initial lease terms ranging from 15 to 20 years and are subject to annual escalation equal to the percentage change in the Consumer Price Index with a stated cap percentage. 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.
Our 104 independent subsidiaries, excluding the subsidiaries that are operated under the Master Leases from CareTrust, are operated under 19 separate master Leases. Under these master leases, a default at a single facility could subject one or more of the other independent subsidiaries covered by the same master lease to the same default risk. Failure to comply with Medicare and Medicaid provider requirements is a default under several of our leases, master lease agreements and debt financing instruments. In addition, other potential defaults related to an individual facility may cause a default of an entire master lease portfolio and could trigger cross-default provisions in our outstanding debt arrangements and other leases. With an indivisible lease, it is difficult to restructure the composition of the portfolio or economic terms of the lease without the consent of the landlord.
Inflation
We have historically derived a substantial portion of our revenue from the Medicare program. We also derive revenue from state Medicaid and similar reimbursement programs. Payments under these programs generally provide for reimbursement levels that are adjusted for inflation annually based upon the state's fiscal year for the Medicaid programs and in each October for the Medicare program. These adjustments may not continue in the future, and even if received, such adjustments may not reflect the actual increase in our costs for providing healthcare services.
Labor, supply expenses and capital expenditures make up a substantial portion of our cost of services. Those expenses can be subject to increase in periods of rising inflation, tariffs enforcement and when labor shortages occur in the marketplace. To date, we have generally been able to implement cost control measures or obtain increases in reimbursement sufficient to offset increases in these expenses. There can be no assurance that we will be able to anticipate fully or otherwise respond to any future inflationary pressures.
The Ensign Group Inc. published this content on July 27, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on July 27, 2026 at 10:04 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]