ENSIGN GROUP INC
For the period ended Mar 31, 2025. Filed Apr 29, 2025.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2025 · Filed Apr 29, 2025
ENSG$181.08-0.7%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-09-30; filed 2024-10-24.
0001125376-24-000171
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-03-31; filed 2025-04-29.
0001125376-25-000075
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 335 previous paragraphs and 290 current paragraphs.
175 unchanged; 92 reworded; 22 added; 43 removed; 25 previous and 1 current paragraphs rearranged.
Tables are not compared: 37 previous and 25 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (22)
Current report
Subsequent to March 31, 2025, we expanded our operations through a combination of long-term leases and real estate purchases, with the addition of two stand-alone skilled nursing operations and one stand-alone senior living operation. Of these additions, Standard Bearer acquired the real estate of one stand-alone skilled nursing operation, which was leased back to Ensign affiliated entities. This new operation added 241 operational skilled nursing beds and 68 operational senior living units to be operated by our affiliated operating subsidiaries. Additionally, we added one stand-alone senior living facility to our real estate portfolio, which is leased to a third-party operator. For further discussion of our real estate properties and expansions, see Note 6 and 7, Standard Bearerand Operation Expansions in the Notes to the Interim Financial Statements.
Current report
Standard Bearer Update —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. We expect the REIT structure to allow us to better demonstrate the growing value of our owned real estate and provide us with an efficient vehicle for future acquisitions of properties that could be operated by our independent subsidiaries or other third parties. This structure gives us new pathways to growth with transactions we would not have considered in the past.
Current report
During the three months ended March 31, 2025, Standard Bearer added $147.8 million of real estate associated with eight stand-alone skilled nursing operations, one stand-alone senior living operation and two campus operations. Four of the acquisitions were related to exercising purchase options from CareTrust REIT, Inc. (CareTrust) lease arrangements, our independent subsidiaries were already operating and managing these locations. The remaining real estate acquisitions were leased back to our independent subsidiaries.
Current report
Subsequent to March 31, 2025, Standard Bearer added $24.8 million of real estate associated with two stand-alone skilled nursing operations, where one stand-alone skilled nursing facility was leased back to our independent subsidiaries and the remaining one real estate acquisition was leased to a third-party operator. Our existing relationships with third-party operators within our industry have allowed us to expand our growing REIT structure to operators outside of our organization.
Current report
The following table provides summary information regarding the location of our owned and operated real estate properties as of March 31, 2025:
Current report
The following table provides summary information regarding the location of our owned real estate properties as of March 31, 2025:
Current report
(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.
Current report
The Improving Care and Access to Nurses Act (I CAN Act) was introduced to the Senate on February 13, 2025. The I CAN Act expands the role of nurse practitioners (NPs) in SNFs and nursing homes by allowing them to certify, oversee, and supervise care under Medicare and Medicaid without requiring physician oversight, subject to state law. If enacted it would grant NPs the authority to certify patient admissions, manage care plans, and provide supervision in SNFs and intermediate care facilities. These proposed changes could potentially reduce reliance on physicians, streamline patient transitions from hospitals to long-term care, and increase access to care particularly in rural and underserved areas.
Current report
Under the direction of the Trump Administration, Congress is considering major cuts to federal spending on Medicaid. One of the options under consideration is to limit the amount of federal Medicaid funding they receive by levying taxes on providers and thereby increasing their reimbursement rates. Restricting these “provider taxes” would create financing gaps for states which could result in higher state taxes, reductions in Medicaid eligibility, lower provider payment rates, and fewer covered benefits.
Current report
On April 7, 2025, the U.S. District Court for the Northern District of Texas issued a ruling to vacate the Biden Administration’s federal staffing mandate for nursing homes that was to be phased in starting in 2026. The court found that CMS lacks authority to issue a regulation that replaces Congress’s preferred minimum staffing hours with its own. While the Trump Administration can appeal the ruling, as of April 28, 2025, there has been no indication of an intent to do so.
Current report
Tariffs— On April 2, 2025, President Trump signed the executive order to impose a variety of tariffs to the global trading partners of the United States. These tariffs have the potential to increase costs on goods that are imported into the United States. As it pertains to our independent subsidiaries, tariffs on medical supplies may lead to higher costs to providers and the federal government through the Medicare and Medicaid programs and may impact the formulas used to calculate federal reimbursements.
Current report
Medicare Annual Payment Rule—CMS is required to calculate an annual Medicare market-basket update to the payment rates. For fiscal year 2026, CMS proposes updating SNF PPS rate by 2.8%, which will start on October 1, 2025 and will run through September 30, 2026. The net increase is based on a 3.0% market basket adjustment to account for inflation, plus a 0.6% forecast error adjustment and a negative 0.8% productivity adjustment. This increase does not include the SNF VBP reductions for certain SNFs subject to the net reduction in payments under the SNF VBP. In addition, CMS is proposing updates to the SNF VBP and SNF Quality Reporting Program (QRP) to simplify methodology and remove certain patient assessment data elements.
Current report
2025 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. The 2025 Home Health PPS Final Rule requires long-term care facilities, including SNFs, to make at least weekly reports to CMS regarding respiratory illnesses, including facility census, resident vaccination status for specified respiratory illnesses, confirmed resident cases and residents hospitalized from such illnesses.
Current report
Finally, the 2025 PFS Final Rule reduces COVID-19 PHE-era telehealth flexibilities beginning on January 1, 2025, which would have taken effect without the above described acts of Congress. Under this final rule, absent the subsequent Congressional acts, certain restrictions on telehealth that existed prior to the COVID-19 PHE will go back into effect: most geographic and site-of-service restrictions to telehealth will return, while physicians can still provide telehealth from home, and can provide audio-only telehealth communication in specific circumstances where the patient is unable to use video technology. CMS is also establishing new coding and payment for caregiver training services, including training services provided through eligible telehealth means.
Current report
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.
Current report
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.
Current report
Americans with Disabilities Act (ADA)
Current report
Revenue generated by our Transitioning Facilities increased by $14.8 million, or 8.8%, primarily due toimproved occupancy growth, increases in skilled mix days and revenue per patient day. The increases in revenue were derived from increasing in Managed Care revenue of 21.1%, Medicaid revenue of 8.5% and private revenue of 19.8%. These increases demonstrate our ability to focus on increasing occupancy across payer types.
Current report
Share Repurchases
Current report
On February 21, 2025, the Board of Directors approved a stock repurchase program pursuant to which we may repurchase up to $20.0 million of our common stock under the program for a period of approximately 12 months from March 26, 2025. During the three months ended March 31, 2025, we repurchased 84 shares of our common stock for $10.8 million. Subsequent to March 31, 2025, we repurchased 73 shares of our common stock for $9.2 million.
Current report
The $36.9 million increase in cash provided by operating activities for the three months ended March 31, 2025 compared to the same period in 2024 was due toan increase in operational performance and timing of payments and accounts receivable collections.
Current report
The $11.9 million increase in cash used by financing activities for the three months ended March 31, 2025 compared to the same period in 2024, was primarily due to $10.8 million of share repurchases as part of our stock repurchase program in 2025.
Removed paragraphs (43)
Previous report
Subsequent to September 30, 2024, we expanded our operations and real estate portfolio with the addition of one campus operation. Standard Bearer acquired the real estate of this operation, which was leased back to our independent subsidiary. The new operation added 83 operational skilled nursing beds and 20 operational senior living units to be operated by our independent subsidiary. Refer to Note 6, Standard Bearer, for additional information on the purchases of real estate properties.
Previous report
Skilled Services —Within our skilled nursing operations, we generate revenue from Medicaid, private pay, managed care and Medicare payors. We believe that our skilled mix, which we define as the number of days Medicare, managed care and other skilled patients are receiving services at our skilled nursing operations divided by the total number of days patients are receiving services at our skilled nursing operations, from all payor sources (less days from senior living services) for any given period, is an important indicator of our success in attracting high-acuity patients because it represents the percentage of our patients who are reimbursed by Medicare, managed care and other skilled payors, for whom we receive higher reimbursement rates.
Previous report
We participate in supplemental payment programs and quality improvement programs in various states that provide supplemental Medicaid payments for skilled nursing facilities that are licensed to non-state government-owned entities such as city and county hospital districts. A number of our independent subsidiaries have entered into transactions with various hospital districts providing for the transfer of the licenses for those skilled nursing facilities to the hospital districts. Each affected independent subsidiary agreement between the hospital district and our subsidiary is terminable by either party to fully restore the prior license status.
Previous report
Standard Bearer —We generate rental revenue primarily by leasing post-acute care properties that we acquired to healthcare operators under triple-net lease arrangements, whereby the tenants are solely responsible for the costs related to the property, including property taxes, insurance and maintenance and repair costs, subject to certain exceptions. As of September 30, 2024, our real estate portfolio within Standard Bearer is comprised of 116 real estate properties. Of these properties, 87 are leased to our independent subsidiaries and 30 are leased to facilities wholly-owned and managed by third-party operators. Of those 30 operations, one senior living operation is located on the same real estate property as a skilled nursing operation that an independent subsidiary operates. During the three and nine months ended September 30, 2024, we generated rental revenues of $24.4 million and $70.0 million, respectively, of which $20.2 million and $57.4 million, respectively, was derived from our independent subsidiaries and therefore eliminated in consolidation.
Previous report
Other —Within our senior living operations, we generate revenue primarily from private pay sources, with a portion earned from Medicaid payors or through other state-specific programs. Payment for these services varies and is based upon the service provided. The payment is adjusted for an inability to obtain appropriate billing documentation or authorizations acceptable to the payor and other reasons unrelated to credit risk.
Previous report
Critical Accounting Estimates
Previous report
Our Interim Financial Statements included in this report have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP). The preparation of these financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of assets, liabilities, cash flows, revenues and expenses, and related disclosure of contingent assets and liabilities.
Previous report
See Item 7., Management’s Discussion and Analysis of Financial Condition and Results of Operations, in our Annual Report for further discussion of critical accounting estimates. There have been no material changes to our critical accounting policies with which the estimates are developed since December 31, 2023.
Previous report
Industry Trends
Previous report
The post-acute care industry has evolved to meet the growing demand for post-acute and custodial healthcare services generated by an aging population, increasing life expectancies and the trend toward shifting patient care to lower cost settings. The industry has evolved in recent years, which we believe has led to a number of favorable improvements in the industry, as described below:
Previous report
•Shift of Patient Care to Lower Cost Alternatives— The growth of the senior population in the U.S. continues to increase healthcare costs, often faster than the available funding from government-sponsored healthcare programs. In response, federal and state governments have adopted cost-containment measures that encourage the treatment of patients in more cost-effective settings such as skilled nursing facilities, for which the staffing requirements and associated costs are often significantly lower than acute care hospitals and other post-acute care settings. As a result, skilled nursing facilities are generally serving a larger population of higher acuity patients than in the past.
Previous report
•Significant Acquisition and Consolidation Opportunities— The skilled nursing industry is large and highly fragmented, characterized predominantly by numerous local and regional providers. Due to the increasing demands from hospitals and insurance carriers to implement sophisticated and expensive reporting systems, we believe this fragmentation provides us with significant acquisition and consolidation opportunities.
Previous report
•Improving Supply and Demand Balance— The number of skilled nursing facilities has declined modestly over the past several years. We expect that the supply and demand balance in the skilled nursing industry will continue to improve due to the shift of patient care to lower cost settings, an aging population and increasing life expectancies.
Previous report
•Increased Demand Driven by Aging Populations— As seniors account for an increasing percentage of the total U.S. population, we believe the demand for skilled nursing and senior living services will continue to increase. According to the census projection released by the U.S. Census Bureau in early 2020, between 2016 and 2030, the number of individuals over 65 years old is projected to be one of the fastest growing segments of the United States population, growing from 15% to 21%. The Bureau expects this segment to increase nearly 50% to 73 million, as compared to the total U.S. population which is projected to increase by 10% over that time period. Furthermore, the generation currently retiring has accumulated less savings than prior generations, creating demand for more affordable senior housing and skilled nursing services. As a high-quality provider in lower cost settings, we believe we are well-positioned to benefit from this trend.
Previous report
•Value-based Care and Reimbursement Reform— In response to rising healthcare spending in the United States, commercial, government and other payors are generally shifting away from fee-for-service (FFS) payment models towards value-based models, including risk-based payment models that tie financial incentives to quality, efficiency and coordination of care. We believe that patient-centered outcomes driven reimbursement models will continue to grow in prominence. Many of our operations already receive value-based payments, and as valued-based payment systems continue to increase in prominence, it is our view that our strong clinical outcomes will be increasingly rewarded.
Previous report
A significant goal of U.S. federal health care reform is to transform the delivery of health care by changing reimbursement to reflect and support a focus on equity, payment for value and efficacious delivery of person-centered care. Reimbursement models and demonstrations that increase accountability and provide financial incentives to encourage efficiency, affordability and high-quality care, have been developed and implemented by government and commercial third-party payers. Special focus is placed on increasing the number of beneficiaries in care relationships with accountability for quality and total cost of care, improvements in care coordination, reducing inequities at the population level and supporting care innovation to close care gaps and increase access. The most prominent value-based models designed to accomplish these aims include Accountable Care Models (e.g., MSSP ACOs, ACO REACH) and Disease-Specific & Episode-Based Models (e.g., BPCI Advanced, GUIDE Model, CJR). These models, alongside State & Community, Statutory and Health Plan Models, are aimed at alignment across payers and care settings, leveraging effective clinical tools, outcomes-focused payment approaches and stakeholder-led policy development. Reimbursement methodology reform includes Value-Based Purchasing (VBP), in which a portion of provider reimbursement is redistributed based on relative performance, or improvement on designated economic, clinical quality and patient satisfaction metrics. These reimbursement methodologies and similar programs are likely to continue and expand, both in government and commercial health plans. Many of our operations already participate in value-based initiatives and models. With our focus on quality care and strong clinical outcomes, we are well-positioned to benefit from these outcome-based payment models.
Previous report
We believe the post-acute industry has been and will continue to be impacted by several other trends. The use of long-term care insurance is increasing among seniors as a means of planning for the costs of skilled nursing services. In addition, as a result of increased mobility in society, reduction of average family size and the increased number of two-wage earner couples, more residents are looking for alternatives outside the family for their care.
Previous report
Final Rule Fiscal Year 2025 Skilled Nursing Facility Prospective Payment System (SNF PPS) — CMS released the final rule for the SNF PPS for FY 2025 (SNF PPS FY 2025 Final Rule) in July 2024 to update the Medicare payment rates within the SNF PPS and provide significant enhancements to CMS’s enforcement capabilities within nursing homes.
Previous report
The initial phase, effective 90 days from the Staffing Rule's publication, which is August 8, 2024, requires facility self-assessment, which enhances the current assessment that all SNFs must perform and document annually and on an as-needed basis. The Staffing Rule’s requirement for enhanced self-assessments requires the following: 1) facilities must use evidence-based methods when planning for resident care, including accommodation of behavioral health needs; 2) facilities to use their self-assessment to assess the specific needs of each resident, with adjustments made for changes in the resident population; 3) facilities include the input of staff, including leadership, management, nurse staff and other direct care providers who render other services to residents; and 4) the facility’s staffing plan maximizes recruitment and retention of staff in a manner consistent with the President’s April 2023 Executive Order on increasing access to high-quality care and supporting caregivers.
Previous report
The second phase, effective within two years of the Staffing Rule's publication, which is May 2026 for non-rural facilities, requires that all SNFs have a registered nurse (RN) available to provide direct resident care onsite 24 hours per day, seven days per weeks (24/7). The rule states that administrative nurses may satisfy this requirement, provided that the nurse is available to provide direct resident care. In addition to the 24/7 RN, the Staffing Rule requires facilities to provide a minimum of 3.48 hours per resident per day (HPRD) of direct nursing care to residents.
Previous report
The third phase, effective within three years of the Staffing Rule's publication, which is May 2027 for non-rural facilities, requires that the HPRD are satisfied through RNs providing 0.55 HPRD, nurse aides (NAs) providing 2.45 HPRD, and any combination of RNs, licensed practical nurses (LPNs), licensed vocational nurses (LVNs), or NAs to account for the final 0.48 HPRD.
Previous report
The Staffing Rule finalized the hardship exemption for the HPRD requirements. A facility can qualify for a temporary hardship exemption from the new minimum staffing ratios and 24/7 RN onsite staffing requirement (the self-assessment standards must still be satisfied) if it is in an area where the supply of RN, NA, or total nursing staff is insufficient to meet the needs of that area. This exemption is based on the provider-to-population ratio for the nursing workforce, which must be at least 20% below the national average as calculated by CMS. Additionally, the Staffing Rule provides a one year extension of deadlines to rural facilities on Phases 2 and 3.
Previous report
The Staffing Rule also enhances transparency for the use of Medicaid payments for facility services, referenced as Medicaid Institutional Payment Transparency Reporting provisions (MIPTR). The MIPTR provisions within the Staffing Rule require States to report to CMS the percentage of Medicaid payments for nursing facility services spent on direct care workers and support staff, regardless of whether such payments are made under a fee-for-service or managed care model.
Previous report
Prior to the publication of the Staffing Rule, two bills, named the Protecting America’s Seniors’ Access to Care Act and Protecting Rural Seniors’ Access to Care Act (one in the House and a companion bill in the Senate) were intended to block the Staffing Rule from taking effect. The Senate version of the Protecting Rural Seniors’ Access to Care Act garnered broad bipartisan support and is endorsed by over 90 organizations. Since being introduced and referred to the Senate Finance Committee in December of 2023, the Senate has not taken action on this bill. These bills reason that the minimum staffing standard would endanger rural nursing facilities, subjecting them to potential fines and closures for failure to comply and might require them to discharge residents or limit the number of residents they accept in an effort to meet the requirements of the bill. It is uncertain if any of these bills or other legislative action will pass as well as their potential impact on the Staffing Rule.
Previous report
Medicare Annual Payment Rule—CMS is required to calculate an annual Medicare market-basket update to the payment rates. The SNF PPS FY 2025 Final Rule, issued on July 31, 2024 increased the Medicare payment rates to SNFs in fiscal year 2025 by 4.2%, which is based on a market basket of 3.0% plus a 1.7% market basket forecast error adjustment and a negative 0.5% productivity adjustment.
Previous report
On July 31, 2023, CMS issued the SNF PPS FY 2024 Final Rule that increased Medicare payment rates by 4.0% to SNFs in fiscal year 2024. This increase results from the 6.4% net market basket update to the payment rates, which is based on a 3.0% SNF market basket increase plus a 3.6% market basket forecast error adjustment, less a 0.2% productivity adjustment and a negative 2.3% adjustment as a result of the recalibrated parity adjustment.
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On July 29, 2022, CMS issued a final rule for fiscal year 2023 that increased the Medicare payment rates to aggregate net market basket by 2.7%. The increase results from the 5.1% update to the market basket, which is based on a 3.9% current year market basket increase plus a 1.5% market basket error adjustment, less a 0.3% productivity adjustment and a negative 2.3% adjustment as a result of the recalibrated parity adjustment. The recalibrated parity adjustment is being phased in at a rate of 2.3% per year on both the SNF PPS FY 2024 and FY 2023 Final Rules.
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Finally, the 2025 PFS Proposed Rule proposes the discontinuation of COVID-19 PHE-era telehealth flexibilities beginning on January 1, 2025. Under the proposed rule, restrictions on telehealth that existed prior to the COVID-19 PHE will go back into effect. CMS’s proposed inclusion of telehealth services in the 2025 PFS Proposed Rule extended to audio-only, two-way, real-time audio communication technology for services furnished in a patient’s home if the distant site provider is technically capable of using an interactive telecommunications system, but the patient is not capable of, or does not consent to, the use of video technology. CMS also proposed the addition of caregiving training services to the reduced Medicare-eligible telehealth services list on a provisional basis.
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Americans with Disabilities Act
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Revenue generated by our Transitioning Facilities increased by $9.0 million, or 7.5%, primarily due to increases in occupancy and revenue per patient day. Our Managed Care revenue increased by 17.2%, Medicare revenue increased by 15.7% and private and other revenue increased by 10.0%, demonstrating our ability to focus on increasing occupancy across payer types. Included in the three months ended September 30, 2023 is the revenue related to a facility that was not operating at full capacity starting in the first quarter of 2024 due to flooding.
Previous report
Our Medicare daily rates at Same Facilities and Transitioning Facilities increased by 4.5% and 3.0%, respectively, compared to the three months ended September 30, 2023. The increase is attributable to the 4.0% net market basket increase that became effective in October 2023, a shift to higher acuity patients and changes in patient payer-mix. For example, we continue to see a shift from Medicare to Medicare Advantage in states that have higher acuity patients, such as Arizona.
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Nine Months Ended September 30, 2024 Compared to the Nine Months Ended September 30, 2023
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Skilled Services Segment
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Revenue
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Skilled services revenue increased $355.9 million, or 13.5%, compared to the nine months ended September 30, 2023. The increases in skilled services revenue were across all payer types including increases in Medicaid revenue of $158.3 million, or 12.8%, Medicare revenue of $54.7 million, or 7.5%, managed care revenue of $93.2 million, or 19.1%, and private revenue of $49.7 million, or 27.5%.
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Revenue in our Same Facilities increased $147.8 million, or 7.0%, compared to the same period in 2023, due to increased occupancy from long-term care patients and revenue per patient day and strong skilled days. Our diligent efforts to strengthen our partnerships with various managed care organizations, hospitals and local communities, increased our managed care revenue by 12.6%, mainly due to increases in managed care days of 6.5% and revenue per patient day of 4.0%. We continued to see a shift in our patient population from Medicare to managed care as Medicare Advantage enrollment continues to accounted for a larger portion of the overall Medicare eligible population. In addition, Medicaid revenue increased by $68.8 million or 7.0%, mainly from the increases in Medicaid days and revenue per patient day. Our skilled mix days and revenue declined mainly due to our non-skilled patients days and revenue growth outpacing our skilled days and revenue.
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Revenue generated by our Transitioning Facilities increased $24.9 million, or 7.1%, primarily due to improved occupancy growth and an increase in revenue per patient day. Managed Care and private revenue increased by 29.8% and 20.0%, respectively, demonstrating our ability to focus on increasing occupancy across payer types. Included in the nine months ended September 30, 2023 is the revenue related to a facility that was not operating at full capacity starting in the first quarter of 2024 due to flooding.
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Skilled services revenue generated by Recently Acquired Facilities increased by approximately $185.6 million compared to the nine months ended September 30, 2023. The increases were primarily due to 28 operational expansions between October 1, 2023 and September 30, 2024 across eight states. In addition, we acquired 17 operations in February 2023 that contributed to the year over year increase.
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Cost of Services
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Standard Bearer
Showing the first 40 of 43 passages. Open the source sections for the rest.
Reworded paragraphs (92)
Previous wording
As used in this Management’s Discussion and Analysis of Financial Condition and Results of Operations, the words, "Ensign," "Company," “we,” “our” and “us” refer to The Ensign Group, Inc. and its consolidated subsidiaries. All of our affiliated operations, the Service Center, our wholly-owned captive insurance subsidiary and our captive real estate investment trust (REIT) called Standard Bearer Healthcare REIT, Inc. (Standard Bearer) are operated by separate, wholly-owned, independent subsidiaries that have their own management, employees and assets. The use of "Ensign," "Company," “we,” “us,” “our” and similar verbiage in this Quarterly Report on Form 10-Q is not meant to imply that any of our affiliated operations, the Service Center, the captive insurance subsidiary or Standard Bearer are operated by the same entity. This Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our consolidated financial statements and related notes included in this Quarterly Report.
Current wording
As used in this Management’s Discussion and Analysis of Financial Condition and Results of Operations, the words, "Ensign," "Company," “we,” “our” and “us” refer to The Ensign Group, Inc. and its consolidated subsidiaries. All of our affiliated operations, the Service Center, our wholly-owned captive insurance subsidiary and our captive real estate investment trust (REIT) called Standard Bearer Healthcare REIT, Inc. (Standard Bearer) are operated by separate, wholly-owned, independent subsidiaries that have their own management, employees and assets. The use of "Ensign," "Company," “we,” “us,” “our” and similar verbiage in this Quarterly Report on Form 10-Q is not meant to imply that any of our affiliated operations, the Service Center, the captive insurance subsidiary or Standard Bearer are operated by the same entity. This Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our consolidated financial statements and related notes included the Quarterly Report.
Previous wording
We are a provider of health care services across the post-acute care continuum. We engage in the operation, ownership, acquisition, development and leasing of skilled nursing, senior living and other healthcare related properties and ancillary businesses located in Arizona, California, Colorado, Idaho, Iowa, Kansas, Nebraska, Nevada, South Carolina, Tennessee, Texas, Utah, Washington and Wisconsin. 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 September 30, 2024, we offered skilled nursing, long term acute care, senior living and rehabilitative care services through 322 skilled nursing and senior living facilities. Our real estate portfolio includes 121 owned real estate properties, which includes 91 facilities operated and managed by us, 30 operations leased to and operated by third-party operators and the Service Center location. Of the 30 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.
Current wording
We are a provider of health care services across the post-acute care continuum. We engage in the operation, ownership, acquisition, development and leasing of skilled nursing, senior living and other healthcare related properties and ancillary businesses located in Alabama, Alaska, Arizona, California, Colorado, Idaho, Iowa, Kansas, Nebraska, Nevada, Oregon, South Carolina, Tennessee, Texas, Utah, Washington and Wisconsin. 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 March 31, 2025, we offered skilled nursing, long term acute care, senior living and rehabilitative care services through 340 skilled nursing and senior living facilities. Our real estate portfolio includes 140 owned real estate properties, which includes 107 facilities operated and managed by us, 33 operations leased to and operated by third-party operators and the Service Center location. Of the 33 third-party operations, one senior living operation is located on the same real estate property as a skilled nursing operation that we own and operate.
Previous wording
Operational Expansions —During the nine months ended September 30, 2024, we expanded our operations and real estate portfolio through a combination of long-term leases and real estate purchases, with the addition of 24 stand-alone skilled nursing operations and two campus operations. Of these additions, Standard Bearer acquired the real estate ofnine of the operations, all of which were leased back to our independent subsidiaries. These new operations added a total of 2,565 operational skilled nursing beds and 202 operational senior living units to be operated by our independent subsidiaries. We also invested in new ancillary services that are complementary to our existing businesses.
Current wording
Operational Expansions —During the three months ended March 31, 2025, we expanded our operations and real estate portfolio through a combination of long-term leases and real estate purchases, with the addition of 11 stand-alone skilled nursing operations, one stand-alone senior living and one campus operation. Of these additions, Standard Bearer acquired the real estate ofseven of these operations, which were leased back to Ensign affiliated entities. These new operations added a total of 1,365 operational skilled nursing beds and 132 operational senior living units to be operated by our affiliated operating subsidiaries.
Previous wording
Expansion into a New State —In 2024, we expanded our operations into the state of Tennessee with the addition of three stand-alone skilled nursing operations. These expansions are part of our strategic vision to further strengthen our growing national presence in both existing and new attractive markets.
Current wording
Expansion into New States —In the first quarter of 2025, we expanded our operations into the states of Alabama, Alaska and Oregon with the addition of three stand-alone skilled nursing operations and one campus operation. These expansions are part of our strategic vision to further strengthen our growing national presence in both existing and new attractive markets.
Previous wording
Common Stock Repurchase Program —On May 16, 2024, the Board of Directors approved a stock repurchase program pursuant to which we may repurchase up to $20.0 million of our common stock under the program for a period of approximately 12 months from September 1, 2024. We did not repurchase any shares during the three months ended September 30, 2024.
Current wording
Common Stock Repurchase Program —On February 21, 2025, the Board of Directors approved a stock repurchase program pursuant to which we may repurchase up to $20.0 million of our common stock under the program for a period of approximately 12 months from March 26, 2025. During the three months ended March 31, 2025 and subsequently, we purchased 157 shares of our common stock for $20.0 million.
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The following table sets forth the location of our operated and owned facilities by type as well as the number of beds and units located at operated and owned facilities as of September 30, 2024:
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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 March 31, 2025:
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•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. These rates exclude additional state relief funding, which includes the American Rescue Plan Act (ARPA), the Family First Coronavirus Response Act (FFCRA) and other state specific relief programs.
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•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.
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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 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 civil monetary penalties, temporary admission and/or payment bans, loss of certification as a provider in the Medicare or Medicaid program, or revocation of a state operating license.
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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.
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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 HHS, Office of the Inspector General (OIG), state Medicaid agencies, state Attorney Generals, local and state ombudsman offices and CMS Recovery Audit Contractors, among other agencies. In response to the inquiries, investigations and audits, federal and state agencies continue to 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.
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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 Attorney Generals, 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.
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The federal government, through CMS rulemaking, Presidential executive actions or Congressional legislation, and state and local governments have recently released the following proposed rulemaking or administrative actions that may have an impact on our independent Skilled Nursing Facilities (SNFs) or Assisted Living Facilities (ALFs):
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The federal government, through CMS rulemaking, Presidential executive actions or Congressional legislation, and state and local governments have released the following proposed or final rulemaking, or administrative actions that may have an impact on our independent Skilled Nursing Facilities (SNFs) or Assisted Living Facilities (ALFs):
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Biden-Harris Administration's Nursing Home Care Priorities — The Biden-Harris Administration is seeking reform around reimbursement, staffing levels, standards of care, increased transparency and public disclosure of ownership, and enhanced civil remedies as a means of enforcement against those facilities that do not satisfy CMS’s standards. Proposed rules based on these directives have already been published in 2023, including those highlighted below and observers expect additional rules to be issued this year and in the future. For example, the SNF PPS FY 2025 Final Rule grants CMS greater sanctioning authority for ongoing or persistent deficiencies in Medicare-participating SNFs. These increased sanctioning authorities will take effect in the 2025 federal fiscal year, beginning October 1, 2024.
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Biden-Harris Administration's Nursing Home Care Priorities — Prior to the change in Presidential Administration in 2025, the Biden-Harris Administration sought reform around reimbursement, staffing levels, standards of care, increased transparency and public disclosure of ownership, and enhanced civil remedies as a means of enforcement against those facilities that do not satisfy CMS’s standards. These rules are still in effect and enforceable. For example, the SNF PPS FY 2025 Final Rule granted CMS greater sanctioning authority for ongoing or persistent deficiencies in Medicare-participating SNFs. These increased sanctioning authorities will take effect in the 2025 federal fiscal year, which began on October 1, 2024. With the new administration, it currently is unknown whether any of these rules will be reduced in their scope or application, or whether they will be increased in any respects. The individuals appointed to serve as the Secretary of HHS and Director of CMS, respectively, have not yet provided any indication what their priorities of anticipated future actions would be in this area.
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Ownership Transparency Final Rule—CMS' final rule published in November 2023 requires SNFs to publicly disclose certain additional information regarding their ownership and managerial relationships, including the identity of any person or legal entity that: (1) exercises financial, operational, or managerial control over any facility or part of a facility, or provides services to a facility that include its policies and procedures or cash management services; (2) leases or subleases real property to the facility, or owns 5% or more of the real property’s total value; and (3) provides any management or administrative services (or consults regarding the same), or provides accounting or financial services to SNFs. The rule also expands ownership and control interest disclosures to include information about each member of the facilities governing body, individuals or entities serving as officers, directors, members, partners or managing employees, and 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.
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Ownership Transparency Final Rule — CMS' final rule published in November 2023 requires SNFs to publicly disclose certain additional information regarding their ownership and managerial relationships, including the identity of any person or legal entity that: (1) exercises financial, operational, or managerial control over any facility or part of a facility, or provides services to a facility that include its policies and procedures or cash management services; (2) leases or subleases real property to the facility, or owns 5% or more of the real property’s total value; and (3) provides any management or administrative services (or consults regarding the same), or provides accounting or financial services to SNFs. The rule also expands ownership and control interest disclosures to include information about each member of the facilities governing body, individuals or entities serving as officers, directors, members, partners or managing employees, and 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. As of November of 2024, all SNFs are required to comply with this rule’s requirements, which industry observers have noted have had adverse effects on some SNFs and their Medicare recertification.
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Federal Legislation — The Home and Community-Based Services (HCBS) Access Act (Access Act) was introduced in 2023 to expand access to and resources available for HCBS. The Access Act ensures that Medicaid funding is made available to individuals who provide direct home- and community-based care to adults over the age of 60 or people who have disabilities. This bill also provides financial resources for the training of these direct care providers, who are intended to provide services to the elderly or disabled that range from advocacy and community integration to transportation and daily assistance tasks ranging from bathing and laundry to meal preparation and housekeeping. As of the date of filing, no further action has been taken on the HCBS Access Act since its introduction and referral to the House of Representatives committees.
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Federal Legislation — The Home and Community-Based Services (HCBS) Access Act (Access Act) was introduced in 2023 to expand access to and resources available for HCBS. The Access Act ensures that Medicaid funding is made available to individuals who provide direct home- and community-based care to adults over the age of 60 or people who have disabilities. This bill also provides financial resources for the training of these direct care providers, who are intended to provide services to the elderly or disabled that range from advocacy and community integration to transportation and daily assistance tasks ranging from bathing and laundry to meal preparation and housekeeping. No further action was taken on the Access Act during the 118th Congress and that congressional session ended without the Access Act being passed into law. Comparable legislation has not yet been introduced in the 119th Congress, which began in January of 2025.
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In addition, the HCBS Relief Act introduced in 2023, provides additional funds to states to stabilize their HCBS service delivery networks, recruit and retain HCBS direct care workers, and meet long-term service and support needs of people eligible for Medicaid home and community-based services. Under the HCBS Relief Act, states would receive a temporary 10% increase in the applicable Federal Medical Assistance Percentage (FMAP) under Medicaid for certain approved home and community-based services that are provided during fiscal year (FY) 2024 through FY 2025. To qualify for the enhanced rate, a state must commit to initiatives aimed at improving the provision of services. This includes offering additional advantages to home health aides and assisting individuals in transition from nursing facilities back to their homes. As of the date of this filing, no action has been taken on the HCBS Relief Act since its introduction and referral to the Senate Committee on Finance.
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In addition, the HCBS Relief Act introduced in 2023, provides additional funds to states to stabilize their HCBS service delivery networks, recruit and retain HCBS direct care workers, and meet long-term service and support needs of people eligible for Medicaid home and community-based services. To qualify for the enhanced rate, a state must commit to initiatives aimed at improving the provision of services. No further action was taken on the HCBS Relief Act during the 118th Congress and that congressional session ended without the HCBS Relief Act being passed into law. Comparable legislation has not yet been introduced in the 119th Congress.
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On April 24, 2024, the California Department of Health Care Access and Information (HCAI) announced that the Office of Health Care Affordability’s Board approved a statewide healthcare spending target of 3%, which represents a long-term reduction of current levels of statewide healthcare spending. The spending target will be phased in over time, initially starting at 3.5% for 2025 and 2026, the target will be lowered to 3.2% for 2027 and 2028 before ultimately reaching 3% for 2029 and beyond.
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On April 24, 2024, the California Department of Health Care Access and Information (HCAI) announced that the Office of Health Care Affordability’s Board approved a statewide healthcare spending target of 3.0%, which represents a long-term reduction of current levels of statewide healthcare spending. The spending target will be phased in over time, initially starting at 3.5% for 2025 and 2026, the target will be lowered to 3.2% for 2027 and 2028 before ultimately reaching 3% for 2029 and beyond.
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CMS Minimum Staffing Standards Final Rule— CMS issued its final rule establishing minimum staffing standards for skilled nursing facilities (Staffing Rule) in April 2024. The Staffing Rule contains three primary staffing requirements and provides for a staggered and phase implementation over the next several years following the Staffing Rule’s publication.
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CMS Minimum Staffing Standards Final Rule— In April 2024, CMS issued its final rule establishing minimum staffing standards for skilled nursing facilities (Staffing Rule). The Staffing Rule contains three primary staffing requirements and provides for a staggered and phase implementation over the next several years following the Staffing Rule’s publication. In addition, the Staffing Rule finalized the hardship exemption for the HPRD requirements and also enhanced transparency for the use of Medicaid payments for facility services, referenced as Medicaid Institutional Payment Transparency Reporting provisions (MIPTR).
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The Staffing Rule has been met with further opposition and proposed legislation to halt its implementation. On May 23, 2024, the American Health Care Association (AHCA) filed a lawsuit in the Northern District of Texas against HHS and CMS, alleging that the Staffing Rule exceeds the scope of CMS’s statutory authority and violates the Administrative Procedure Act. The State of Texas brought suit and was granted consolidation of its lawsuit with AHCA's in the same venue arguing the rule is “arbitrary and capricious” and in violation of the Administrative Procedure Act. Subsequently, over 20 additional states have filed similar suits in opposition to the rule, as well as industry groups including Leading Age and the South Dakota Association of Healthcare Organizations. On May 10, 2024, a joint resolution was introduced in the House of Representatives under the Congressional Review Act to overturn the Staffing Rule, which was referred to the House Ways and Means committee and its Subcommittee on Health on May 17, 2024, with no further action taken on the joint resolution since then. Related to the pending proposed legislation regarding the Staffing Rule, the Long-Term Care Workforce Support Act was introduced in both the Senate and House of Representatives in April of 2024 and both versions of the bill were subsequently referred to the Senate Committee on Finance and the House Ways and Means committee and its Subcommittee on Health, respectively, by April 19, 2024, with no action taken on either bill since then. These companion bills were introduced in order to increase the direct care workforce and improve pay, by increasing the federal match for Medicaid by up to 10% for each state across 10 years. The recent Supreme Court decision in Loper Bright Enterprises v. Raimondo ("Chevron" decision) gives courts greater authority to challenge federal agencies' statutory interpretations. As such, the Staffing Rule may see increase legal challenges under the new doctrine. (For further discussion of the Chevron case and its implications see "United States Supreme Court Decisions" section below.)
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The Staffing Rule has been met with further opposition and proposed legislation to halt its implementation. On May 23, 2024, the American Health Care Association (AHCA) filed a lawsuit in the Northern District of Texas against HHS and CMS, alleging that the Staffing Rule exceeds the scope of CMS’s statutory authority and violates the Administrative Procedure Act. The State of Texas brought suit and was granted consolidation of its lawsuit with AHCA's in the same venue arguing the rule is “arbitrary and capricious” and in violation of the Administrative Procedure Act. Subsequently, over 20 additional states have filed similar suits in opposition to the rule, as well as industry groups including Leading Age and the South Dakota Association of Healthcare Organizations. On January 16, 2025, the United States District Court for the Northern District of Iowa rejected a motion for preliminary injunction filed by the plaintiff states and LeadingAge affiliates. Litigation over the Staffing Rule remains ongoing and no final decision has yet been entered.
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Medicare presently accounts for approximately 26.3% 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.
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Medicare presently accounts for approximately 25.6% 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.
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These six new measures were included in the five-star rating 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.
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These six new 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.
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Under the SNF PPS FY 2024 Final Rule, CMS will adopt two measures for the SNF QRP starting in FY 2026. First, CMS will raise 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% reduction on their applicable fiscal year payment starting in FY 2026. Second, CMS will adopt the Patient/Resident COVID-19 Vaccine metric. This metric highlights the number of patient stays in which SNF patients received the COVID-19 vaccine.
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Under the SNF PPS FY 2024 Final Rule, CMS will adopt two measures for the SNF QRP starting in FY 2026. First, CMS will raise 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 will adopt the Patient/Resident COVID-19 Vaccine metric. This metric highlights the number of patient stays in which SNF patients received the COVID-19 vaccine.
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CMS’s SNF PPS FY 2025 Final Rule adopts 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 fiscal year 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 proposes that SNFs participating in the SNF QRP undergo a data validation process similar to that already implemented in the SNF VBP Program. Also beginning in fiscal year 2027, SNFs participating in the SNF QRP program must participate in a validation program similar to that used for SNFs participating in the SNF VBP Program.
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CMS’s SNF PPS FY 2025 Final Rule adopts 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 fiscal year 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 Value-Based Purchasing (VBP) Program. Also beginning in fiscal year 2027, SNFs participating in the SNF QRP program must participate in a validation program similar to that used for SNFs participating in the SNF VBP Program.
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This final rule results in a net 4.2% increase in SNF payments under Medicare Part A in FY 2025, which started on October 1, 2024 and will run through September 30, 2025. The net increase is based on the SNF market basket of 3.0%, plus a 1.7% market basket forecast error adjustment, and a negative 0.5% productivity adjustment. This increase does not include the SNF VBP reductions for certain SNFs subject to the net reduction in payments under the SNF VBP. CMS also revised the SNF market basket base year from the 2018 base year to the current 2022 base year and updated the payment rates used under the SNF PPS based on the FY 2025 market basket increase factor, which is adjusted by both the productivity adjustment and forecast error correction. Within this rule, CMS also updated the SNF PPS wage index using core-based statistical areas (CBSAs) to reflect regional wage costs.
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Final Rule Fiscal Year 2025 SNF PPS -CMS' final rule for the SNF PPS for FY 2025 (SNF PPS FY 2025 Final Rule) results in a net 4.2% increase in SNF payments under Medicare Part A in fiscal year 2025, which started on October 1, 2024 and will run through September 30, 2025. The net increase was based on the SNF market basket of 3.0%, plus a 1.7% market basket forecast error adjustment, and a negative 0.5% productivity adjustment. This increase does not include the SNF VBP reductions for certain SNFs subject to the net reduction in payments under the SNF VBP. CMS also revised the SNF market basket base year from the 2018 base year to the current 2022 base year and updated the payment rates used under the SNF PPS based on the FY 2025 market basket increase factor, which is adjusted by both the productivity adjustment and forecast error correction. Within this rule, CMS also updated the SNF PPS wage index using core-based statistical areas (CBSAs) to reflect regional wage costs.
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The SNF PPS FY 2025 Final Rule also includes significant enhancements to CMS’s enforcement capabilities within nursing homes, aiming to reinforce the safety and quality of care. The rule broadens CMS’s ability to use financial penalties to ensure sustained remediation of health and safety infractions, thereby motivating facilities to quickly comply with CMS regulations. The rule eliminates the restrictions of per instance (PI) for isolated violations or per day (PD) for ongoing non-compliance restrictions, allowing for more flexible imposition of both PD and PI penalties, which would not exceed statutory daily limits. This change is intended to provide CMS with enhanced tools to address violations more effectively and reflect the severity of the impact on residents’ health and safety.
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The SNF PPS FY 2025 Final Rule also includes significant enhancements to CMS’s enforcement capabilities within nursing homes, aiming to reinforce the safety and quality of care. The rule broadens CMS’s ability to use financial penalties to ensure sustained remediation of health and safety infractions, thereby motivating facilities to quickly comply with CMS regulations. The rule eliminates the restrictions of per instance (PI) for isolated violations or per day (PD) for ongoing non-compliance restrictions, allowing for more flexible imposition of both PD and PI penalties, which would not exceed statutory daily limits. This change is intended to provide CMS with enhanced tools to address violations more effectively and reflect the severity of the impact on residents’ health and safety. Additionally, the SNF PPS FY 2025 includes updates to the QRP to better account for social determinants of health, adding items to be reported regarding these social determinants of health—living situation, food, and utilities—in the minimum data set each SNF is required to report to CMS. The SNF PPS FY 2025 also contains an update to the SNF Value-Based Purchasing (VBP) Program, including how its measurements are retained or removed from use in evaluating quality of care, updates to technical measures so that measures can be updated using a sub-regulatory process, and administrative policies for updating and correcting data CMS relies on in calculating its measurements.
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The SNF PPS FY 2024 Final Rule finalized the rates to be paid in the 2024 fiscal year, which started on October 1, 2023 and ran through September 30, 2024. The net effect of these changes was an overall 4.0% increase in payments to SNFs in FY 2024. The increase includes a 6.4% net market basket update to the payment rates of 3.0%, plus a 3.6% market basket forecast error adjustment, less a 0.2% productivity adjustment, as well as a negative 2.3% in the FY 2024 SNF PPS rates due to the second phase of the Patient Driven Payment Model (PDPM) parity adjustment recalibration. In addition, this final rule also updates the SNF QRP for FY 2024 and future years, including the adoption of two new quality reporting measures, modification of one measure and removal of three measures resulting in public reporting of four QRP measures. Additionally, the SNF PPS FY 2024 Final Rule makes changes to the SNF VBP Program, specifically adopting four new measures: the nursing staff turnover measure, the discharge function score measure, the long stay hospitalization measure per 1,000 resident days and the percent of residents experiencing one or more falls with a major injury (long stay); the existing SNF 30-day all-cause readmission measure (SNFRM) is replaced with the SNF within stay potentially preventable readmissions (SNF WS PPR) measure beginning in FY 2028.
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Final Rule Fiscal Year 2024 SNF PPS — The SNF PPS FY 2024 Final Rule, which was effective October 1, 2023, updated the Medicare payment rates and modified the SNF QRP and the SNF VBP Program. The SNF PPS FY 2024 Final Rule finalized the rates to be paid in fiscal year 2024, which started on October 1, 2023 and ran through September 30, 2024. The net effect of these changes was an overall 4.0% increase in payments to SNFs in FY 2024. The increase included a 6.4% net market basket update to the payment rates of 3.0%, plus a 3.6% market basket forecast error adjustment, less a 0.2% productivity adjustment, as well as a negative 2.3% adjustment in the FY 2024 SNF PPS rates due to the second phase of the Patient Driven Payment Model (PDPM) parity adjustment recalibration. In addition, this final rule also updates the SNF QRP for FY 2024 and future years, including the adoption of two new quality reporting measures, modification of one measure and removal of three measures resulting in public reporting of four QRP measures. Additionally, the SNF PPS FY 2024 Final Rule made changes to the SNF VBP Program, specifically adopting four new measures: the nursing staff turnover measure, the discharge function score measure, the long stay hospitalization measure per 1,000 resident days and the percent of residents experiencing one or more falls with a major injury (long stay); the existing SNF 30-day all-cause readmission measure (SNFRM) is replaced with the SNF within stay potentially preventable readmissions measure beginning in FY 2028.
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SNF PPS FY 2024 Final Rule adopted the Nursing Staff Turnover (NST) measure for the SNF VBP program beginning with the FY 2026 program year. This is a structural measure that has been collected and publicly reported on Care Compare, and the measure assesses the stability of the staffing within a SNF using nursing staff turnover. The NST measure uses facility-reported, electronic data from CMS’ Payroll-Based Journal (PBJ) system to calculate annual turnover rates for nursing staff, including RNs, LPNs, and nurse assistants. Facilities would begin reporting this measure in FY 2024, with payment effects beginning in FY 2026.
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SNF PPS FY 2024 Final Rule adopted the Nursing Staff Turnover (NST) measure for the SNF VBP program beginning with the FY 2026 program year. This is a structural measure that has been collected and publicly reported on Care Compare, and the measure assesses the stability of the staffing within a SNF using nursing staff turnover. The NST measure uses facility-reported, electronic data from CMS’ Payroll-Based Journal (PBJ) system to calculate annual turnover rates for nursing staff, including RNs, LPNs, and nurse assistants. Facilities began reporting this measure in FY 2024, with payment effects beginning in FY 2026.
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The NST measure looks at six consecutive quarters of data. It starts with a baseline quarter and the first two quarters of the performance period to identify eligible employees. Then, it uses the next four quarters to find the number of employment cycles that ended in turnover. Finally, the data from the sixth quarter is validated to identify gaps in days worked that began in the last 60 days of the fifth quarter used for the measure. The measure score is then calculated by comparing the total number of eligible employees with 60-day gaps in working during the specified periods.
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The NST measure looks at six consecutive quarters of data. It starts with a baseline quarter and the first two quarters of the performance period to identify eligible employees. Then, uses the next four quarters to find the number of employment cycles that ended in turnover. Finally, the data from the sixth quarter is validated to identify gaps in days worked that began in the last 60 days of the fifth quarter used for the measure. The measure score is then calculated by comparing the total number of eligible employees with 60-day gaps in working during the specified periods. After submission, CMS may audit the data and if discrepancies are found, the consequences may include penalties, decreased ratings and suppression of metrics for the trailing 6 quarters.
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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 2023, unless Congress takes further action. Under the CAA 2023, a further 4% cut to Medicare spending that would have been required under the Statutory Pay-As-You-Go Act of 2010 (PAYGO) was waived for fiscal years 2023 and 2024. Instead, the CAA 2023 deferred any further Medicare sequestration under PAYGO until fiscal year 2025. 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%. Absent a further act by Congress, such as a consolidated appropriations act for 2025 or other bill addressing spending in fiscal year 2025 (including retroactively), the sequestration of Medicare FFS claims is expected to take effect in fiscal year 2025.
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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 2023, unless Congress takes further action. Under the Consolidated Appropriations Act of 2023 (CAA 2023), a further 4.0% cut to Medicare spending that would have been required under the Statutory Pay-As-You-Go Act of 2010 (PAYGO) was waived for fiscal years 2023 and 2024. Instead, the CAA 2023 deferred any further Medicare sequestration under PAYGO until fiscal year 2025. 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%. Absent a further act by Congress, such as a consolidated appropriations act for 2025 or other bill addressing spending in fiscal year 2025 (including retroactively), the sequestration of Medicare FFS claims is expected to take effect in fiscal year 2025. 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.
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The SNF PPS FY 2025 Final Rule adopted several operational and administrative updates to the SNF VBP Program. The SNF rule adopted a policy to select, retain and remove measurements to ensure the VBP Program’s evaluation metrics remain relevant and effective for assessing care quality, as well as policies for updating technical measures and policies for reviewing and correcting data CMS relies upon to calculate its measures. The rule allows CMS to update the case-mix methodology for the Total Nurse Staffing measure, and its policies to allow the review and revise measures, as well as review and correct data, allow SNFs to review and correct Payroll-Based Journal (PBJ) data from fiscal year 2026 and MDS data from fiscal year 2027, allowing CMS to fashion more accurate measures based on updated data. CMS previewed these proposed changes in the SNF PPS FY 2024 Final Rule, with a focus on how CMS will now calculate performance scores and collect data on the new quality measures related to nursing staff turnover, infection prevention and control, and nursing care hours.
Current wording
The SNF PPS FY 2025 Final Rule adopted several operational and administrative updates to the SNF VBP Program. The SNF rule adopted a policy to select, retain and remove measurements to ensure the VBP Program’s evaluation metrics remain relevant and effective for assessing care quality, as well as policies for updating technical measures and policies for reviewing and correcting data CMS relies upon to calculate its measures. The rule allows CMS to update the case-mix methodology for the Total Nurse Staffing measure, and its policies to allow the review and revise measures, as well as review and correct data, allow SNFs to review and correct Payroll-Based Journal (PBJ) data from fiscal year 2026 and MDS data from fiscal year 2027, allowing CMS to fashion more accurate measures based on updated data.
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Part B Rehabilitation Requirements — Some of our revenue is paid by the Medicare Part B program under a fee schedule. Part B services are limited with a payment cap by combined speech-language pathology services (SLP), physical therapy (PT) services and a separate annual cap for occupational therapy (OT) services. On July 31, 2024, CMS published the calendar year (CY) 2025 Physician Fee Schedule (PFS) Proposed Rule (2025 PFS Proposed Rule), which contained several reductions from the current CY 2024 Physician Fee Schedule Final Rule (2024 PFS Final Rule).
Current wording
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.
Previous wording
Additionally, the Multiple Procedure Payment Reduction (MPPR) continues at a 50% 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.
Current wording
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.
Previous wording
Through the end of CY 2024, certain of our Part B services provided through telehealth will still qualify for Medicare reimbursement based on flexibility first provided under the Emergency Waivers, which added physical therapy, occupational therapy and speech-language pathology to the list of approved telehealth Providers for the Medicare Part B programs provided by a SNF. 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. The CAA 2023 extended certain, but not all, telehealth flexibilities until December 31, 2024, allowing certain telehealth flexibilities to continue after the PHE's expiration.
Current wording
Through the end of CY 2024, certain of our Part B services provided through telehealth would qualify for Medicare reimbursement based on flexibility first provided under the Emergency Waivers, which added physical therapy, occupational therapy and speech-language pathology to the list of approved telehealth Providers for the Medicare Part B programs provided by a SNF. During the Public Health Emergency (PHE), CMS added certain PT and OT services to the list of Medicare-covered telehealth services on a temporary basis, some of which were made permanent for use and new codes were added for PT, OT, or SLP telehealth services—including some “sometimes therapy” codes that were not subject to MPPR. The CAA 2023 extended certain, but not all, telehealth flexibilities until December 31, 2024, allowing certain telehealth flexibilities to continue after the PHE's expiration. The American Relief Act, 2025 extended some but not all telehealth flexibilities for an additional 3 months through March 31, 2025. On March 15, 2025, the President signed into law the Full-Year Continuing Appropriations and Extensions Act, 2025 that Congress passed on March 14, 2025, which extended these pandemic-era telehealth waivers for Medicare beneficiaries through September 30, 2025.
Previous wording
Under the 2025 PFS Proposed Rule, the 2.93% increase to the CY 2024 PFS Conversion Factor (CF) will expire and CMS seeks to impose an estimated 0.05% adjustment based on changes in work relative value units (RVUs) for certain services. As a result, the 2025 PFS Proposed Rule proposes a reimbursement reduction of 2.80%, with a proposed CF of $32.35, which is a reduction from the CY 2024 CF of $33.29. The 2025 PFS Proposed Rule proposes a 3.6% increase to the threshold for coding modifier requirements for PT and SLP combined, totaling $2,410 for CY 2025 with the same threshold for OT services. The threshold for targeted medical review for PT and OT (combined) and SLP is proposed to remain at $3,000 through CY 2027. The billing period starts on January 1, 2025 and will run through December 31, 2025.
Current wording
Under the Calendar Year (CY) 2025 Physician Fee Schedule (PFS) Final Rule (2025 PFS Final Rule), the 2.93% increase to the CY 2024 PFS Conversion Factor (CF) expired and CMS seeks to impose an estimated 0.05% adjustment based on changes in work relative value units (RVUs) for certain services. As a result, the 2025 PFS Final Rule implements a reimbursement reduction of 2.83%, with a CF of $32.35, which is a reduction from the CY 2024 CF of $33.29. The 2025 PFS Final Rule adopts a 3.6% increase to the threshold for coding modifier requirements for PT and SLP combined, totaling $2,410 for CY 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 CY 2027.
Previous wording
The 2025 PFS Proposed Rule also suggests a regulatory change that would allow physical therapy assistants and occupational therapy assistants to be generally supervised by physical therapists and occupational therapists, respectively, in private practice, non-institutional settings, allowing greater flexibility in billing for those assistants’ services. Additionally, the proposed rule seeks to except a therapist-established initial plan of care (POC) for PT, OT, or SLT services from requiring 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 proposed flexibility applies only to the initial certification.
Current wording
The 2025 PFS Final Rule also adopts a regulatory change that allows physical therapy assistants and occupational therapy assistants to be generally supervised by physical therapists and occupational therapists, respectively, in private practice, non-institutional settings, allowing greater flexibility in billing for those assistants’ services. Additionally, the 2025 PFS Final Rule excepts a therapist-established initial plan of care (POC) for PT, OT, or SLT services from requiring 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.
Previous wording
On March 9, 2024, President Biden signed the Consolidated Appropriations Act, 2024, which included a 2.93% update to the CY 2024 PFS CF for dates of service March 9, 2024 through December 31, 2024. This replaces the 1.25% update provided by the Consolidated Appropriations Act, 2023.
Current wording
On October 29, 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 no further action has been taken on this bill. On March 9, 2024, President Biden signed the Consolidated Appropriations Act, 2024, which included a 2.93% update to the CY 2024 PFS CF for dates of service March 9, 2024 through December 31, 2024. This replaced the 1.25% update provided by the Consolidated Appropriations Act, 2023.
Previous wording
The 2024 PFS Final Rule was finalized in November 2023, which changes Medicare payments under the PFS and other Medicare Part B components. The CY 2024 PFS Final Rule contains a conversion factor of $32.74, which is a decrease of $1.15 from the CY 2023 PFS conversion factor of $33.89. This CY 2024 conversion factor is 3.4% lower than the CY 2023 conversion factor. The billing period started on January 1, 2024 and runs through December 31, 2024.
Current wording
The 2024 PFS Final Rule was finalized in November 2023, which changed Medicare payments under the PFS and other Medicare Part B components. The CY 2024 PFS Final Rule contained a conversion factor of $32.74, which was a decrease of $1.15 from the CY 2023 PFS conversion factor of $33.89. This CY 2024 conversion factor was 3.4% lower than the CY 2023 conversion factor. The billing period started on January 1, 2024 and ran through December 31, 2024.
Previous wording
The 2024 PFS Final Rule allows for general supervision of therapy assistants by PTs and OTs for remote therapeutic monitoring (RTM) services. This change may affect the rate of reimbursement for PT and OT services in the future. Additionally, the 2024 PFS Final rule adds certain health and well-being coaching services that Medicare will reimburse on a temporary basis for 2024. The final rule also adds risk assessments for social determinants of health to the list of telehealth services Medicare will reimburse on a permanent basis.
Current wording
The 2024 PFS Final Rule allowed for general supervision of therapy assistants by PTs and OTs for remote therapeutic monitoring (RTM) services. This change may affect the rate of reimbursement for PT and OT services in the future. Additionally, the 2024 PFS Final Rule added certain health and well-being coaching services that Medicare reimbursed on a temporary basis for 2024. The final rule also added risk assessments for social determinants of health to the list of telehealth services Medicare would reimburse.
Previous wording
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 takes 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.
Current wording
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.
Previous wording
In 2024, CMS issued a new prescription drug event (PDE) reporting requirements for PACE organizations to receive manufacturer discounts for drugs provided through Medicare Part D as provided for in the Inflation Reduction Act of 2022 (IRA). The additional PDE information must be submitted beginning January 1, 2025.
Current wording
In 2024, CMS issued a new prescription drug event (PDE) reporting requirements for PACE organizations to receive manufacturer discounts for drugs provided through Medicare Part D as provided for in the Inflation Reduction Act of 2022 (IRA). The additional PDE information must be submitted beginning January 1, 2025. In June of 2024, CMS also updated its statement of rights for PACE participants.
Previous wording
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.
Current wording
Various healthcare reform provisions became law upon enactment of the Patient Protection and Affordable Care Act (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.
Previous wording
The 2024 presidential election may significantly alter the current regulatory framework and impact our business and the health care industry, including any further 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.
Current wording
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.
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Current report — wording carried from elsewhere
Investing cash flows consist primarily of capital expenditures, investment activities, insurance proceeds and cash used for acquisitions.
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Previous report — wording carried elsewhere
Final Rule Fiscal Year 2024 Skilled Nursing Facility Prospective Payment System (SNF PPS) — The SNF PPS FY 2024 Final Rule, which was effective October 1, 2023, updated the Medicare payment rates and modified the SNF Quality Reporting Program (QRP) and the SNF Value-Based Purchasing (VBP) Program.
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The increase in skilled services revenue was primarily driven by strong occupancy performance across our skilled services operations. Our consolidated occupancy increased by 2.0% to 80.9%, during the three months ended September 30, 2024 compared to the same period in 2023. In addition, in the third quarter of 2024, we experienced an increase in skilled days, driven by steady growth in our managed care, Medicare and our Medicaid-skilled patients.
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(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 and state relief funding during the three months ended September 30, 2023.
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Cost of services related to our skilled services segment increased by $110.9 million, or 15.5% from the same period in 2023. Cost of services as a percentage of revenue increased to 79.8% from 79.0% due to increased labor cost as a result of new acquisitions with higher expenses in the turnaround stage, increased healthcare costs and general and professional liability reserves and increased expense related to the deferred compensation investment program of $2.3 million compared to the three months ended September 30, 2023. Our cost of services as a percentage of revenue varies depending on the volume of acquisitions during the period, which typically have higher costs during the transition period.
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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.
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Our total revenue increased by $379.3 million, or 13.8%, compared to the nine months ended September 30, 2023. The increase in revenue was primarily driven by an increase in occupancy of 2.2% and 2.9% from our skilled services in Same Facilities and Transitioning Facilities, respectively, coupled with increasing daily revenue rates and the impact of acquisitions. Additionally, our skilled services in Recently Acquired Facilities increased total revenue by $185.6 million, when compared to the same period in 2023.
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The following tables present the skilled services revenue and key performance metrics by category during the nine months ended September 30, 2024 and 2023:
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(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.
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(2)Same Facility results represent all facilities purchased prior to January 1, 2021.
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(3)Transitioning Facility results represent all facilities purchased from January 1, 2021 to December 31, 2022.
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(4)Recently Acquired Facility (Acquisitions) results represent all facilities purchased on or subsequent to January 1, 2023.
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(5)Facility Closed results represent a closed operation during the nine months ended September 30, 2024 due to the transitioning of an intermediate care facility program to group home setting, which is included in All Other category. The operation revenue was excluded from Same Facilities results for the nine months ended September 30, 2024 and 2023 for comparison purposes.
Previous report — wording carried elsewhere
Historically, we have generally experienced lower occupancy rates and lower skilled mix at Recently Acquired Facilities and therefore, we anticipate lower overall occupancy during years of growth. Included in our metrics for Recently Acquired Facilities are 17 facilities we acquired in California in 2023 that were more mature and accordingly, had higher occupancy rates, higher skilled mix days and higher skilled mix revenue than our typical acquisitions. In the future, if we acquire additional turnaround or start-up operations, we expect to see lower occupancy rates and skilled mix and these metrics are expected to vary from period to period based upon the type of the facilities and operations that we acquire.
Previous report — wording carried elsewhere
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):
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Our average Medicaid rates increased 8.7% due to state reimbursement increases, our participation in supplemental Medicaid payment programs and quality improvement programs in various states and changes in Medicaid mix. For example, we continue to have an increase in Medicaid days in states with higher rates, such as California.
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Payor Sources as a Percentage of Skilled Nursing Services— We use our skilled mix as a measure of the quality of reimbursements we receive at our independent skilled nursing facilities over various periods.
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The following tables set forth our percentage of skilled nursing patient revenue and days by payor source:
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The following table sets forth total cost of services for our skilled services segment for the periods indicated (dollars in thousands):
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Rental revenue— Our rental revenue, including revenue generated from our independent subsidiaries, increased by $9.4 million, or 15.5%, to $70.0 million, compared to the nine months ended September 30, 2023. The increase in revenue is primarily attributable to 10 real estate purchases as well as annual rent increases since the nine months ended September 30, 2023.
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FFO—Our FFO increased by $3.3 million, or 8.3%, to $43.4 million, compared to the nine months ended September 30, 2023. The increase in rental revenue of $9.4 million is offset by increases in interest expense of $5.7 million associated with the intercompany debt arrangements between Standard Bearer and us, as we continue to grow our real estate portfolio.
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Our other revenue increased by $26.5 million, or 23.1%, to $141.1 million, compared to the nine months ended September 30, 2023. Other revenue for the nine months ended September 30, 2024 includes senior living revenue of $65.9 million, revenue from other ancillary services of $66.3 million and rental income of $8.9 million. The increase in other revenue is primarily attributable to our other ancillary services.
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Rent-cost of services— Our rent-cost of services as a percentage of revenue decreased by 0.2% to 5.1%, as our operational expansions included a higher mix of real estate purchases.
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Depreciation and amortization— Depreciation and amortization expense increased by $8.5 million, or 15.9%, to $61.6 million. This increase was primarily related to the additional depreciation and amortization incurred as a result of our newly acquired operations and capital expenditures. Depreciation and amortization expense as a percentage of revenue remained consistent at 1.9%.
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Other income, net— Other income, net as a percentage of revenue increased by 0.4%. Other income primarily includes interest income from our investments, interest expense related to our debt and deferred compensation gains and losses. Other income, net increased by $13.9 million due to increases in interest income from our investments and gains in our deferred compensation plan which incurs gains or losses depending on market performance. During the nine months ended September 30, 2024 and 2023, the deferred compensation plan had gains of $6.1 million and $1.1 million, respectively. We also recorded an offsetting expense allocated between cost of services and general and administrative expenses.
Previous report — wording carried elsewhere
Provision for income taxes— Our effective tax rate was 22.0% for the nine months ended September 30, 2024, compared to 22.1% for the same period in 2023. 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 14, Income Taxes, in the Interim Financial Statements for further discussion.