Dave Kingsley, PhD

During April and May, the Kansas City Star published several articles chronicling the spread of COVID-19 through Riverbend Post-Acute Care nursing home in Kansas City, Kansas.  The facility experienced nearly 140 infected patients and workers, as approximately 40 deaths.[1] I was also interviewed by Fox4 local news, which subsequently ran a story regarding Riverbend.  The facility has become something of a poster child for the spread of COVID-19 among nursing home patients and employees.

But another important part of the story should now be told in the media.  Skilled nursing facilities like Riverbend are a pipeline to Wall Street.  Riverbend is owned by The Ensign Group, a large, profitable, and rapidly growing corporation.  As a publicly traded company, it is required to file a Form 10-K with the Securities and Exchange Commission.  According to its 2019 10-K[2] the company had a good year.  In his cover letter, CEO Barry R. Port touted the company’s 2019 performance:

“We had a record year in 2019 as we again achieved our highest adjusted earnings per share in our history.  Our GAAP[3] earnings per share for the fourth quarter was $0.49, an increase of 48.5% from the prior year quarter, and our spin-adjusted earnings per share was $0.60, an increase of 39.5% over the prior year quarter and a increase of 33.3% sequentially over the third quarter.  Our GAAP earnings per share for the year was $1.97 and adjusted earnings per share was $2.24, up 29.5% for the entire year.”

The Ensign Group’s strong financial performance has continued into 2020.  On May 11th, while people were dying in their understaffed and underfunded nursing home with an inadequate disease prevention and protection program, the company released its first quarter results.[4]  Highlights stressed in the report included: (1) Earnings per share for the quarter increased 87.2% over the same quarter in 2019, (2) Revenue increased 25.1% “over the prior year quarter,” and (3) total skilled services, i.e. the nursing home business, $558.4 million and increase of 24.3% over 2019.

These corporate statements suggest that shareholders and executives were financially well rewarded from robust earnings in 2019. But a January 2020 state of Kansas inspection report suggests that employees and patients, without whom those earnings would not be possible, did not share in the benefits of the company’s 2019 good financial performance. [5]

On January 9, 2020, the facility received a citation from state inspectors for failing to “provide and implement an infection prevention and control program.”  Also, the report noted significantly low staff hours – especially RN hours.  If you are accustomed to reading these reports, you would conclude that you would not want to put your loved ones in this place. The lowly two star rating it received in Nursing Home Compare is probably generous.

Although Big Blue Health Care, Inc. is listed as the own/operator of the facility on Nursing Home Compare, it is owned 100% by Endura Health Care, Inc, which in turn is owned 100% by The Ensign Group.  There is no doubt that earnings flow to The Ensign Group, which is a multibillion-dollar corporation and “player” in the senior care market.

The Ensign Group is a holding company, which claims to own no nursing homes or other operations.  That is a legal fiction and contradicted throughout the 10-K report. It is not uncommon for nursing home corporations to legally structure ownership so that capital flows through a series of “front” companies and enriches corporate executives and investors in the private equity or holding company.

Operating companies are typically financially stressed by these arrangements, which are designed to extract cash for the benefit of investors, who are shielded from liability through these arrangements.  Furthermore, cash flow is enhanced through a host of financial maneuvers such as stock buybacks, depreciation allowances and other forms of tax arbitrage.

One maneuver pulled off by The Ensign Group was a “spin off” of operations into a subsidiary while retaining the real estate, which they leased back to the subsidiary’s operations under terms advantageous to the holding company.[6]  If I were to teach a semester course on corporate finance in the nursing home business, no one would probably sign up for it, but be that as it may, the 132 page Form 10-K filed by The Ensign Group would make a good textbook – particularly as it pertains to “financialization” of the industry.

A full explication of the cash flow and financial position of The Ensign Group is far beyond the scope of this post.  Suffice it to say that advocacy will be far more effective when we begin to appreciate the importance of corporate finance and the trend in the past few decades toward “financialization,”[7] which has resulted in excessive flow of Medicaid, Medicare, and private pay funds from their intended purpose – high quality of services for Americans needing skilled nursing care.


[1] https://www.kansascity.com/news/coronavirus/article241959296.html;https: //www.kansascity.com/news/local/article242156096.html; https://www.kansascity.com/news/coronavirus/article241828786.html https://www.kansascity.com/news/coronavirus/article242025381.html; https://www.kansascity.com/news/coronavirus/article242067641.html; https://www.kansascity.com/news/coronavirus/article241888241.html; https://www.kansascity.com/news/coronavirus/article242275961.html


[2] http://investor.ensigngroup.net/static-files/19128193-890b-467f-b954-8e940361b42a

[3] GAAP is the acronym for the term “generally accepted accounting principles”, It is not important to know this for the purposes of this blog post.  However, for the curious: It refers to “rules that encompass the details, complexities, and legalities of business and corporate accounting.” The Financial Accounting Standards Board (FASB) uses GAAP as the foundation for its comprehensive set of approved accounting methods and practices.

[4] “The Ensign Group Reports First Quarter Results,” May 11, 2020, Conference Call and Webcast scheduled tomorrow, May 12, 2020 at 10:00 am PT. http://investor.ensigngroup.net/news-releases/news-release-details/ensign-group-reports-first-quarter-results-1


[6] Nursing home real estate leases are typically “triple-net,” which is highly disadvantageous to the leasee.

[7] Financialization has become a common term in economics and finance for describing the rising dominance of finance in corporate management.  As finance has risen from an ancillary service to the actual mission of corporations, production of goods and services have become devalued.  Cash flow is designed for maximum shareholder return at the expense of other stakeholders such as patients/customers, employees, and communities.  Due to the importance of real estate, the nursing home system is particularly amenable to financial machinations for the extraction of cash from operations.  The Ensign Group’s legal structure as a holding company is an excellent example of how businesses can be structured to extract cash and avoid legal liability.


The 65+ population will grow to 80 million by 2028 – over 20% of the U.S. population will have entered this later life stages.  A proportion of them will be affluent and have excess resources travel, entertainment, hobbies, and general consumption of nonessential goods and services.  These lucky elders will be consuming at a rate comparable to younger affluent Americans.

A large proportion of 65+ Americans will either experience deep poverty or struggle to pay living expenses in the form of food, housing, and utilities.  Despite Medicare benefits, medical expenses can consume a large share of a beneficiary’s income.  Social Security generally does not provide enough income for living and medical expenses.  Only a small number of workers are now reaching retirement age without adequate savings and monthly benefits through a 401K, Roth IRA, or an employer provided defined benefits program.

The inadequacy of retirement income requires some federal transfer of funds for medical care, housing, and SSI.  However, these transfers are not nearly as robust as transfers of wealth through tax expenditures (tax cuts) for upper income individuals and corporations.  As will be discussed throughout blog posts to follow this one, the elderly receive a rather minor proportion of budgeted expenditures each year.

Economists have ignored the realities of politics & economics pertaining to the 20% of Americans in the 65+ population.  Far too many have bought into myths about the impact of Social Security and Medicare on the federal budget.  Furthermore, the contribution of the this rapidly growing demographic subgroup to economic growth has not been balanced against transfers of wealth to them.