The Ensign Group Successfully Graduates Troubled Nursing Home from CMS Special Focus Facility Program

Wednesday, February 20, 2008 General News
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MISSION VIEJO, Calif., Feb. 19 The Ensign Group,Inc. (Nasdaq: ENSG), the parent company of the Ensign(TM) group of skillednursing, rehabilitative care services and assisted living companies, announcedthat its Waverly Park skilled nursing facility in Tucson, Arizona hassuccessfully graduated from the Special Focus Facility Program established bythe Centers for Medicare and Medicaid Services ("CMS").


An Ensign team recently completed the challenging clinical turnaround atWaverly Park, a 200-bed skilled nursing facility that was placed on SpecialFocus status by CMS in 2005 based largely on events that occurred prior toEnsign's acquisition of the facility. The facility passed its final inspectionin November 2007, and recently received official notice from CMS that it hadgraduated from the Special Focus Facility program.

Theresa Linnane, a 14-year veteran of the Arizona Department of Health,where she worked as a Survey Program Team Leader, and now an EnsignAdministrator and Executive Director of Waverly Park, explained the process."We had to start from scratch with this facility. It had no systems, anegative reputation and had been in bankruptcy. We first rebuilt its clinicalsystems and its reputation for quality, and we are currently rebuilding itsfinancial foundation -- all one step at a time," she said.

Ensign has long pursued "turnaround" opportunities like Waverly Park, andcontinues to seek similar opportunities for its growing portfolio of long-termcare facilities.

"We founded this company to bring a new level of quality to long-termcare, and we have built our business largely by turning around strugglingnursing facilities similar to Waverly and other facilities on CMS' SpecialFocus Facility list," said Ensign President and CEO Christopher Christensen.

"Troubled facilities that others had given up on have been our bread andbutter," he added, explaining that Ensign's turnaround program targetspoorly-operated and undervalued acquisitions, and then attempts to transformthem to produce outstanding clinical and financial improvements over time.

Ensign now has two additional facilities that have been named to theSpecial Focus Facility list. CMS and state regulators selected the two basedon their last three years of regulatory history, even though Ensign acquiredthem much more recently. One of the facilities, Mt. Ogden Rehab & Care Centerin Ogden, Utah, has already been surveyed once by state regulators sinceEnsign took it over. The facility passed that survey; however it still fellwithin CMS' Special Focus criteria based on several serious incidents thatoccurred prior to Ensign's arrival, including the drowning of a patient.

"Although problems that were created over long periods of time obviouslydo not get fixed overnight, we are proud of the sweeping and meaningfulchanges we've made at Waverly Park and Mt. Ogden, and we are continuing theseefforts across all of our turnaround projects," said Christensen.

Noting that not all of Ensign's facilities were troubled at the time ofacquisition, Christensen added that, in addition to improving care, Ensign hashistorically been able to create tremendous value by pursuing thisopportunistic business model over the majority of its portfolio. He pointed toEnsign's industry-leading EBITDAR margins and return on assets as indicatorsof the program's success.

He also noted that Ensign had been tapped by the California Department ofHealth Services in 2001 to rescue three troubled facilities that the State hadtaken over because they were in "immediate jeopardy" status, meaning thatpatients were in imminent danger of harm. "We want to become the answer forCMS and state regulators in every state where we operate when they encounterespecially troubled facilities," said Christensen.


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