What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-04-30 compared with 2025-11-03 · 295 added, 510 removed, 878 unchanged (48% of the section changed)

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We undertake no obligation to revise or update publicly any forward-looking statement for any reason, except as otherwise required by law.

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.

We are a provider of health care services across the post-acute care continuum.

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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, 2025, we offered skilled nursing, long term acute care, senior living and rehabilitative care services through 361 skilled nursing and senior living facilities.

As of March 31, 2026, we offered skilled nursing, long-term acute care, senior living and rehabilitative care services through 378 skilled nursing and senior living facilities.

Our real estate portfolio includes 160 owned real estate properties, which includes 124 facilities operated and managed by us, 36 operations leased to and operated by third-party operators and the Service Center location.

Of the 36 third-party operations, one senior living operation is located on the same real estate property as a skilled nursing operation that we own and operate.

The following table summarizes our independent subsidiaries and operational skilled nursing beds and senior living units by ownership status as of September 30, 2025:

The following table summarizes our independent subsidiaries and operational skilled nursing beds and senior living units by ownership status as of March 31, 2026:

Owned and Operated Leased (with a Purchase Option) Leased (without a Purchase Option) Total for Facilities Operated

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and Cornet Limited, Inc., referred to collectively as the Service Center, provide centralized accounting, payroll, human resources, information technology, legal, risk management and other centralized services to the other independent subsidiaries.

We also have a wholly-owned captive insurance subsidiary that provides some claims-made coverage to our independent subsidiaries for general and professional liability, as well as coverage for certain workers’ compensation insurance liabilities and our captive real estate trust owns and operates our real estate portfolio.

Our captive real estate investment trust, Standard Bearer, owns and manages our real estate business.

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Refer to Results of Operations for further discussion.

Operational Expansions — During the nine months ended September 30, 2025, we expanded our operations with the addition of 28 stand-alone skilled nursing operations, five stand-alone senior living and one campus operation.

These new operations added a total of 3,384 operational skilled nursing beds and 313 operational senior living units operated by our independent subsidiaries.

Subsequent to September 30, 2025, we expanded our operations with the addition of eight stand-alone skilled nursing operations which added 428 operational skilled nursing beds operated by our Company's independent subsidiaries.

Seven of the eight expansions are part of a real estate portfolio that allows us to continue growing our footprint in the state of Utah.

For further discussion of expansions, see Note 6, and Operation Expansions in the Notes to the Interim Financial Statements.

Expansion into New States — In the first quarter of 2025, we expanded our operations into the states of Alabama, Alaska and Oregon.

These expansions are part of our strategic vision to further strengthen our growing national presence in both existing and new attractive markets.

Standard Bearer Update — Standard Bearer Healthcare REIT, Inc.

Operational Expansions — During the three months ended March 31, 2026, we expanded our operations with the addition of five stand-alone skilled nursing operations in three states.

These new operations added a total of 582 operational skilled nursing beds operated by our independent subsidiaries.

In the same period, we entered into definitive agreements to acquire 15 stand-alone skilled nursing operations and two campus operations in Texas on May 1, 2026, subject to customary closing conditions.

Assuming the closing of the acquisitions, these new operations will add 2,080 operational skilled nursing beds and 155 senior living units to be operated by our independent subsidiaries.

These acquisitions establish Texas as our largest state by skilled nursing and senior living operations, totaling 105 operations, and reaffirm our continued growth in the markets where we began in 1999.

Standard Bearer Acquisitions — Standard Bearer Healthcare REIT, Inc.

(Standard Bearer), our captive REIT, is a holding company with subsidiaries that own a majority of our real estate portfolio.

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.

During the nine months ended September 30, 2025, Standard Bearer added $228.9 million of real estate associated with 15 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 where our independent subsidiaries have been operating and managing these locations.

Of these additions, two stand-alone skilled nursing operations are leased to third-party operators and the remaining additions are operated by our independent subsidiaries.

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.

Subsequent to September 30, 2025, Standard Bearer added approximately $65.0 million of real estate associated with seven stand-alone skilled nursing operations, as discussed above, where all of the stand-alone skilled nursing facilities were leased back to our independent subsidiaries.

Common Stock Repurchase Program — On February 21, 2025, the Board of Directors approved a stock repurchase program pursuant to which we were authorized to 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 first quarter of 2025, we purchased 84 shares of our common stock for $10.8 million.

During the second quarter of 2025, we purchased 73 shares of our common stock for $9.2 million.

This repurchase program expired upon the repurchase of the fully authorized amount under the plan and is no longer in effect.

On May 15, 2025, the Board of Directors approved a stock repurchase program pursuant to which we are authorized to repurchase up to $20.0 million of our common stock under the program for a period of approximately 12 months from June 16, 2025.

During the third quarter of 2025, we did not repurchase any shares pursuant to this stock repurchase program.

Litigation — During the three months ended September 30, 2025, we agreed to settle all alleged wage, hour or labor code-related violations asserted on a class or representative basis against our independent subsidiaries in California for purported violations occurring during the six year period ending December 2025, for $12,000, pending court approval.

Management believes that the REIT structure enhances transparency into the value of the Company’s owned real estate and provides an efficient platform to support future property acquisitions, which may be operated by the our independent subsidiaries or leased to third‑party operators.

During the three months ended March 31, 2026, Standard Bearer added $17.5 million of real estate assets associated with two stand-alone skilled nursing operations operated by our independent subsidiaries .

In addition, during the same period, two stand‑alone skilled nursing operations owned by Standard Bearer were transitioned from third‑party operators to our independent subsidiaries.

In addition, during the three months ended March 31, 2026, we entered into definitive agreements to acquire real estate assets associated with 19 operations subsequent to March 31, 2026, subject to customary closing conditions, for an aggregate purchase price of approximately $342.4 million.

The real estate assets are associated with 15 stand-alone skilled nursing operations and two campus operations to be operated by our independent subsidiaries and two stand-alone senior living operations to be leased to a third-party operator beginning on May 1, 2026, in each case, assuming the closing of the acquisitions.

Facility Information

The following table sets forth the location of our facilities and the number of operational beds and units located at our skilled nursing, senior living and campus facilities as of September 30, 2025:

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, 2026:

Facility Counts Bed / Unit Counts

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Idaho 14 — 1 15 1,331 21 1,352

Tennessee 11 — — 11 1,120 — 1,120

Kansas 4 — 8 12 883 251 1,134

Tennessee 11 — — 11 1,122 — 1,122

South Carolina 9 — — 9 1,126 — 1,126

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(1) Campuses represent facilities that offer both skilled nursing and senior living services.

The following table provides summary information regarding the location of our owned and operated real estate properties as of September 30, 2025:

The following table provides summary information regarding the location of our owned and operated real estate properties as of March 31, 2026:

Facility Counts Bed / Unit Counts

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Arizona 12 — 5 17 2,052 494 2,546

Utah 15 — — 15 1,102 — 1,102

California 11 — 1 12 1,291 42 1,333

Colorado 6 3 — 9 593 369 962

8 — — 8 764 — 764

Washington 6 — — 6 621 — 621

Kansas 2 — 5 7 495 167 662

Washington 6 — — 6 621 — 621

Idaho 6 — — 6 590 — 590

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Tennessee 3 — — 3 300 — 300

Alaska 1 1 — 2 146 82 228

Iowa 3 — — 3 234 — 234

Alaska 1 1 — 2 146 82 228

Oregon — — 1 1 98 50 148

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(1) Campuses represent facilities that offer both skilled nursing and senior living services.

The following table provides summary information regarding the location of our owned real estate properties as of September 30, 2025:

The following table provides summary information regarding the location of our owned real estate properties as of March 31, 2026:

Owned and Operated by Ensign (1)

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Arizona 17 1 — 18

Utah 15 — — 15

Colorado 9 — — 9

Washington 6 3 — 9

Idaho 6 — — 6

Kansas 7 — — 7

Idaho 6 — — 6

South Carolina 5 — — 5

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The following table summarizes our overall skilled mix from our skilled nursing services for the periods indicated as a percentage of our total skilled nursing routine revenue and as a percentage of total skilled nursing patient days:

Three Months Ended September 30, Nine Months Ended September 30,

2025 2024 2025 2024

Three Months Ended March 31,

Days 32.0 % 31.4 %

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The following table summarizes our overall occupancy statistics for skilled nursing operations for the periods indicated:

Three Months Ended September 30, Nine Months Ended September 30,

Three Months Ended March 31,

Occupancy for skilled services:

2025 2024 2025 2024

Operational beds at end of period 38,549 34,946

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These businesses are neither significant individually, nor in aggregate and therefore do not constitute a reportable segment.

Our Chief Executive Officer and Chairman of the Board, who is our chief operating decision maker, or CODM, reviews financial information at the operating segment level.

Our Chief Executive Officer, who is our chief operating decision maker, or CODM, reviews financial information at the operating segment level.

Revenue Sources

The following tables set forth our total service revenue by payor source generated by our skilled services segment and our "All Other" category and as a percentage of total revenue for the periods indicated (dollars in thousands):

Three Months Ended September 30,

Skilled Services All Other (3)

Total Service Revenue

2025 2024 2025 2024 2025 2024

$ 501,722 $ 416,190 $ 13,435 $ 9,452 $ 515,157 $ 425,642

Medicare 303,281 263,594 — — 303,281 263,594

Medicaid-skilled 78,450 65,907 — — 78,450 65,907

Subtotal $ 883,453 $ 745,691 $ 13,435 $ 9,452 $ 896,888 $ 755,143

Managed care 237,978 202,528 — — 237,978 202,528

Private and other (2)

117,665 84,894 37,248 33,527 154,913 118,421

TOTAL SERVICE REVENUE $ 1,239,096 $ 1,033,113 $ 50,683 $ 42,979 $ 1,289,779 $ 1,076,092

Three Months Ended September 30,

Skilled Services All Other (3)

Total Service Revenue

2025 2024 2025 2024 2025 2024

40.5 % 40.3 % 26.5 % 22.0 % 39.9 % 39.6 %

Medicare 24.5 25.5 — — 23.5 24.5

Medicaid-skilled 6.3 6.4 — — 6.1 6.1

Subtotal 71.3 % 72.2 % 26.5 % 22.0 % 69.5 % 70.2 %

Managed care 19.2 19.6 — — 18.5 18.8

Private and other (2)

9.5 8.2 73.5 78.0 12.0 11.0

TOTAL SERVICE REVENUE 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %

(1) Medicaid payor includes revenue for senior living operations.

(2) Private and other in skilled services includes private, Veteran Affairs and hospice payors.

In addition, private and other in the "all other" category includes revenue from senior living and ancillary operations.

(3) All Other incorporates intercompany eliminations.

Nine Months Ended September 30,

Three Months Ended March 31,

Skilled Services All Other (3)

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TOTAL SERVICE REVENUE $ 1,330,835 $ 1,123,554 $ 51,468 $ 43,486 $ 1,382,303 $ 1,167,040

Nine Months Ended September 30,

Three Months Ended March 31,

Skilled Services All Other (3)

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(1) Medicaid payor includes revenue for senior living operations.

(2) Private and other in skilled services includes private, Veteran Affairs and hospice payors.

In addition, private and other in our "all other" category includes revenue from senior living and ancillary operations.

(2) Private and other includes revenue for skilled services (private, Veteran Affairs and hospice payors), senior living and ancillary operations.

(3) All Other incorporates intercompany eliminations.

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In addition, these same subsidiaries are subject to federal and state laws that govern billing and reimbursement, relationships with vendors, business relationships with physicians and workplace protection for healthcare staff.

Such laws include (but are not limited to) the Anti-Kickback Statute (AKS), the federal False Claims Act (FCA), the Stark Law and state corporate practice of medicine statutes.

Such laws include (but are not limited to) the Anti-Kickback Statute (AKS), the federal False Claims Act (FCA), the federal prohibition on physician self-referral known as the Stark Law, state law, and state corporate practice of medicine statutes.

Governmental and other authorities periodically inspect our independent subsidiaries to verify continued compliance with applicable regulations and standards.

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Proposed, Anticipated and Recently Issued Rulemaking and Administrative Actions

The federal government, through CMS rulemaking, Presidential executive actions or Congressional legislation, and state and local governments have recently released the following proposed or final rulemaking, or administrative actions that may have an impact on our independent Skilled Nursing Facilities (SNFs) or Assisted Living Facilities (ALFs):

Federal Government Shutdow n — Congress was unable to pass a new spending package before October 1, 2025, and as a result, the federal government shut down.

At this time, we anticipate minimal impact on our businesses as both Medicare and Medicaid are mandatory health program payments that continue even during a lapse of appropriations.

HHS has a contingency plan to maintain necessary staffing and funding for certain programs during this time.

This includes continuing Medicare and Medicaid payments to providers and states.

There may be slight delays in payments, waiver approvals, changes of ownership approvals, and technical assistance due to fewer federal staff available to do this work, but we do not anticipate serious disruptions.

Given the reduction in federal staff, rule-making and other policy developments may be delayed.

CMS survey and certification surveys will focus on serious, complaint investigations and other survey activities (e.g., recertification, initial and less serious complaint investigations) by federal staff will be suspended.

Final Rule Updating Health-Care Related Tax Policies — On February 2, 2026, CMS published a final rule, effective April 3, 2026, related to the statistical test used to evaluate state Medicaid health care-related tax waiver requests, implementing requirements codified in the One Big Beautiful Bill (OBBB).

In relevant part, this rule limits the circumstances under which states may obtain waivers from CMS to impose taxes that fund state Medicaid programs by assessing taxes that impose a greater burden on Medicaid-participating organizations (whether based on volume or percentage of Medicaid taxable units) than the burden imposed on organizations that do not participate in Medicaid, or have relatively less Medicaid participation.

While the rule primarily targets managed care organization taxes, it applies to all permissible provider tax classes, including nursing facilities, for which CMS has identified at least two existing taxes that appear to exploit the loophole.

Non-MCO provider taxes, including nursing facility taxes, have a compliance deadline of the end of the applicable state fiscal year ending in calendar year 2028 (no later than September 30, 2028).

Federal Nurse Staffing Legislation — Following the repeal of the federal minimum staffing requirements in December 2025, there has been legislation introduced in Congress, that if enacted, would impose mandatory minimum staffing requirements for skilled nursing facilities participating in the Medicare and Medicaid Programs.

Controlled Substances Act Telemedicine Flexibilities — On December 31, 2025, the Drug Enforcement Administration (DEA) in coordination with the HHS, issued a fourth extension of certain telemedicine flexibilities related to the prescribing of controlled substances, extending these provisions through December 31, 2026.

Under the Ryan Haight Online Pharmacy Consumer Protection Act of 2008, practitioners are generally required to conduct at least one in-person medical evaluation before prescribing controlled substances to a patient via telemedicine.

Consolidated Appropriations Act of 2026 (CAA 2026) — On February 3, 2026, the Consolidated Appropriations Act of 2026 (CAA 2026) was passed, which further extended government funding through September 30, 2026.

Of specific importance to our businesses are:

• Telehealth Waivers:

Since the COVID-19 Pandemic, Congress has temporarily waived restrictions so Medicare beneficiaries can access telehealth services at home and outside of rural areas.

Medicare recipients can now continue using telehealth under these relaxed rules, regardless of location.

The waivers expired on September 30th but were reinstated effective October 1, 2025 and extended through December 31, 2027.

Specifically, key waivers that were restored temporarily include:

• Lifting geographic limitations for medical telehealth services, allowing them to be provided nationwide, including in a person's home such as an assisted living residence.

• Allowing physical therapists, occupational therapists and speech-language pathologists to deliver telehealth services.

• Delay the Medicare requirement for in-person visits for mental health services provided through telehealth or audio-only telecommunications technology.

• Permits telehealth to be used for face-to-face encounters required for Hospice recertification purposes.

• Work Geographic Index Floor:

Temporarily and retroactively restores nationwide payment floor multiplier for the work component of Medicare Part B services paid under the physician fee schedule.

This is effective October 1, 2025 through at least September 30, 2026.

• Extension of Funding for Quality Measure Endorsement, Input, and Selection:

This extends such funding through September 30, 2026.

• Sequestration :

This legislation prevents the triggering of statutory 4.0% Statutory Pay-As-You-Go Act of 2010 (PAYGO) sequestration cuts to Medicare ( See Sequestration of Medicare Rates below).

CMS has issued guidance instructing Medicare Administrative Contractors (MACs) to perform mass adjustments to any paid claims that are inconsistent with the above and instructing Practitioners to resubmit to CMS any returned claims that were previously determined not payable during the shutdown.

One Big Beautiful Bill (OBBB) — The OBBB was signed into law on July 4, 2025, implementing a range of federal reforms targeting Medicaid financing, eligibility, and payment structures.

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Moratorium on New or Increased Provider Taxes — Provider taxes, which are state taxes assessed on healthcare providers or facilities, are a commonly used by states to generate non-federal share of Medicaid payments, including payments to SNFs.

Under the Patient Protection and Affordable Care Act (ACA), provider taxes were capped at 6% of a provider's net patient revenue.

Under the ACA, provider taxes were capped at 6% of a provider's net patient revenue.

Existing federal law prohibits states Medicaid programs from guaranteeing providers that they will receive their provider taxes paid back - this is known as the hold harmless provision.

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While SNFs are exempt from the moratorium, broader limitations on provider taxes could reduce overall state Medicaid financing flexibility, increasing the risk of lower SNF reimbursement rates.

In February 2026, CMS issued a final rule implementing these requirements as they pertain to granting state-requested waivers for imposing Medicaid provider taxes to fund those states' Medicaid programs.

See Item 1., Government Regulation, Proposed, Anticipated and Recently Issued Rulemaking and Administrative Actions - Closing a Health Care-Related Tax Loophole Final Rule.

Medicaid Recertification Changes and Retroactive Eligibility Cut — Beginning in the first quarter of 2027, states must conduct Medicaid eligibility redeterminations every six months, rather than annually, for individuals enrolled under Medicaid.

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This provision could reduce overall state Medicaid financing flexibility, increasing the risk of lower SNF reimbursement rates.

CMS issued implementing guidance on February 2, 2026, clarifying that SDPs covering rating periods for CY 2024 to CY 2026 may be grandfathered and qualify for protection from the OBBB's reductions in payment, provided that a state seeking this protection provided CMS with completed forms seeking approval for such directed payments before May 1, 2025;

however, grandfathered dollar amounts are frozen at current approved levels and cannot be increased through any preprint version, amendment, or renewal.

SDPs in rating periods beginning on or after March 30, 2026, will not qualify for grandfathering and must immediately comply with the new payment caps based on Medicare payment rates.

Cap on Home Equity Excluded for Long-Term Care Eligibility Determination — The OBBB establishes a limit of $1.0 million for home equity that can be exempted from calculating an individual’s eligibility for Medicaid in seeking long-term care beginning January 1, 2028.

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Overall Impact on State Budgets – The full effect of the OBBB on state budgets remains uncertain, particularly given the anticipated reduction in federal Medicaid contributions.

A key risk to our revenue is that states may generally have fewer financial resources available.

A key risk to our revenue is that states may generally have fewer financial resources available without federal contributions to Medicaid.

In response to how the overall budgets of states will be impacted by the OBBB due to reduced federal Medicaid contributions, some states have already taken legislative and regulatory actions to address the provisions of the OBBB and its potential impact.

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We will continue to monitor any such developments and advocate accordingly at the federal, state and local levels.

Medicare Annual Payment Rule — On July 31, 2025, CMS released the final rule for the SNF Prospective Payment System (PPS) Fiscal Year (FY) 2026 Final Rule outlining the following key changes:

FY 2026 Final Updates to the SNF Payment Rates — For fiscal year 2026, which begins on October 1, 2025 and ends on September 30, 2026, CMS has finalized a 3.2% increase to SNF PPS payment rates.

Medicare Annual Payment Rule — On April 2, 2026, CMS released the proposed FY 2027 Skilled Nursing Facility Prospective Payment System Final Rule (FY 2027 PPS) which proposes a net 2.4% increase in to the SNF PPS payment rates.

The increase is based on a proposed SNF market basket of 3.2% partially offset by a negative 0.8% productivity adjustment.

CMS did not propose major changes to the Patient‑Driven Payment Model (PDPM), but is seeking public input on whether updates may be needed to address possible case‑mix coding concerns and improve payment accuracy.

CMS is also considering requiring all‑payer Minimum Data Set (MDS) reporting for skilled stays in the future.

In addition, CMS proposed several updates to the SNF Quality Reporting Program (QRP) and SNF Value-Based Purchasing Program (VBP), including the planned removal of two COVID‑19 vaccination measures beginning in fiscal year 2028, changes to data submission deadlines, and updates to performance standards.

CMS is also requesting feedback on alternative wage index approaches designed specifically for skilled nursing facilities.

On July 31, 2025, CMS released the FY 2026 PPS outlining the following key changes:

FY 2026 Final Updates to the SNF Payment Rates — For fiscal year 2026, which began on October 1, 2025 and ends on September 30, 2026, CMS has finalized a 3.2% increase to SNF PPS payment rates.

This increase is based on the final SNF market basket of 3.3%, plus a 0.6% market basket forecast error adjustment, and a negative 0.7% productivity adjustment.

This increase does not incorporate the SNF Value-Based Purchasing (VBP) Program reductions for certain SNFs subject to the net reduction in payments under the SNF VBP.

This increase does not incorporate the SNF VBP Program reductions for certain SNFs subject to the net reduction in payments under the SNF VBP.

Patient-Driven Payment Model ( PDPM) ICD-10 code mappings – CMS finalized several technical revisions to the code mappings used to classify patients under the PDPM.

These revisions are intended to enhance the accuracy of patient classification, payment calculations and coding practices under the PDPM.

SNF Quality Reporting Program (QRP) — CMS has announced changes to the QRP that will take effect for residents admitted on or after October 1, 2025, impacting the FY 2027 SNF QRP.

SNF QRP — CMS has announced changes to the QRP that will take effect for residents admitted on or after October 1, 2025, impacting the FY 2027 SNF QRP.

Specifically, four standardized patient assessment data elements within the Social Determinants of Health (SDOH) category will be removed.

Additionally, CMS has updated the policy and process for submitting reconsideration requests, including amendments and codification of these procedures.

SNF Value-Based Purchase (VBP) Program — For the FY 2028 and FY 2029 program years, CMS has established performance standards to meet the statutory notice requirements.

SNF VBP Program — For the FY 2028 and FY 2029 program years, CMS has established performance standards to meet the statutory notice requirements.

Additionally, starting with the FY 2028 program year, CMS will implement the previously established scoring methodology for the SNF Within-Stay Potentially Preventable Readmission (SNF WS PPR) measure, which will be included in the program’s measure set for the first time.

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This process will allow SNFs to request reconsideration if they are dissatisfied with CMS’s decision regarding a review and correction request.

Medicare Part B Fee Schedule — On July 14, 2025, CMS issued the 2026 Medicare Physician Fee Schedule (PFS) Proposed Rule, which outlines significant changes aimed at modernizing Medicare, improving care quality, and reducing unnecessary spending.

Medicare Part B Fee Schedule — On October 31, 2025, CMS issued the CY 2026 Medicare Physician Fee Schedule (CY 2026 PFS) Final Rule, which outlines significant changes aimed at modernizing Medicare, improving care quality, and reducing unnecessary spending.

Two Payment Rates Based on Advanced Alternative Payment Model (AAPM) Participation — For the first time, there are two separate conversion factors for all Medicare-participating providers which impacts reimbursement for therapeutic services (including occupational therapy, speech language therapy, and physical therapy), evaluation and management services, and other services furnished in SNFs covered by Medicare Part B.

This is required under the Medicare Access and CHIP Reauthorization Act (MACRA) depending on whether a provider qualifies as a participant in an AAPM.

CMS proposes a qualifying AAPM participant conversion factor of $33.59, representing a 3.83% increase over the 2025 conversion factor of $32.35.

The non-AAPM participant conversion factor is $33.42, a 3.31% increase over such 2025 conversion factor.

Payment Adjustments — CMS intends to decrease payments by 2.5% for certain services that are not time-based, such as certain therapy services.

CMS finalized a qualifying AAPM participant conversion factor of $33.57, representing a 3.77% increase over the CY 2025 conversion factor of $32.35.

The non-AAPM participant conversion factor is $33.40, a 3.26% increase over such the CY 2025 conversion factor.

Payment Adjustments — Under the CY 2026 PFS, CMS decreases payments by 2.5% for certain services that are not time-based, such as certain therapy services.

The rationale is that providers are expected to deliver these services more efficiently as they performed them repeatedly over time.

This reduction is designed to balance out other areas of Medicare spending increases.

Telehealth — CMS has proposed significant changes to the Medicare Telehealth List (MTSL), including expanding permanent flexibilities for virtual direct supervision.

Telehealth — Among other things, CMS finalized changes to the Medicare Telehealth Services List (MTSL) by adding additional services and expanding permanent flexibilities for virtual direct supervision.

One key change is the permanent lifting of frequency limits on providing subsequent nursing facility visits furnished via telehealth.

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Removing these restrictions will likely result in increased access to care and allow for additional services to be provided via telehealth.

CMS’s proposed changes could impact how SNFs deliver and bill for physician and ancillary services.

Notably, CMS increased the originating site facility fee to $31.85 for CY 2026.

These changes could impact how SNFs deliver and bill for physician and ancillary services.

The scope of reimbursable therapy and remote care services may expand, but future payment levels could fluctuate, positively or negatively, based on broader assumptions about efficiency and practice cost.

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However, these changes may also introduce added operational complexity and new compliance requirements.

We are actively evaluating the proposal to understand its potential effects on our operations and financial outcomes.

Improving Care and Access to Nurses Act (I CAN Act) – I CAN Act was introduced in the Senate on February 13, 2025 and seek to expand the role of nurse practitioners (NPs) in SNFs and nursing homes.

Under this legislation, NPs would be permitted to certify, oversee, and supervise care under Medicare and Medicaid without requiring physician oversight, subject to state law.

If enacted, the Act 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.

The bill was referred to the Senate Committee on Finance on February 13, 2025, and has not advanced further since then.

Biden-Harris Administration's Nursing Home Care Priorities — Prior to the change in Presidential Administration in 2025, the Biden-Harris Administration pursued reforms related to 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 regulations remain active and enforceable.

For instance, the SNF PPS FY 2025 Final Rule expanded CMS's authority to impose sanctions on Medicare-participating SNFs with ongoing or repeated deficiencies, with these enhanced enforcements taking effect at the start of the 2025.

These increased sanctioning authorities took effect in the 2025 federal fiscal year, which began on October 1, 2024.

With the publication of the SNF PPS FY2026 Final Rule, it appears the new administration does not intend to make significant changes to the scope, impact, or enforcement of these existing rules.

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 has been met with opposition and legislation to halt its implementation.

Litigation followed in federal courts located in Texas and Iowa, followed by appeals to the United States Courts of Appeals for the Fifth and Eight Circuits, respectively, in which CMS appealed court rulings holding that the Staffing Rule's staffing requirements were unenforceable.

CMS has moved to dismiss both of these appeals, which request the Fifth Circuit granted on September 19, 2025.

Notwithstanding CMS's reversal of its defense of the Staffing Rule, on September 2, 2025, CMS announced that it had drafted an interim final rule to repeal the Staffing Rule's minimum staffing standards.

Implementation of the Staffing Rule was further impaired by the passage of the OBBB on July 4, 2025, which prohibited HHS from implementing, administering, or enforcing the Staffing Rule until October 1, 2034.

Medicare presently accounts for approximately 25.2% of our skilled nursing services revenue year-to-date, being our second-largest revenue payor.

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Implementation of these and other types of measures has in the past, and could in the future, result in substantial reductions in our revenue and operating margins.

Patient-Driven Payment Model (PDPM) — The FY 2020 SNF PPS Rule implemented the Patient-Driven Payment Model (PDPM), a case mix methodology that bases Medicare reimbursement on the clinical condition and care needs of each patient.

Patient-Driven Payment Model (PDPM) — The FY 2020 PPS implemented the PDPM, a case mix methodology that bases Medicare reimbursement on the clinical condition and care needs of each patient.

Under PDPM, diagnosis codes and various patient characteristics are used to classify residents and determine payment levels.

The model incorporates five case-mix adjusted payment components - physician therapy, occupational therapy, speech language pathology, nursing and social services and non-therapy ancillary services - to reflect the complexity of care provided.

The model incorporates five case-mix adjusted payment components - physical therapy, occupational therapy, speech language pathology, nursing and social services and non-therapy ancillary services - to reflect the complexity of care provided.

Additionally, PDPM includes a sixth non-case mix component to account for utilization of SNFs' resources that are unrelated to individual resident characteristics.

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CMS's rulemaking often identifies new data elements to be reported.

CMS revised the calculation of its five-star ratings for the Nursing Home Compare website.

CMS continues to revise the calculation of its five-star ratings for the Nursing Home Compare website.

Under this methodology, points are assigned to a SNF based on its performance across six measures:

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Going forward, CMS plans to implement similar rating threshold increases every six months.

CMS has continued to refine the QRP including various measurements such as the adoption of a process measure for influenza vaccination coverage among healthcare personnel within SNFs and a Discharge Function Score (DC Function) measure, which determines the functional condition of residents by examining the proportion of SNF residents who achieve or surpass a projected discharge functionality score.

CMS has also continued to refine the QRP, including various measurements such as the adoption of a process measure for influenza vaccination coverage among healthcare personnel within SNFs and a Discharge Function Score (DC Function) measure.

The DC Function determines the functional condition of residents by examining the proportion of SNF residents who achieve or surpass a projected discharge functionality score.

The assessment includes consideration of mobility and self-care, utilizing data from the Minimum Data Set (MDS).

The DC Function replaces the current process and is in effect for the FY 2025 SNF QRP.

The SNF PPS FY 2024 Final Rule also modified the SNF QRP’s Healthcare Professional (HCP) Covid Vaccine Measure.

The FY 2024 PPS also modified the SNF QRP’s Healthcare Professional (HCP) Covid Vaccine Measure.

The measure will track the proportion of healthcare staff vaccinated for COVID-19 and have kept their vaccination status current per the CDC recommendations.

The SNF PPS FY 2024 Final Rule also removed the Application of Functional Assessment/Care Plan measures from the SNF QRP.

Under the SNF PPS FY 2024 Final Rule, CMS adopted two measures for the SNF QRP starting in FY 2026.

However, this measure may be removed in the future pending final rules published as a result of the FY 2027 PPS.

The FY 2024 PPS also removed the Application of Functional Assessment/Care Plan measures from the SNF QRP.

Under the FY 2024 PPS, CMS adopted two measures for the SNF QRP starting in FY 2026.

First, CMS raised the Data Completion Thresholds for the MDS.

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This metric highlights the number of patient stays in which SNF patients received the COVID-19 vaccine.

CMS’s SNF PPS FY 2025 Final Rule adopted several updates to the SNF QRP aimed at enhancing the integration of social determinants of health (SDOH) into patient assessments and ensuring the accuracy of reported data.

Starting in 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.

Starting in 2026, SNFs participating in the SNF QRP program will be required to take part in a validation program similar to that used for SNFs participating in the SNF VBP Program.

However, this measure may be removed in the future pending final rules published as a result of the FY 2027 PPS.

CMS’s FY 2025 PPS adopted several updates to the SNF QRP aimed at enhancing the integration of Social Determinants of Health (SDOH) into patient assessments and ensuring the accuracy of reported data.

Starting in FY 2027, CMS will introduce four new SDOH items related to living situation, food security, and utility access, and modify an existing item on transportation availability in the MDS.

Additionally, CMS requires that SNFs participating in the SNF QRP undergo a data validation process similar to that already implemented in the SNF VBP Program.

Starting in FY 2026, SNFs participating in the SNF QRP program will be required to take part in a validation program similar to that used for SNFs participating in the SNF VBP Program.

Each year, 1,500 SNFs will be randomly chosen to submit MDS records for review.

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failure to do so will result in noncompliance and a 2% reduction in Medicare reimbursement for that fiscal year.

Additionally, as outlined in the SNF PPS FY 2026 Final Rule, four standardized patient assessment data elements within the Social Determinants of Health (SDOH) category will be modified for residents admitted on or after October 1, 2025, impacting the FY 2027 SNF QRP.

Additionally, as outlined in the FY 2026 PPS, four standardized patient assessment data elements within the SDOH category will be modified for residents admitted on or after October 1, 2025, impacting the FY 2027 SNF QRP.

CMS has also finalized changes to the reconsideration request policy and process, formally amending and codifying procedures related to QRP data and evaluations.

Medicare Annual Payment Rule — Refer to Proposed, Anticipated and Recently Issued Rulemaking and Administrative Actions above for additional information on the SNF PPS FY 2026 Final Rule.

Final Rule Fiscal Year 2025 SNF PPS — Starting on October 1, 2024 through September 30, 2025, 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.

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.

Home Health and Hospice Payment Rules Affecting SNFs — CMS’s final payment rules for other modalities of care delivery also affect the operations of SNFs.

Under the 2025 Home Health PPS Final Rule, long-term care facilities, including SNFs, are required to submit at least weekly reports to CMS on respiratory illnesses.

Under the CY 2025 Home Health PPS, long-term care facilities, including SNFs, have been required to submit at least weekly reports to CMS on respiratory illnesses beginning January 1, 2025.

These reports must include information such as facility census, resident vaccination status for specified respiratory illnesses, confirmed resident cases and residents hospitalized from such illnesses.

Sequestration of Medicare Rates — The Budget Control Act of 2011 requires a mandatory, across the board reduction in federal spending, called sequestration.

Medicare FFS claims with dates of service or dates of discharge on or after April 1, 2013, incur a 2.0% reduction in Medicare payments through at least 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.

Medicare FFS claims with dates of service or dates of discharge on or after April 1, 2013, incur a 2.0% reduction in Medicare payments through at least the end of 2025, unless Congress takes further action.

The Consolidated Appropriations Act of 2023 (CAA 2023), waived a further 4.0% cut to Medicare spending that would have been required under the Statutory Pay-As-You-Go Act of 2010 (PAYGO) for fiscal years 2023 and 2024.

Instead, the CAA 2023 deferred any further Medicare sequestration under PAYGO until fiscal year 2025.

The CAA 2023 also offset planned Medicare sequestrations that would have been as high as 4.0% and instead maintained fee schedule cuts of approximately 2.0%.

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.

Except for the increase in Medicare reimbursement made available under the OBBB discussed above, as of September 30, 2025, there has not been any further legislation proposed to combat this sequestration of Medicare rates.

As part of the Continuing Resolution that ended the federal government shutdown in late 2025 (CR), Congress reset the balances on PAYGO scorecard, which are used to determine whether a law creates a sufficient amount of budget deficit that it would require mandatory spending cuts like those to Medicare, to zero.

Because the OBBB's requirements were likely to result in a deficit, the 4.0% deduction required by sequestration was expected to start in January of 2026 before the CR's passage.

However, as the CR reset the PAYGO scorecards to zero, the expected 4.0% reduction of Medicare rates under sequestration will not materialize, further delaying the 4.0% reduction.

On February 3, 2026, the CAA 2026 was passed and keeps the protections from the CR in place.

Skilled Nursing Facility Value-Based Purchasing (SNF-VBP) Program — The SNF-VBP Program incentivizes SNFs by awarding payments based on the quality of care provided to Medicare beneficiaries, primarily measured through hospital readmission rates.

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CMS regulations outline both the performance metrics and the required data reporting for SNFs.

Reporting deadlines for baseline period and performance periods began with the 2023 program year.

The FY 2023 SNF PPS Final Rule expanded the SNF-VBP program beyond the single hospital readmission measure, adding new metrics for fiscal year 2026, such as healthcare associated infections requiring hospitalization (SNF HAI) and total nursing hours per resident day, and in fiscal year 2027, the discharge to community post-acute care measure for SNFs, which tracks of successful transitions from SNFs to community settings.

In the FY 2024 SNF PPS Final Rule, CMS elected to replace the SNFRM measure with the SNF within-stay (WS) potentially preventable readmission (PPR) measure starting in FY 2028.

Reporting deadlines for baseline period and performance periods began with fiscal year 2023.

The FY 2023 PPS expanded the SNF VBP program beyond the single hospital readmission measure, adding new metrics for fiscal year 2026, such as healthcare associated infections requiring hospitalization (SNF HAI) and total nursing hours per resident day, and in fiscal year 2027, the discharge to community post-acute care measure for SNFs, which tracks of successful transitions from SNFs to community settings.

In the FY 2024 PPS, CMS elected to replace the SNFRM measure with the SNF WS PPR measure starting in FY 2028.

The PPR measure assesses the risk-standardized rate of unplanned, avoidable readmissions during SNF stays for Medicare fee-for-service beneficiaries.

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The measure uses two years of Medicare claims data to calculate provider-specific risk-standardized readmission rate.

The FY 2025 SNF PPS Final Rule adopted several operational and administrative updates to the SNF VBP Program, including policies for selecting, updating and removing measurements to ensure ongoing relevance and effectiveness for assessing care quality.

The FY 2025 PPS adopted several operational and administrative updates to the SNF VBP Program, including policies for selecting, updating and removing measurements to ensure ongoing relevance and effectiveness for assessing care quality.

CMS also updated technical measures and procedures for reviewing and correcting data used to calculate its measures.

SNFs can now review and correct PBJ data from fiscal year 2026 and MDS data from fiscal year 2027, allowing for more precise measurement based on updated data.

The FY 2026 SNF PPS Final Rule finalized several updates, including setting performance standards for the FY 2028 and FY 2029 program years to meet statutory notice requirements.

CMS will apply the previously established scoring methodology

to the SNF Within-Stay Potentially Preventable Readmission (WS PPR) measure starting in FY 2028.

The FY 2026 PPS finalized several updates, including setting performance standards for the FY 2028 and FY 2029 program years to meet statutory notice requirements.

CMS will apply the previously established scoring methodology to the SNF WS PPR measure starting in FY 2028.

Additionally, CMS removed the Health Equity Adjustment to simplify scoring and clarify incentives for quality improvement.

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and (2) providers in private practice, including speech-language pathologists, who perform and bill for multiple services in a single day.

On March 9, 2024, President Biden signed the Consolidated Appropriations Act of 2024, which included a 2.93% update to the 2024 Physician Fee Schedule (PFS) Conversion Factor (CF) for dates of service March 9, 2024 through December 31, 2024.

This replaced the 1.25% update provided by the Consolidated Appropriations Act of 2023.

Through the end of 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.

Under the 2025 PFS Final Rule, the 2.93% increase to the 2024 PFS 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 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 2025 with the same threshold for OT services.

Certain of our Part B services provided through telehealth would qualify for Medicare reimbursement based on flexibility first provided under the emergency waivers first issued during PHE, which added physical therapy (PT), occupational therapy (OT) and speech-language pathology (SLP) to the list of approved telehealth Providers for the Medicare Part B programs provided by a SNF.

During the PHE, CMS added certain PT and OT services to the list of Medicare-covered telehealth services on a temporary basis, some of which were made permanent for use and new codes were added for PT, OT, or SLP telehealth services—including some “sometimes therapy” codes that were not subject to MPPR.

These flexibilities were most recently extended by the CAA 2026 through December 31, 2027.

The CY 2025 PFS adopted a regulatory change that allowed physical therapy assistants and occupational therapy assistants to be generally supervised by physical therapists and occupational therapists, respectively, in private practice, non-institutional settings, thus allowing greater flexibility in billing for those assistants’ services.

Additionally, the CY 2025 PFS excepted a therapist-established initial plan of care (POC) for PT, OT, or SLT services from the requirement for a physician or non-physician provider’s (NPP’s) signature, provided that (1) the patient’s physician or NPP referred the patient to the therapist and (2) the therapist has evidence that the POC was transmitted to the patient’s physician or NPP within 30 days of the patient’s initial evaluation.

This flexibility applies only to the initial certification of the POC.

While the OBBB did not affect the CY 2025 PFS, the OBBB provided a one-year increase of 2.5% to the CF for services provided between January 1, 2026 and January 1, 2027.

Under the CY 2026 PFS, the 2.93% increase to the 2024 PFS Conversion Factor (CF) expired and CMS sought to impose an estimated 0.05% adjustment thereto based on changes in work relative value units (RVUs) for certain services.

As a result, the CY 2025 PFS implemented a reimbursement reduction of 2.83%, with a CF of $32.35, which is a reduction from the 2024 CF of $33.29.

The CY 2025 PFS adopts a 3.6% increase to the threshold for coding modifier requirements for PT and SLP combined, totaling $2,410 for 2025 with the same threshold for OT services.

The threshold for targeted medical review for PT and OT (combined) and SLP is expected to remain at $3,000 through 2027.

While the OBBB does not affect the 2025 PFS Final Rule, the OBBB did provide a one-year 2.5% increase to the conversion factor for services provided between January 1, 2026 and January 1, 2027.

On July 14, 2025, CMS issued the 2026 PFS Proposed Rule (2026 PFS Proposed Rule), which increases Medicare reimbursement for provider services by a 2.5% increase in the conversion factor as set forth in the OBBB.

The 2026 PFS Proposed Rule contains numerous significant changes regarding payment methods and models, encourages care coordination, reduces collection and reporting of data measurements, and continues certain telehealth flexibilities that began during the COVID-19 pandemic.

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.

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.

In addition, the CY 2026 PFS contains numerous significant changes regarding payment and models, encourages care coordination, reduces collection and reporting of data measurements, and continues certain telehealth flexibilities that began during the PHE ( see Medicare Part B Fee Schedule above ).

Programs of All-Inclusive Care for the Elderly

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Efforts to impose reduced allowances, greater discounts and more stringent cost controls by government and other payors are expected to continue and could adversely affect our business, financial condition and results of operations.

These include statutory and regulatory changes, rate adjustments (including retroactive adjustments), administrative or executive orders and government funding restrictions influenced by budgetary or political pressures, may materially adversely affect the rates at which Medicare reimburses us for our services.

These include statutory and regulatory changes, rate adjustments (including retroactive adjustments), administrative or executive orders and government funding restrictions influenced by budgetary or political pressures, which may materially adversely affect the rates at which Medicare reimburses us for our services.

Implementation of these and other types of measures has in the past, and could in the future, result in substantial reductions in our revenue and operating margins.

For a discussion of historic adjustments and recent changes to the Medicare program and other reimbursement rates, see Part II, Item 1A Risk Factors under the headings Risks Related to Our Business and Industry.

For a discussion of historic adjustments and recent changes to the Medicare program and other reimbursement rates, see Part I, Item 1A Risk Factors under the headings Risks Related to Our Business and Industry.

Patient Protection and Affordable Care Act (ACA)

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This may aid older patients in obtaining or keeping their health insurance in order to pay for long-term care services.

The CAA 2023 revised the funds available to fund Medicare in 2023 and deferred the PAYGO sequestration of Medicare expenses.

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.

On July 4, 2025, the OBBB was enacted into law and intends to be a budget reconciliation law that by 2028 may significantly change the automatic reenrollment process for ACA marketplace health plans and impose work requirements as a condition of Medicaid eligibility, among other things.

The OBBB reflects broader legislative efforts to roll back provisions of the ACA, and its enactment along with ongoing executive actions that run counter to the ACA, could reduce the availability of insurance coverage and may affect the population and payer mix of our independent subsidiaries.

We continually monitor these developments so we can respond to the changing regulatory environment impacting our business.

Requirements of Participation

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These updates provided more information for state surveyors to utilize when evaluating SNFs’ compliance with the Medicare Requirements of Participation, as well as included guidance for facilities on operationalizing compliance with these requirements based on how surveyors would measure and evaluate facility performance.

CMS issued comprehensive updates to the State Operations Manual (Appendix PP) that took effect on April 28, 2025.

CMS issued comprehensive updates to the Medicare State Operations Manual (Appendix PP) that took effect on April 28, 2025.

These updates revised surveyor guidance across multiple areas, including infection control, staffing, PBJ reporting, psychotropic medication use, and medical director oversight responsibilities.

These revisions are intended to enhance survey consistency and align with CMS’s broader focus on care quality and resident outcomes.

Additionally, CMS issued guidance effective March 24, 2025, which took effect on April 28, 2025, clarifying that SNFs may not include pre-dispute, binding arbitration provisions or third-party financial guarantee requirements in admission agreements.

Additionally, CMS issued guidance on March 24, 2025, clarifying that SNFs may not include pre-dispute, binding arbitration provisions or third-party financial guarantee requirements in admission agreements.

If these provisions are not removed, they may result in survey citations and potential penalties for non-compliant SNFs.

Civil and Criminal Fraud and Abuse Laws and Enforcement

Various complex federal and state laws exist which govern a wide array of referrals, relationships and arrangements, and prohibit fraud by healthcare providers.

Various complex federal and state laws exist that govern a wide array of referrals, relationships and arrangements, and prohibit fraud by healthcare providers.

Governmental agencies are devoting increasing attention and resources to such anti-fraud efforts.

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CMS can recover overpayments from health care providers up to six years following the year in which payment was made.

Over the years, the OIG have released the result of audit findings of Medicare overpayments, potentially affecting SNFs.

Over the years, the OIG has released the results of audit findings of Medicare overpayments, potentially affecting SNFs.

These investigatory actions by OIG demonstrate its increased scrutiny into post-hospital SNF care provided to beneficiaries and may encourage additional oversight or stricter compliance standards.

The DOJ has indicated that its healthcare enforcement trends would emphasize opioid prescribing, Medicare Advantage and managed care plan fraud, and COVID-19 related fraud, including under various relief programs available during and in conjunction with the pandemic.

In November of 2023, OIG added to its work plan an audit of nursing homes' nurse staffing hours reported in CMS's payroll-based journal, for which OIG expects to issue a report in FY 2025.

In November of 2023, OIG added to its work plan an audit of nursing homes' nurse staffing hours reported in CMS's payroll-based journal, for which OIG expected to issue a report in FY 2025.

However, the report has not yet been issued.

In addition, the OIG identified the following areas as its "key goals" for oversight:

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In addition, a May 2025 OIG report identified deficiencies in how CMS shares PBJ staffing data with state survey agencies, limiting surveyors’ ability to assess RN staffing compliance and potentially delaying corrective action.

In November of 2025, OIG announced that along with the State survey agencies it would begin assessing the effect of ownership changes on quality of care provided in nursing homes via onsite surveys, state monitoring visits, and requesting additional documentation.

The OIG's Fall 2025 semiannual report to Congress described the OIG's ongoing focus on the standard of care provided within SNFs and enforcement actions based on those concerns, as well as identifying certain nursing facilities' noncompliance with the return of provider relief funds paid to facilities during the COVID-19 PHE and which were due to be repaid to HHS.

OIG announced in February of 2026 that it would be studying the efficacy and performance of nursing home pharmacy services' internal controls to prevent the diversion, misuse, and over-use of opioids in the nursing home setting.

Our business model is based in part on serving higher acuity patients.

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Additionally, CMS will begin publishing aggregated five-star performance metrics for nursing home chains and will remove COVID-19 vaccination measures from facility profile pages.

CMS is also updating the long-stay antipsychotic measure to incorporate data from Medicare and Medicaid claims as well as Medicare Advantage encounter records.

This updated measure, effective January 28, 2026, is expected to increase the reported national antipsychotic rates from 14.6% to 17.0%.

We expect that this change will result in varying changes to individual facilities' ratings.

However, starting July 30, 2025, updates to Nursing Home Care Compare will be temporarily paused until October 2025 as CMS transitions to a cloud-based Internet Quality Improvement and Evaluation System (iQIES) for survey data management.

CMS is updating the long‑stay antipsychotic quality measure to incorporate additional data sources, including Medicare and Medicaid claims and Medicare Advantage encounter records.

The updated measure, effective January 28, 2026, will assign providers to ten equal deciles for scoring purposes.

CMS expects this methodology change to increase the reported national long‑stay antipsychotic rate from approximately 14.6% to 17.0%.

While the overall national rate is expected to increase, the impact on individual facility ratings will vary.

Additionally, starting July 30, 2025 until October 2025, updates to Nursing Home Care Compare were temporarily paused as CMS transitions to a cloud-based Internet Quality Improvement and Evaluation System (iQIES) for survey data management.

This pause is intended to give CMS time to validate the accuracy and integrity of the data and ensure that publicly reported information meets quality standards before resuming updates to the five-star ratings.

The move to iQIES, along with the other changes, may also result in further adjustments to the rating system and could prompt additional audits by CMS or state surveyors.

In January of 2025, CMS unfroze four of its quality measures that it previously froze with its April 2024 refresh.

In April 2024, CMS froze four quality measures and three staffing measures to prevent changes until a subsequent date.

It also updated the staffing rating methodology to assign the lowest score to facilities that fail to submit (or submit incorrect) staffing data.

However, in January of 2025, CMS unfroze four of its quality measures that it previously froze with its April 2024 refresh.

CMS updated these measures to reflect recent changes in the minimum data set collected from SNFs.

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To maintain consistency in star ratings, CMS adjusted thresholds so the distribution of 4- and 5-star ratings remains stable.

In April 2024, CMS froze four quality measures and three staffing measures to prevent changes until a subsequent date.

It also updated the staffing rating methodology to assign the lowest score to facilities that fail to submit or submit incorrect staffing data.

Ownership Transparency Final Rule — In November 2023, CMS finalized a rule requiring SNFs to publicly disclose expanded information regarding their ownership and management structure, 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.

Starting in November of 2024, all SNFs must comply with these requirements.

To facilitate compliance, CMS now requires SNFs to submit a new "SNF Attachment" to the standard CMS form 885A during revalidation.

On July 23, 2025, CMS announced that all SNFs must revalidate their enrollment using this new attachment by January 1, 2026, regardless of their previous revalidation date.

Ownership Transparency Final Rule — In November 2023, CMS finalized a rule requiring SNFs to publicly disclose information regarding their ownership and management structure.

SNF must identify any person or legal entity that:

(1) exercises financial, operational, or managerial control over any facility or part of a facility, or provides services to facility that includes its policies and procedures or cash management services;

(2) leases or subleases real property to the facility, or owns at least 5% of the real property’s total value;

and (3) provides any management or administrative services (or consult regarding the same), or provides accounting or financial services to SNFs.

The rule also requires disclosures of governing body members, officers, directors or managing employees, plus a comprehensive breakdown of the organizational structure of any additional disclosable party that is not a natural person along with a description of their relationships with the facility.

Starting in November of 2024, all SNFs must comply with these requirements by submitting a new "SNF Attachment" with CMS form 855A during revalidation.

Although CMS initially required all SNFs to complete revalidation using this new attachment by January 1, 2026, this deadline was indefinitely suspended in December 2025 by CMS until further notice.

On February 24, 2026, CMS provided further guidance regarding SNF revalidation, which further confirmed the January 1, 2026 deadline for revalidation with new information required by the Ownership Transparency Final Rule remained indefinitely suspended.

Certain states have adopted laws reflecting their concerns regarding ownership transparency.

For example, Iowa adopted laws requiring disclosure of ownership information not previously required for licensure to promote transparency in 2023.

Additionally, in March 2024, the California Department of Health Care Access and Information of the California Health and Human Services Agency issued its notice of approval of regulatory action establishing policies and procedures that implement financial and ownership transparency requirements for California-licensed SNFs that are required by California law passed in 2021.

Additionally, on July 27, 2025, the State of Washington enacted H.B.

1686, directing state agencies to develop a plan and recommendations for creating a registry of health care entities, including SNFs.

In California, the California Department of Health Care Access and Information of the California Health and Human Services Agency issued its notice of approval of regulatory action in March 2024, establishing policies and procedures that implement financial and ownership transparency requirements for California-licensed SNFs that are required by California law passed in 2021.

Additionally, the State of Washington enacted H.B.

1686 in July 2025, directing state agencies to develop a plan and recommendations for creating a registry of health care entities, including SNFs.

State-level Legislation and Healthcare Reform

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In addition, the impacts of the OBBB, as discussed above, will create varying approaches by state legislatures to address the provisions of such bill.

We continue to monitor and advocate for positions that protect the interest of our employees, residents and those of our independent subsidiaries at all levels of government, particularly at the state and local levels.

We continue to monitor and advocate for positions that protect the interests of our employees, residents and those of our independent subsidiaries at all levels of government, particularly at the state and local levels.

The Impact of United States Supreme Court Decisions

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Raimondo , deciding to vacate and remand decisions by the United States Courts of Appeals that relied on the Supreme Court’s own 1984 precedent in Chevron U.S.A.

Natural Resources Defense Council, Inc., which sometimes required courts to defer to “permissible” agency interpretations of the statutes those agencies administered and enforced—a legal doctrine known as the “Chevron doctrine.” In Loper, the Supreme Court had to decide whether it should overrule or clarify the Chevron doctrine based on its application more than 40 years after its creation, and the Supreme Court chose to overrule it.

Natural Resources Defense Council, Inc.

, which sometimes required courts to defer to “permissible” agency interpretations of the statutes those agencies administered and enforced—a legal doctrine known as the “Chevron doctrine.” In Loper, the Supreme Court had to decide whether it should overrule or clarify the Chevron doctrine based on its application more than 40 years after its creation, and the Supreme Court chose to overrule it.

The Chevron doctrine required courts to use a two-step process to interpret statutes administered by federal agencies.

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The Supreme Court’s Loper decision found that the Chevron doctrine is incompatible with the federal Administrative Procedure Act’s requirement for courts to exercise their independent judgment in deciding whether a federal agency has acted within its statutory authority.

It further held that courts may not defer to an agency interpretation of a statute merely because the statute is ambiguous, as it is the responsibility of the court, rather than an agency that administers or acts under a statute, to discern the statute’s meaning.

It further held that courts may not defer to an agency's interpretation of a statute merely because the statute is ambiguous, as it is the responsibility of the court, rather than an agency that administers or acts under a statute, to discern the statute’s meaning.

The Supreme Court reasoned that allowing agencies to interpret the laws they enforce or act under, rather than reserving that activity for the courts, was an impermissible delegation of an activity reserved to the courts.

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In October 2022, CMS increased penalties for SFFs that fail to improve their performance upon further inspection by CMS, increasing the standards SFFs must meet to graduate from the SFF program, maintaining heightened oversight of any SFF for a period of three years after it graduates and increasing the technical assistance CMS provides to SFFs.

On October 24, 2025, OIG issued a report titled "CMS's Special Focus Facility Program for Nursing Homes Has Not Yielded Lasting Improvements." Within this report, OIG set out its observation that, from 2013 to 2022, SNFs that graduated from the SFF program failed to maintain the improvements achieved while in the SFF program.

The report also addresses OIG's findings on the impact of staffing on sustaining the gains seen in the SFF program and additional factors to consider such as facility ownership, and its recommendations for improving the program.

OIG recommended that CMS (1) impose more non-financial enforcement remedies to promote compliance;

(2) examine the extent to which it took enhanced enforcement actions for facilities that graduated the SFF program.

In January of 2026, CMS issued new guidance updating the SFF program to place a greater emphasis on resident falls, increase the frequency of inspections, and decrease notice to facilities in advance of inspections to enhance the oversight powers of CMS and state survey agencies in monitoring facilities that are recommended to or participating in the SFF program.

Sanctions such as denial of payment for new admissions often are scheduled to go into effect before surveyors return to verify compliance.

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We and our independent subsidiaries have established policies and procedures to comply with HIPAA privacy and security requirements and our independent subsidiaries have adopted and implemented HIPAA compliance plans, which we believe comply with the HIPAA privacy and security regulations, which impose significant costs for ongoing compliance activities.

On February 8, 2024, HHS through the Substance Abuse and Mental Health Services Administration (SAMHSA) finalized rules that align the confidentiality of substance use disorder records (i.e., 42 CFR Part 2, also known as "Part 2") with HIPAA;

the compliance deadline for such rules was February 16, 2026.

Such rules align many Part 2 requirements with HIPAA, extend HIPAA's breach notification and enforcement regime to records subject to Part 2, and permit broader care coordination of such records while preserving heightened protections under Part 2.

In addition, such rules require us and our independent subsidiaries to include information regarding Part 2 uses and disclosures in applicable "Notice of Privacy Practices" that inform individuals of the uses and disclosures of certain health information.

There are numerous other laws and legislative and regulatory initiatives at the federal and state levels addressing privacy and security concerns.

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The HSR Act mandates that parties involved in certain transactions must provide advance notice to the Department of Justice (DOJ) and the Federal Trade Commission (FTC) to obtain clearance, ensuring the transaction complies with federal antitrust regulations.

Similarly, these state-level HSR analogues require parties to notify state authorities and secure approval before finalizing mergers or acquisitions.

Similarly, the state-level HSR analogues require parties to notify state authorities and secure approval before finalizing mergers or acquisitions.

This regulatory trend has accelerated in 2025, with more states actively considering or enacting such legislation.

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Among the states where we operate, California implemented its relevant laws in 2024, and Washington expanded the scope of its HSR-like requirements with new legislation effective July 27, 2025.

Nevada, while it did not pass a comprehensive HSR analogue, does require notification or approval for certain healthcare transactions prior to closing.

Nevada, while it did not pass a comprehensive HSR when proposed in 2025, does require notification or approval for certain healthcare transactions prior to closing.

These evolving state regulations add new layers of compliance for mergers and acquisitions, particularly in the healthcare sector.

California Office of Health Care Affordability

The California Office of Health Care Affordability (OHCA), under California law, requires healthcare entities to provide OHCA with written notice of proposed qualifying agreements or transactions (referred to as a “Material Change Notice”) at least 90 days prior to entering into the agreement or transaction.

The California Office of Health Care Affordability (OHCA) requires healthcare entities to provide OHCA with written notice of proposed qualifying agreements or transactions (referred to as a “Material Change Notice”) at least 90 days prior to entering into the agreement or transaction.

Reportable transactions are determined based on a variety of factors outlined in the applicable regulations.

OHCA may coordinate with other state agencies, which may include the California Attorney General, California Department of Managed Care and Department of Insurance, to address the potential consequences of the agreement or transaction on the affected market.

If OHCA determines that a proposed agreement or transaction may have a risk of significant impact on certain aspects of the healthcare market, OHCA will conduct a Cost and Market Impact Review (CMIR) to analyze the issue in more detail.

If OHCA determines, on its own or in conjunction with other state agencies, that a proposed agreement or transaction may have a risk of significant impact on certain aspects of the healthcare market, OHCA will conduct a Cost and Market Impact Review (CMIR) to analyze the transaction in more detail.

This CMIR process involves a deeper analysis than OHCA’s initial review of the information contained in a reporting party’s Material Change Notice.

OHCA’s CMIR process may result in findings of anti-competitive effects that could generate a referral to the California Attorney General for further action.

From March 2025 through September 2025, we have cooperated with requests for information from OHCA regarding specific components of a proposed transaction in relation to purported concerns about market impact.

Despite this continued cooperation, on October 10, 2025, OHCA issued an investigatory subpoena to us to produce (among other things) certain confidential and proprietary documents.

We are reviewing the subpoena and will respond within the applicable time period.

OHCA’s CMIR process has the potential to result in findings of anti-competitive effects.

If such an impact is identified, OHCA may refer the matter to the California Attorney General for further action.

Between March and September 2025, we provided OHCA with requested information regarding specific components of a proposed transaction.

Despite our ongoing cooperation, on October 10, 2025, OHCA issued an investigatory subpoena to us to produce (among other things) certain confidential and proprietary documents.

We timely responded to the investigatory subpoena and asserted objections.

We have been unable to effect resolution including attempts to narrow the scope, and limit the requests to our independent subsidiaries operating in California.

We have filed a Petition in the Superior Court of the State of California, County of Orange, seeking a declaration that the CMIR regulations violate the United States Constitution and/or the California Constitution, and is void and unenforceable as applied to us.

We have also requested that OHCA be ordered to withdraw the subpoena and close the inquiry, so the underlying transaction can be completed.

Americans with Disabilities Act (ADA)

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federal income tax purposes.

Standard Bearer's qualification as a REIT will depend upon its ability to meet, on a continuing basis, various complex requirements under the Internal Revenue Code, relating to, among other things, the sources of its gross income, the composition and value of its assets, distribution levels to its shareholders and the concentration of ownership of its capital stock.

Standard Bearer's qualification as a REIT will depend upon its ability to meet, on a continuing basis, various complex requirements under the Internal Revenue Code, relating to, among other things, the sources of its gross income, the composition and value of its assets, distribution levels to its stockholders and the concentration of ownership of its capital stock.

We believe that Standard Bearer is organized in conformity with the requirements for qualification and taxation as a REIT under the Code and that its manner of operation has and will enable it to continue to meet the requirements for qualification and taxation as a REIT.

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RESULTS OF OPERATIONS

Our total revenue for the three months ended September 30, 2025 increased $214.6 million, or 19.8%, compared to the three months ended September 30, 2024, while our diluted GAAP earnings per share grew by 6.0%, from $1.34 to $1.42, compared to the three months ended September 30, 2024.

Our Same Facilities occupancy increased by 2.1% to 83.0% during the three months ended September 30, 2025 compared to the same period in 2024, demonstrating our ability to gain additional market share even at our more mature operations.

Our total revenue for the three months ended March 31, 2026 increased $216.2 million, or 18.4%, compared to the three months ended March 31, 2025, while our diluted GAAP earnings per share grew by 21.9%, from $1.37 to $1.67, compared to the three months ended March 31, 2025.

Our Same Facilities occupancy increased by 2.3% to 84.3% during the three months ended March 31, 2026 compared to the same period in 2025, demonstrating our ability to gain additional market share even at our more mature operations.

Further, our Transitioning Facilities occupancy increased by 3.8% to 85.1% compared to the same period in 2025, highlighting our ability to organically grow and transform underperforming operations that we have acquired.

Throughout most of our history, our business has been affected by seasonal fluctuations in occupancy and acuity, which are most prominent when comparing the summer and winter months of the calendar year.

For skilled nursing occupancy and skilled mix, we typically experience stronger occupancy and acuity during the first and fourth quarters and softening in the second and third quarters.

Additionally, we historically have acquired operations with lower occupancy and skilled mix.

As these operations become "operations of choice" in each of their respective healthcare markets, we typically see both occupancy and skilled mix increase.

Throughout most of our history, our operating results have been affected by seasonal fluctuations in occupancy and patient acuity, which are most notable when comparing the summer and winter months.

For skilled nursing occupancy and skilled mix, we typically experience stronger occupancy and acuity during the first and fourth quarters and softer demand in the second and third quarters.

Additionally, our recently acquired facilities typical include operations that historical have had lower occupancy and skilled mix at the time of acquisition.

As these operations become "operations of choice" within their respective healthcare markets, we generally experience increases in both occupancy and skilled mix.

We have continued to make progress on targeted initiatives related to increasing occupancy and the level of acuity and complexity of the patients we serve in our facilities, attracting and developing our people and acquiring underperforming skilled nursing operations and integrating them with our proven cultural and operational principles.

During the nine months ended September 30, 2025, we added 34 new operations.

We consistently experience healthy growth in both revenue and overall results as we continue to work diligently with existing and recently acquired operations so that each operation can reach its full clinical and financial potential.

During the three months ended March 31, 2026, we added 5 new operations.

We continue to generate healthy growth in both revenue and overall results as we continue to work diligently with existing and recently acquired operations, so that each operation can reach its full clinical and financial potential.

Our strength remains in our operating model, which empowers each operator to form their own market-specific strategy and adjust to the needs of their local medical communities, including methods for attracting new healthcare professionals into our workforce and retaining and developing existing staff.

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The following table sets forth details of operating results for our revenue, expenses and earnings and their respective components, as a percentage of total revenue for the periods indicated:

Three Months Ended September 30, Nine Months Ended September 30,

2025 2024 2025 2024

Three Months Ended March 31,

Service revenue 99.5 % 99.5 %

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Interest income 0.5 0.6

0.5 0.4 0.3 0.2

Other expense

OTHER INCOME, NET 0.3 % 0.4 %

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Net income attributable to The Ensign Group, Inc.

6.5 % 7.3 % 6.7 % 7.0 %

Three Months Ended September 30, Nine Months Ended September 30,

2025 2024 2025 2024

Three Months Ended March 31,

SEGMENT INCOME (1)

2 unchanged sentences

Standard Bearer (2)

9,622 7,274 27,331 21,892

NON-GAAP FINANCIAL MEASURES:

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Adjusted EBT $ 147,051 $ 118,730

Adjusted Net Income

110,200 88,972

Adjusted Earnings Per Share

EBITDA 152,681 125,846

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(2) Standard Bearer segment income includes rental revenue and expenses from our independent subsidiaries.

The following discussion includes references to Adjusted EBT, EBITDA, Adjusted EBITDA, Adjusted EBITDAR and Funds from Operations (FFO) which are non-GAAP financial measures (collectively, the Non-GAAP Financial Measures).

The following discussion includes references to Adjusted EBT, Adjusted net income, Adjusted earnings per share, EBITDA, Adjusted EBITDA, Adjusted EBITDAR and Funds from Operations (FFO) which are non-GAAP financial measures (collectively, the Non-GAAP Financial Measures).

Regulation G, Conditions for Use of Non-GAAP Financial Measures, and other provisions of the Securities Exchange Act of 1934, as amended (the Exchange Act), define and prescribe the conditions for use of certain non-GAAP financial information.

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Adjusted EBT is income before provision for income taxes adjusted for non-core business items, which for the reported periods includes, to the extent applicable.

These items are generally infrequent or variable in nature, or do not represent current operating activities.

• stock-based compensation expense;

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• costs incurred related to system implementations;

• litigation;

• gain on business interruption recoveries and loss on long-lived assets;

• gain on other investments;

• loss on long-lived assets;

• amortization of patient base intangible assets.

Adjusted Net Income and Adjusted Earnings Per Share

We adjust net income attributable to The Ensign Group, Inc.

(adjusted net income) and diluted earnings per share (adjusted earnings per share) when evaluating our performance because we believe these measures provide useful supplemental information to management and investors regarding our ongoing operating performance.

We believe that the presentation of adjusted net income and adjusted earnings per share, when considered together with GAAP net income attributable to The Ensign Group, Inc.

and GAAP diluted earnings per share, enhances an investor’s understanding of our results of operations.

Management uses these measures for performance evaluation, operational planning and decision‑making purposes.

Adjusted net income is net income adjusted for non-core business items as listed in adjusted EBT, as well as the related income tax effects of these adjustments.

Adjusted earnings per share is calculated by dividing adjusted net income by the weighted‑average diluted shares outstanding for the applicable period.

We believe EBITDA is useful to investors in evaluating our operating performance because it helps investors evaluate and compare the results of our operations from period to period by removing the impact of our asset base (depreciation and amortization expense) from our operating results.

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The table below reconciles income before provision for income taxes to Adjusted EBT for the periods presented:

Three Months Ended September 30, Nine Months Ended September 30,

2025 2024 2025 2024

Three Months Ended March 31,

Consolidated statements of income data:

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13,895 10,724

Litigation (1)

12,000 (555) 12,000 (1,425)

(Gain)/loss on business interruption recoveries and long-lived assets, net

Costs incurred related to system implementations

Loss on long-lived assets 1,284 —

Acquisition related costs (1)

Depreciation and amortization - patient base (2)

$ 147,051 $ 118,730

Gain on other investments (2)

(1) Represents costs incurred to acquire operations that are not capitalizable.

(2) Represents amortization expenses related to patient base intangible assets at newly acquired skilled nursing and senior living facilities.

The table below reconciles net income to adjusted net income and diluted earnings per share to adjusted earnings per share for the periods presented:

Three Months Ended March 31,

Net income attributable to The Ensign Group, Inc.

$ 99,668 $ 80,277

Acquisition related costs (3)

Stock-based compensation expense

13,895 10,724

Costs incurred related to system implementations 3,019 334

701 89 1,472 2,522

Loss on long-lived assets 1,284 —

Acquisition related costs (1)

Depreciation and amortization - patient base (2)

— 236 1,020 449

Provision for income taxes on Non-GAAP adjustments (3)

(7,947) (3,455)

(1) Represents specific proceedings and adjustments arising outside of the ordinary course of business.

(2) Represents gains on the sale of investments that are not part of our core business operations.

These investments have no observable market prices and are held at historical cost basis until sold or impaired.

Adjusted Net Income $ 110,200 $ 88,972

Average number of diluted shares outstanding 59,567 58,500

Diluted Earnings Per Share $ 1.67 $ 1.37

Adjusted Earnings Per Share $ 1.85 $ 1.52

(1) Represents costs incurred to acquire operations that are not capitalizable.

(2) Represents amortization expenses related to patient base intangible assets at newly acquired skilled nursing and senior living facilities.

(3) Represents an adjustment to the provision for income tax to our historical effective tax rate of 25.0%.

The table below reconciles net income to EBITDA, Adjusted EBITDA and Adjusted EBITDAR for the periods presented:

Three Months Ended September 30, Nine Months Ended September 30,

2025 2024 2025 2024

Three Months Ended March 31,

Consolidated statements of income data:

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Net income attributable to noncontrolling interests

67 123 213 422

Interest income

6,168 7,607 18,291 21,151

Provision for income taxes

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Stock-based compensation expense 13,895 10,724

Litigation (1)

12,000 (555) 12,000 (1,425)

(Gain)/loss on business interruption recoveries and long-lived assets, net

(1,660) 486 (2,660) 2,335

Gain on other investments (2)

(2,437) — (2,437) —

Acquisition related costs (3)

528 239 1,663 518

Costs incurred related to system implementations 3,019 334

Loss on long-lived assets 1,284 —

Acquisition related costs (1)

ADJUSTED EBITDA

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ADJUSTED EBITDAR

$ 212,618 $ 610,885

(1) Represents specific proceedings and adjustments arising outside of the ordinary course of business.

(2) Represents gains on the sale of investments that are not part of our core business operations.

These investments have no observable market prices and are held at historical cost basis until sold or impaired.

(1) Represents costs incurred to acquire operations that are not capitalizable.

Three Months Ended September 30, 2025 Compared to the Three Months Ended September 30, 2024

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.

Three Months Ended September 30, 2025

Three Months Ended March 31, 2026 Compared to the Three Months Ended March 31, 2025

The following tables set forth details of operating results for our revenue and earnings, and their respective components, by our reportable segments for the periods indicated:

Three Months Ended March 31, 2026

Skilled services Standard Bearer All Other Eliminations Consolidated

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Segment income (loss) 174,017 10,809 (56,254) — 128,572

Loss on long-lived assets — — — — (1,073)

Income before provision for income taxes $ 128,572

Three Months Ended September 30, 2024

Three Months Ended March 31, 2025

Skilled services Standard Bearer All Other Eliminations Consolidated

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Segment income (loss) 143,931 8,583 (45,934) — 106,580

Loss on long-lived assets

Income before provision for income taxes $ 106,580

Our total revenue increased by $214.6 million, or 19.8%, compared to the three months ended September 30, 2024.

The increase in revenue was primarily driven by increases in occupancy of 2.1% and 3.6% from our skilled services in Same Facilities and Transitioning Facilities, respectively, coupled with increasing skilled mix and daily revenue rates.

In addition, our Recently Acquired Facilities revenue increased by $135.2 million, when compared to the same period in 2024, primarily as a result of acquisitions from October 1, 2024 through September 30, 2025.

Our total revenue increased by $216.2 million, or 18.4%, compared to the three months ended March 31, 2025.

The increase in revenue was primarily driven by increases in occupancy of 2.3% and 3.8% from our skilled services in Same Facilities and Transitioning Facilities, respectively, coupled with increasing daily revenue rates and the impact of acquisitions.

In addition, our Recently Acquired Facilities revenue increased by $128.0 million, when compared to the same period in 2025.

Skilled Services

The following tables present the skilled services revenue and key performance metrics by category during the three months ended September 30, 2025 and 2024:

Three Months Ended September 30,

The following tables present the skilled services revenue and key performance metrics by category during the three months ended March 31, 2026 and 2025:

Three Months Ended March 31,

2026 2025 Change % Change

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Number of campuses at period end (1)

31 29 2 6.9 %

Actual patient days 2,896,034 2,538,135 357,899 14.1 %

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Skilled mix by nursing revenue 50.7 % 50.2 % 0.5 % 1.0 %

Three Months Ended September 30,

Three Months Ended March 31,

2026 2025 Change % Change

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Skilled mix by nursing revenue 51.2 % 51.2 % — % — %

Three Months Ended September 30,

Three Months Ended March 31,

2026 2025 Change % Change

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Skilled mix by nursing revenue 49.7 % 48.3 % 1.4 % 2.9 %

Three Months Ended September 30,

Three Months Ended March 31,

2026 2025 Change % Change

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(3) Transitioning Facility results represent all facilities purchased from January 1, 2023 to December 31, 2024.

(4) Recently Acquired Facility (Acquisitions) results represent all facilities purchased on or subsequent to January 1, 2024.

Skilled services revenue increased by $206.0 million, or 19.9%, compared to the three months ended September 30, 2024.

The increases in skilled services revenue were across all payer types, including increases in Medicaid revenue of $95.0 million, or 19.6%, and Medicare revenue of $39.7 million, or 15.1%.

The increase in skilled services revenue was primarily driven by strong occupancy and skilled mix performance across our skilled services operations.

Our consolidated occupancy increased by 1.7% to 82.3%, during the three months ended September 30, 2025 compared to the same period in 2024 across all payors, with an increase in skilled days from our operations within Same Facilities and Transitioning Facilities.

Revenue in our Same Facilities increased by $52.9 million, or 6.6%, compared to the same period in 2024, due to increased occupancy from strong skilled days and revenue per patient day.

(4) Recently Acquired Facility results represent all facilities purchased on or subsequent to January 1, 2025.

Skilled services revenue increased by $207.3 million, or 18.4%, compared to the three months ended March 31, 2025.

The increases in skilled services revenue were across all payer types, primarily driven by strong occupancy across our skilled services operations.

Our consolidated occupancy increased by 2.6% to 84.0%, during the three months ended March 31, 2026 compared to the same period in 2025, with an increase in skilled days from our operations within Same Facilities and Transitioning Facilities.

Revenue in our Same Facilities increased by $62.7 million, or 6.8%, compared to the three months ended March 31, 2025, due to increased occupancy from skilled days and revenue per patient day.

Our continuous efforts to strengthen our partnerships with various managed care organizations, hospitals and local communities, increased our managed care revenue by 4.5%, resulting from an increase in managed care days and revenue per patient day.

We continued to expand our Medicare patient base while also increasing our share of the growing Medicare Advantage market.

Our Medicare revenue increased by 3.8% due to an increase in Medicare days and revenue per patient day.

In addition, our other skilled revenue has continued to support the needs of the local communities through the expansion of the Veterans Affairs programs.

Revenue in our Transitioning Facilities increased by $18.0 million, or 10.3%, compared to the same period in 2024, due to improved occupancy growth, increases in skilled mix days and revenue per patient day.

The increases in revenue were derived from increased Managed Care revenue of 22.0%, Medicaid revenue of 7.6% and private and other revenue of 33.2%.

The increases are a result of an increase in patient days across all payer types, which reflect our operational fundamentals as we continue to transition and integrate these facilities.

Revenue in our Recently Acquired Facilities increased by approximately $135.2 million compared to the same period in 2024.

The 34 operational expansions between October 1, 2024 and September 30, 2025 across 12 states contributed $113.0 million of the total increase.

In addition to our growing Medicare Advantage market, we experienced meaningful growth in our Medicare patient base.

Revenue in our Transitioning Facilities increased by $16.6 million, or 9.3%, compared to the three months ended March 31, 2025, due to improved occupancy growth, increases in skilled mix days and revenue per patient day, across all payors.

The increases reflect our operational fundamentals as we continue to transition and integrate these facilities.

Revenue in our Recently Acquired Facilities increased by approximately $128.0 million compared to three months ended March 31, 2025.

The 34 operational expansions between April 1, 2025 and March 31, 2026 across 11 states contributed $109.8 million of the total increase.

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.

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The following table reflects the change in skilled nursing average daily revenue rates by payor source, excluding services that are not covered by the daily rate (1) :

Three Months Ended September 30,

Three Months Ended March 31,

Same Facility Transitioning Acquisitions Total

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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.

Our Medicare daily rates at Same Facilities and Transitioning Facilities increased by 5.6% and 6.3%, respectively, compared to the three months ended September 30, 2024.

Our Medicare daily rates at Same Facilities and Transitioning Facilities increased by 4.4% and 4.7%, respectively, compared to the three months ended March 31, 2025.

The increase is attributable to the 3.2% net market basket increase that became effective in October 2025 as well as a shift toward higher acuity patients.

As hospitals continue to discharge individuals with more complex medical conditions to skilled nursing facilities, we are experiencing a greater proportion of higher acuity patients, which necessitates more advanced and specialized care.

Our average Medicaid rates increased 5.4% due to state reimbursement increases, our participation in Medicaid supplemental payment and quality improvement programs in various states.

Our average Medicaid rates increased 5.2%, compared to the three months ended March 31, 2025, due to state reimbursement increases and our participation in Medicaid supplemental payment and quality improvement programs in various states.

Payor Sources as a Percentage of Skilled Nursing Services.

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The following tables set forth our percentage of skilled nursing patient revenue and days by payor source:

Three Months Ended September 30,

Three Months Ended March 31,

Same Facility Transitioning Acquisitions Total

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100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %

Three Months Ended September 30,

Three Months Ended March 31,

Same Facility Transitioning Acquisitions Total

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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):

Three Months Ended September 30, Change

Three Months Ended March 31, Change

2026 2025 $ %

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Revenue percentage 79.1 % 79.4 % (0.3) %

Cost of services for our skilled services segment increased by $165.8 million, or 20.1% compared to the same period in 2024.

As a percentage of revenue, cost of services rose slightly to 79.9% from 79.8%.

This increase was primarily driven by higher operational expense associated with recent acquisitions and insurance expense.

Historically, 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.

Cost of services related to our skilled services segment increased by $160.9 million, or 18.0%, from the same period in 2025.

Cost of services as a percentage of revenue decreased by 0.3% to 79.1% reflecting continued cost management, a shift towards higher acuity as we serve more clinically complex patients, and improving operational performance at our newer acquisitions.

In addition, 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.

Standard Bearer

Three Months Ended September 30, Change

Three Months Ended March 31, Change

2026 2025 $ %

8 unchanged sentences

$ 21,592 $ 17,059 $ 4,533 26.6 %

Rental revenue — Our rental revenue, including revenue generated from our independent subsidiaries, increased by $8.2 million, or 33.5%, to $32.6 million, compared to the three months ended September 30, 2024.

The increase in revenue is primarily attributable to 26 real estate purchases, as well as annual rent increases since the three months ended September 30, 2024.

FFO — Our FFO increased by $4.6 million, or 31.0%, to $19.3 million, compared to the three months ended September 30, 2024.

The increase in rental revenue of $8.2 million was partially offset by increases in interest expense of $3.6 million associated with the agreements between Standard Bearer and us as we continue to grow our real estate portfolio.

Rental revenue — Our rental revenue, including revenue generated from our independent subsidiaries, increased by $7.7 million, or 27.1%, to $36.1 million, compared to the three months ended March 31, 2025.

The increase in revenue is primarily attributable to 19 real estate purchases, as well as annual rent increases since the three months ended March 31, 2025.

FFO — Our FFO increased by $4.5 million, or 26.6%, to $21.6 million, compared to the three months ended March 31, 2025.

The increase in rental revenue of $7.7 million was offset by increases in interest expense of $2.7 million associated with the debt agreements between Standard Bearer and us as Standard Bearer continues to grow its real estate portfolio.

All Other Revenue

Our other revenue increased by $9.4 million, or 18.4%, to $60.6 million, compared to the three months ended September 30, 2024.

Our other revenue increased by $9.8 million, or 18.8%, to $62.3 million, compared to the three months ended March 31, 2025.

Other revenue includes senior living revenue of $30.6 million, revenue from other ancillary services of $28.5 million and rental income of $3.2 million.

The increase in other revenue is primarily attributable to the increase in occupancy in our senior living operations and growth in our other ancillary services.

The increase in other revenue is primarily attributable to the growth in our other ancillary services.

Consolidated Financial Expenses

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General and administrative expense — General and administrative expense increased $11.7 million or 18.6%, to $74.2 million.

This increase was primarily driven by additional headcount due to acquisition activities and increases in wages and benefits due to enhanced performance and growth.

This increase was primarily driven by additional headcount due to acquisition activities, increases in wages and benefits due to enhanced performance and growth and costs incurred related to our system implementation.

General and administrative expense as a percentage of revenue remained consistent at 5.3%.

Depreciation and amortization — Depreciation and amortization expense increased $4.6 million, or 19.1%, to $28.8 million.

This increase was primarily related to the additional depreciation and amortization incurred as a result of our newly acquired operations, which have a greater mix of real estate purchases than leases, and capital expenditure investments.

Depreciation and amortization increased 0.2%, to 2.1%, as a percentage of revenue.

Other income, net — Other income, net as a percentage of revenue decreased by 0.1%.

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 $1.0 million due to a $2.4 million realized gain on other investments not core to our business operations offset by a decrease in interest income of $1.4 million as we utilized our cash on hand to fund more real estate purchases during the period.

Provision for income taxes — Our effective tax rate was 21.3% for the three months ended September 30, 2025, compared to 20.4% for the same period in 2024.

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 13, Income Taxes , in the Notes to the Interim Financial Statements for further discussion.

Nine Months Ended September 30, 2025 Compared to the Nine Months Ended September 30, 2024

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.

Nine Months Ended September 30, 2025

Skilled Services Standard Bearer All Other Eliminations Consolidated

Total revenue $ 3,536,226 $ 92,479 $ 170,336 $ (101,826) $ 3,697,215

Total expenses, including other income, net

3,089,165 65,148 318,117 (101,826) 3,370,604

Segment income (loss) 447,061 27,331 (147,781) — 326,611

Loss on long-lived assets

Income before provision for income taxes $ 325,538

Nine Months Ended September 30, 2024

Skilled Services Standard Bearer All Other Eliminations Consolidated

Total revenue $ 2,994,000 $ 69,984 $ 141,055 $ (76,806) $ 3,128,233

Total expenses, including other income, net

2,616,517 48,092 257,759 (76,806) 2,845,562

Segment income (loss) 377,483 21,892 (116,704) — 282,671

Loss on long-lived assets

Income before provision for income taxes $ 280,336

Our total revenue increased by $569.0 million, or 18.2%, compared to the nine months ended September 30, 2024.

The increase in revenue was primarily driven by an increase in occupancy of 2.4% and 4.5% from our skilled services in Same Facilities and Transitioning Facilities, respectively, coupled with increasing daily revenue rates.

In addition, our Recently Acquired Facilities revenue increased by $341.7 million, when compared to the same period in 2024, primarily as a result of acquisitions from October 1, 2024 through September 30, 2025.

Skilled Services Segment

The following tables present the skilled services revenue and key performance metrics by category during the nine months ended September 30, 2025 and 2024:

Nine Months Ended September 30,

2025 2024 Change % Change

TOTAL FACILITY RESULTS:

(Dollars in thousands)

Skilled services revenue $ 3,536,226 2,994,000 $ 542,226 18.1 %

Number of facilities at period end 314 282 32 11.3 %

Number of campuses at period end (1)

31 29 2 6.9 %

Actual patient days 7,925,688 6,962,308 963,380 13.8 %

Occupancy percentage — Operational beds 81.8 % 80.4 % 1.4 % 1.7 %

Skilled mix by nursing days 30.8 % 30.2 % 0.6 % 2.0 %

Skilled mix by nursing revenue 49.4 % 48.8 % 0.6 % 1.2 %

Nine Months Ended September 30,

2025 2024 Change % Change

SAME FACILITY RESULTS:

(Dollars in thousands)

Skilled services revenue

$ 2,539,758 $ 2,391,099 $ 148,659 6.2 %

Number of facilities at period end 210 210 — — %

Number of campuses at period end (1)

Actual patient days 5,641,877 5,516,552 125,325 2.3 %

Occupancy percentage — Operational beds 82.6 % 80.7 % 1.9 % 2.4 %

Skilled mix by nursing days 32.4 % 31.2 % 1.2 % 3.8 %

Skilled mix by nursing revenue 51.3 % 49.5 % 1.8 % 3.6 %

Nine Months Ended September 30,

2025 2024 Change % Change

TRANSITIONING FACILITY RESULTS:

(Dollars in thousands)

Skilled services revenue

$ 565,354 $ 512,950 $ 52,404 10.2 %

Number of facilities at period end 48 48 — — %

Number of campuses at period end (1)

Actual patient days 1,270,693 1,221,348 49,345 4.0 %

Occupancy percentage — Operational beds 84.0 % 80.4 % 3.6 % 4.5 %

Skilled mix by nursing days 29.7 % 27.8 % 1.9 % 6.8 %

Skilled mix by nursing revenue 50.9 % 48.9 % 2.0 % 4.1 %

Nine Months Ended September 30,

2025 2024 Change % Change

RECENTLY ACQUIRED FACILITY RESULTS:

(Dollars in thousands)

Skilled services revenue

$ 431,114 $ 89,377 $ 341,737 NM

Number of facilities at period end 56 24 32 NM

Number of campuses at period end (1)

Actual patient days 1,013,118 222,326 790,792 NM

Occupancy percentage — Operational beds 75.7 % 73.3 % NM NM

Skilled mix by nursing days 23.0 % 18.2 % NM NM

Skilled mix by nursing revenue 36.5 % 29.7 % NM NM

(1) Campus represents a facility that offers both skilled nursing and senior living services.

Revenue and expenses related to skilled nursing and senior living services have been allocated and recorded in the respective operating segment.

(2) Same Facility results represent all facilities purchased prior to January 1, 2022.

(3) Transitioning Facility results represent all facilities purchased from January 1, 2022 to December 31, 2023.

(4) Recently Acquired Facility (Acquisitions) results represent all facilities purchased on or subsequent to January 1, 2024.

(5) Skilled services revenue and key performance metrics for a closed facility was not material and has been excluded from Same Facilities results during the nine months ended September 30, 2024.

The facility was closed in 2024 as the program was transitioned from an intermediate care facility to a group home setting.

Skilled services revenue increased $542.2 million, or 18.1%, compared to the nine months ended September 30, 2024.

The increases in skilled services revenue were across all payer types, including increases in Medicaid revenue of $243.8 million, or 17.4%, and managed care revenue of $113.0 million, or 19.4%.

The increase in skilled services revenue was primarily driven by strong occupancy and skilled mix performance across our skilled services operations.

Our consolidated occupancy increased by 1.7% to 81.8% during the nine months ended September 30, 2025 compared to the same period in 2024 across all payors, with an increase in skilled days from our operations within Same Facilities and Transitioning Facilities.

Revenue in our Same Facilities increased $148.7 million, or 6.2%, compared to the nine months ended September 30, 2024, due to increased occupancy, strong skilled days and revenue per patient day.

Our continuous efforts to strengthen our partnerships with various managed care organizations, hospitals and local communities, increased our managed care revenue by 9.8%, resulting from an increase in managed care days and revenue per patient day.

We continued to grow our Medicare patient population in addition to capturing market share in the increases in Medicare Advantage enrollments of the overall Medicare eligible population.

Our Medicare revenue increased by 3.6% due to an increase in Medicare days and revenue per day.

In addition, our other skilled revenue has continued to increase as we support the needs of the local communities through the expansion of the Veterans Affairs programs.

Revenue in our Transitioning Facilities increased $52.4 million, or 10.2%, compared to the nine months ended September 30, 2024, due to improved occupancy growth, increases in skilled mix days and revenue per patient day.

The increases in revenue were derived from managed care revenue of 21.9%, Medicare revenue of 3.6%, Medicaid revenue of 8.3% and private revenue of 27.8%.

The increases are a result of an increase in patient days across all payer types, which reflect our operational fundamentals as we continue to transition and integrate these facilities.

Revenue in our Recently Acquired Facilities increased $341.7 million, compared to the nine months ended September 30, 2024.

The 34 operational expansions between October 1, 2024 and September 30, 2025 across 12 states contributed $213.0 million of the total increase.

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.

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.

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) :

Nine Months Ended September 30,

Same Facility Transitioning Acquisitions Total

2025 2024 2025 2024 2025 2024 2025 2024

SKILLED NURSING AVERAGE DAILY REVENUE RATES

Medicare $ 786.85 $ 747.58 $ 856.42 $ 817.25 $ 703.85 $ 626.48 $ 791.47 $ 759.90

Managed care 575.83 550.62 604.73 562.97 542.99 464.39 576.91 550.73

Other skilled 652.78 622.67 601.73 539.78 699.83 676.49 650.77 613.37

Total skilled revenue 664.57 634.06 722.63 687.76 638.95 565.98 671.14 641.47

Medicaid 304.21 295.85 291.76 276.00 329.49 300.15 305.55 292.35

Private and other payors 295.80 279.88 313.36 287.13 344.46 285.54 306.74 281.39

Total skilled nursing revenue

$ 420.23 $ 399.71 $ 421.69 $ 391.80 $ 402.80 $ 346.21 $ 418.26 $ 396.61

Our Medicare daily rates at Same Facilities and Transitioning Facilities increased by 5.3% and 4.8%, respectively, compared to the nine months ended September 30, 2024.

The increases are attributable to the 4.2% net market basket increase that became effective in October 2024 as well as a shift toward higher acuity patients.

Our average Medicaid rates increased 4.5% due to state reimbursement increases, our participation in Medicaid supplemental payment and quality improvement programs in various states.

Payor Sources as a Percentage of Skilled Nursing Services — We use our skilled mix as a measure of the quality of reimbursements we receive at our independent skilled nursing facilities over various periods.

The following tables set forth our percentage of skilled nursing patient revenue and days by payor source:

Nine Months Ended September 30,

Same Facility Transitioning Acquisitions Total

2025 2024 2025 2024 2025 2024 2025 2024

PERCENTAGE OF SKILLED NURSING REVENUE

Medicare 21.4 % 20.9 % 28.4 % 29.2 % 17.0 % 13.8 % 22.0 % 22.1 %

Managed care 20.5 19.9 16.4 14.7 12.4 10.3 18.8 18.7

Other skilled 9.4 8.7 6.1 5.0 7.1 5.6 8.6 8.0

Skilled mix 51.3 % 49.5 % 50.9 % 48.9 % 36.5 % 29.7 % 49.4 % 48.8 %

Private and other payors 6.9 7.3 6.7 7.6 12.0 13.1 7.5 7.5

Medicaid 41.8 43.2 42.4 43.5 51.5 57.2 43.1 43.7

TOTAL SKILLED NURSING 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %

Nine Months Ended September 30,

Same Facility Transitioning Acquisitions Total

2025 2024 2025 2024 2025 2024 2025 2024

PERCENTAGE OF SKILLED NURSING DAYS

Medicare 11.4 % 11.2 % 14.0 % 14.0 % 9.7 % 7.7 % 11.6 % 11.6 %

Managed care 14.9 14.4 11.4 10.2 9.2 7.7 13.6 13.5

Other skilled 6.1 5.6 4.3 3.6 4.1 2.8 5.6 5.1

Skilled mix 32.4 % 31.2 % 29.7 % 27.8 % 23.0 % 18.2 % 30.8 % 30.2 %

Private and other payors 9.9 10.4 9.0 10.4 14.1 15.8 10.2 10.6

Medicaid 57.7 58.4 61.3 61.8 62.9 66.0 59.0 59.2

TOTAL SKILLED NURSING 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %

Cost of Services

The following table sets forth total cost of services for our skilled services segment for the periods indicated (dollars in thousands):

Nine Months Ended September 30, Change

2025 2024 $ %

Cost of service $ 2,814,637 $ 2,383,742 $ 430,895 18.1 %

Revenue percentage 79.6 % 79.6 % — %

Cost of services related to our skilled services segment increased by $430.9 million, or 18.1%, from the same period in 2024.

Cost of services as a percentage of revenue remained consistent at 79.6% as we continued to see stabilization in the labor markets.

In addition, 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.

Standard Bearer

Nine Months Ended September 30, Change

2025 2024 $ %

(Dollars in thousands)

Rental revenue generated from third-party tenants $ 14,185 $ 12,588 $ 1,597 12.7 %

Rental revenue generated from Ensign's independent subsidiaries

78,294 57,396 20,898 36.4

TOTAL RENTAL REVENUE $ 92,479 $ 69,984 $ 22,495 32.1 %

Segment income 27,331 21,892 5,439 24.8

Depreciation and amortization 27,450 21,479 5,971 27.8

FFO $ 54,781 $ 43,371 $ 11,410 26.3 %

Rental revenue — Our rental revenue, including revenue generated from our independent subsidiaries, increased by $22.5 million, or 32.1%, to $92.5 million, compared to the nine months ended September 30, 2024.

The increase in revenue is primarily attributable to 26 real estate purchases as well as annual rent increases since the nine months ended September 30, 2024.

FFO — Our FFO increased by $11.4 million, or 26.3%, to $54.8 million, compared to the nine months ended September 30, 2024.

The increase in rental revenue of $22.5 million is offset by increases in interest expense of $10.3 million associated with the debt arrangements between Standard Bearer and us as Standard Bearer continues to grow its real estate portfolio.

All Other Revenue

Our other revenue increased by $29.3 million, or 20.8%, to $170.3 million, compared to the nine months ended September 30, 2024.

Other revenue for the nine months ended September 30, 2025 includes senior living revenue of $81.5 million, revenue from other ancillary services of $79.4 million and rental income of $9.4 million.

The increase in other revenue is primarily attributable to our senior living and other ancillary services.

Consolidated Financial Expenses

Rent-cost of services — Our rent-cost of services as a percentage of revenue decreased by 0.3% to 4.8%, as the expansions in our footprint have resulted from more real estate purchases than leased properties.

General and administrative expense — General and administrative expense increased by $29.5 million or 17.4%, to $199.0 million.

This increase was primarily driven by additional headcount due to acquisition activities and increases in wages and benefits due to enhanced performance and growth.

General and administrative expense as a percentage of revenue remained consistent at 5.4%.

Depreciation and amortization — Depreciation and amortization expense increased by $15.0 million, or 24.3%, to $76.6 million.

Depreciation and amortization increased 0.1%, to 2.0%, as a percentage of revenue.

Other income, net — Other income, net as a percentage of revenue decreased by 0.1%.

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 $1.2 million due to a $2.4 million realized gain on other investments not core to our business operations and a $1.2 million gain on our deferred compensation plan offset by a decrease in interest income of $2.9 million as we utilized our cash on hand to fund more real estate purchases during the period.

This increase was primarily related to the additional depreciation incurred as a result of our newly acquired operations, which have a greater mix of real estate purchases than leases, and capital investments.

Depreciation and amortization expense remained consistent at 2.1%, as a percentage of revenue.

Other income, net — Other income, net primarily includes interest income from our investments, interest expense related to our debt and deferred compensation gains and losses.

Other income, net decreased by $1.5 million due primarily due to a $1.7 million loss on our deferred compensation plan and a decrease in interest income of $0.3 million as we utilized our cash on hand to fund more real estate purchases during the period coupled with a lower interest rate environment.

Changes in our deferred compensation plan are a result of gains or losses depending on market performance.

Provision for income taxes — Our effective tax rate was 23.6% for the nine months ended September 30, 2025, compared to 22.0% for the same period in 2024.

Other income, net as a percentage of revenue decreased by 0.1%.

Provision for income taxes — Our effective tax rate was 22.4% for the three months ended March 31, 2026, compared to 24.6% for the same period in 2025.

See Note 13, Income Taxes , in the Interim Financial Statements for further discussion.

See Note 12, Income Taxes , in the Notes to the Interim Financial Statements for further discussion.

Liquidity and Capital Resources

Our principal sources of liquidity have historically been derived from our cash flows from operations and long-term debt issuance secured by our real property and borrowings under our revolving Credit Facility (defined below).

Our liquidity as of September 30, 2025 is impacted by cash generated from strong operational performance offset by investments made for our operational expansions as well as capital expenditures to improve the quality of care at our existing operations.

Historically, we have primarily financed the majority of our acquisitions through mortgages on our properties, our Credit Facility and cash generated from operations.

Cash paid to fund acquisitions was $240.3 million for the nine months ended September 30, 2025 compared to $87.2 million for the nine months ended September 30, 2024.

Total capital expenditures for property and equipment were $143.7 million and $110.1 million for the nine months ended September 30, 2025 and 2024, respectively.

Our principal sources of liquidity have historically been derived from our cash flows from operations, long-term debt secured by our real property and borrowings under our Credit Facility (defined below).

Our liquidity as of March 31, 2026 is impacted by cash generated from strong operational performance offset by our real estate acquisitions, as well as capital expenditures to improve the quality of care at our existing operations.

Historically, we have primarily financed the majority of our acquisitions through cash generated from operations, mortgages on our properties and our Credit Facility.

Cash paid to fund acquisitions was $28.7 million for the three months ended March 31, 2026 compared to $194.2 million for the three months ended March 31, 2025.

Total capital expenditures for property and equipment were $35.5 million and $42.9 million for the three months ended March 31, 2026 and 2025, respectively.

We currently have approximately $175.0 million budgeted for renovation projects in 2026.

We believe our current cash balances, our cash flow from operations and the amounts available for borrowing under our Credit Facility will be sufficient to cover our operating needs for at least the next 12 months.

As further discussed in Recent Activities , during the three months ended March 31, 2026, we entered into definitive agreements to acquire real estate assets associated with 19 operations subsequent to March 31, 2026, subject to customary closing conditions, for an aggregate purchase price of approximately $342.4 million.

Our cash and cash equivalents of approximately $539.5 million as of March 31, 2026 consisted of bank deposits and money market funds.

In addition, as of March 31, 2026, we held investments of approximately $250.0 million.

We believe our investments that were in an unrealized loss position as of March 31, 2026 do not require an allowance for expected credit losses, nor has any event occurred subsequent to that date that would indicate so.

We may, in the future, seek to raise additional capital to fund growth, capital renovations, operations and other business activities, but such additional capital may not be available on acceptable terms, on a timely basis, or at all.

Our cash and cash equivalents of approximately $443.7 million as of September 30, 2025 consisted of bank deposits and money market funds.

In addition, as of September 30, 2025, we held investments of approximately $231.8 million.

We believe our investments that were in an unrealized loss position as of September 30, 2025 do not require an allowance for expected credit losses, nor has any event occurred subsequent to that date that would indicate so.

Our primary source of cash is from our ongoing operations.

Our positive cash flows have supported our business and have allowed us to pay regular dividends to our stockholders.

We currently anticipate that existing cash and total investments as of September 30, 2025, along with projected operating cash flows and available financing, will support our normal business operations for the foreseeable future.

We currently anticipate that existing cash and total investments as of March 31, 2026, along with projected operating cash flows and available financing, will support our normal business operations for the foreseeable future.

Share Repurchases

During the second quarter of 2025, we did not repurchase any shares pursuant to this stock repurchase program.

On February 21, 2025, the Board of Directors approved a stock repurchase program pursuant to which we were authorized to 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 first quarter of 2025, we repurchased 84 shares of our common stock for $10.8 million.

During the second quarter of 2025, we repurchased 73 shares of our common stock for $9.2 million.

This repurchase program expired upon the repurchase of the fully authorized amount under the plan and is no longer in effect.

During the three months ended March 31, 2026, we did not repurchase any shares pursuant to this stock repurchase program.

As of March 31, 2026, the full $20.0 million authorized for repurchase remained available under the stock repurchase program.

Under our repurchase program, we are authorized to repurchase our issued and outstanding common shares from time to time in open-market and privately negotiated transactions, tender offers, pursuant to contractual provisions, and block trades, or otherwise in accordance with federal securities laws.

The stock repurchase programs do not obligate us to acquire any specific number of shares.

The stock repurchase program does not obligate us to acquire any specific number of shares.

Any such repurchases will depend on our business strategy, prevailing market conditions, our liquidity requirements, contractual restrictions or covenants, compliance with securities laws, and other factors.

1 unchanged sentence

The following table presents selected data from our condensed consolidated statement of cash flows for the periods presented:

Nine Months Ended September 30,

Three Months Ended March 31,

NET CASH PROVIDED BY (USED IN):

3 unchanged sentences

Financing activities 6,650 (10,348)

Net (decrease)/increase in cash and cash equivalents $ (20,930) $ 22,440

Net increase (decrease) in cash and cash equivalents $ 35,617 $ (181,932)

Cash and cash equivalents beginning of period 503,881 464,598

2 unchanged sentences

Cash provided by operating activities is net income adjusted for certain non-cash items and changes in operating assets and liabilities.

The $134.2 million increase in cash provided by operating activities for the nine months ended September 30, 2025 compared to the same period in 2024 w as due to an increase in operational performance and timing of payments and accounts receivable collections.

The $27.9 million increase in cash provided by operating activities for the three months ended March 31, 2026 compared to the same period in 2025 w as due to an increase in operational performance offset by timing of payments.

Investing Activities

Investing cash flows consist primarily of capital expenditures, investment activities, insurance proceeds and cash used for acquisitions.

The $165.8 million increase in cash used in investing activities for the nine months ended September 30, 2025 compared to the same period in 2024 was primarily used for acquisitions and capital expenditures.

The $172.6 million decrease in cash used in investing activities for the three months ended March 31, 2026 compared to the same period in 2025 was primarily attributable to fewer acquisitions and reduced capital expenditures, partially offset by maturities of our investments.

Financing Activities

Financing cash flows consist primarily of cash provided by the issuance of common stock upon exercise of stock options, payment of dividends to stockholders, issuance and repayment of short-term and long-term debt and payment for share repurchases.

The $11.8 million increase in cash used by financing activities for the nine months ended September 30, 2025 compared to the same period in 2024, was primarily due to $20.0 million of share repurchases in 2025 as part of our stock repurchase program offset by an increase in cash provided by the issuance of stock options.

The $17.0 million increase in cash provided by financing activities for the three months ended March 31, 2026 compared to the same period in 2025, was primarily attributable to increased cash proceeds from the exercise of stock options in 2026 and share repurchase activity in 2025 under our stock repurchase program that did not recur in 2026.

Credit Facility with a Lending Consortium Arranged by Truist

5 unchanged sentences

Mortgage Loans and Promissory Note

As of September 30, 2025, 23 of our subsidiaries had mortgage loans insured with HUD for an aggregate amount of $144.3 million, which subjects these subsidiaries to HUD oversight and periodic inspections.

As of March 31, 2026, 23 of our subsidiaries had mortgage loans insured with HUD for an aggregate amount of $142.6 million, which subjects these subsidiaries to HUD oversight and periodic inspections.

The mortgage loans bear effective interest rates at a range of 3.1% to 4.2%, including fixed interest rates at a range of 2.4% to 3.3% per annum.

6 unchanged sentences

The note, which was used for an acquisition, is secured by the real property comprising the facility and the rent, issues and profits thereof, as well as all personal property used in the operation of the facility.

While the mortgage loans and promissory note requires ongoing principal and interest payments over their respective terms, we currently expect these obligations to be satisfied through cash from ongoing operations.

Operating Leases

As of September 30, 2025, 249 of our facilities have long-term lease arrangements, of which 104 of the operations are under eight triple-net Master Leases with CareTrust.

As of March 31, 2026, 254 of our facilities have long-term lease arrangements, of which 104 of the operations are under eight triple-net Master Leases with CareTrust.

The Master Leases consist of multiple leases, each with its own pool of properties, that have varying maturities and diversity in property geography.

3 unchanged sentences

If we elect to renew the term of a Master Lease, the renewal will be effective as to all, but not less than all, of the leased property then subject to the Master Lease.

We also lease certain facilities and our administrative offices under non-cancelable operating leases, most of which have initial lease terms ranging from five to 20 years and are subject to annual escalation equal to the percentage change in the Consumer Price Index with a stated cap percentage.

We also lease certain facilities under non-cancelable operating leases, most of which have initial lease terms ranging from 15 to 20 years and are subject to annual escalation equal to the percentage change in the Consumer Price Index with a stated cap percentage.

In addition, we lease certain of our equipment under non-cancelable operating leases with initial terms ranging from three to five years.

14 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis