Investor Essentials Daily

Profiting from the rising life expectancy

April 26, 2024

Life expectancy in the U.S. has steadily increased due to advancements in healthcare, nutrition, and lifestyle changes, leading to a rise in the median age of Americans. 

However, this poses challenges such as increased demand for long-term care services for the elderly. 

Ensign Group (ENSG), a major operator of nursing facilities, has capitalized on this demand by focusing on quality care and expanding its services to meet the needs of senior patients, leading to financial success and positioning itself well for the future.

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Life expectancy in the U.S. has seen a significant increase over the past century and continues to rise due to improvements in healthcare and access to better nutrition.

In 1990, life expectancy was 75.19 years but had risen to 79.25 years by 2024 – an increase of over 4 years in just three decades. This represents a dramatic shift from a century ago when life expectancy was only around 48 years.

Several factors have contributed to the rise in life expectancy.

Advances in medical technologies and treatments have allowed those with life-threatening illnesses to survive. For example, cardiovascular disease mortality rates have declined due to better prevention, diagnosis, and management of conditions like heart attacks and strokes.

Nutritional factors have also played a role, with access to more nutritious foods helping to reduce mortality from malnutrition and diet-related diseases like diabetes.

Lifestyle changes like reduced smoking rates have further boosted longevity.

This sustained increase in longevity has significant societal impacts. As the population ages, the average age of Americans has risen steadily over the past few decades.

In 1990, the median age was 32.9 years compared to 38.9 years in 2022. While living longer lives is undoubtedly positive, an aging population also brings new challenges.

One major issue is the growing need for long-term care services for the elderly. As life expectancy increases, so too does the number of people living with age-related disabilities or conditions like dementia that prevent independent living.

This has driven immense demand for nursing homes and assisted living facilities to care for those who can no longer care for themselves.

One of the largest operators capitalizing on the surging demand for nursing facilities is Ensign Group (ENSG).

Ensign owns and operates over 300 skilled nursing, post-acute care, and assisted living facilities across 13 western and midwestern states as of 2024.

Ensign has strategically grown its portfolio through both acquisitions and new facility openings to become a leading national provider of senior care services.

In the late 2000s, the company recognized the opportunity presented by America’s rapidly aging population and shifted its focus from standalone skilled nursing facilities to integrated care models.

This included expanding into related sectors like acute rehabilitation and memory care to offer a continuum of care to senior patients.

A core part of Ensign’s strategy has been an emphasis on clinical quality. The company has invested heavily in staff training programs, quality monitoring systems, and process improvements to achieve the best patient outcomes in the industry.

This focus on quality is reflected in Ensign’s star ratings – over 90% of its facilities now hold the top ratings of 4 or 5 stars from Medicare and Medicaid.

Ensign’s commitment to quality was especially evident during the COVID-19 pandemic, as its infection control policies helped it avoid the severe outbreaks experienced elsewhere.

Ensign’s transformation into a best-in-class clinical operator has paid off financially.

Over the past decade, the company has consistently grown its revenues at a mid-teens annual rate due to increases in patient volumes and reimbursement rates associated with its elevated quality ratings. Profits have also risen sharply during this period of transformation.

With its national scale, integrated care platform, and reputation for quality, Ensign appears well-positioned to continue capitalizing on America’s growing senior population and demand for long-term care services in the years ahead.

Best regards,

Joel Litman & Rob Spivey
Chief Investment Strategist &
Director of Research
at Valens Research

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