Pennant Posts Record Home Health Numbers, Hits Pause on Senior Living Dealmaking

Despite staffing pressures, increased expenditures and other challenges tied to the COVID-19 pandemic, The Pennant Group Inc. (Nasdaq: PNTG) reported a record first quarter for its home health and hospice segment in 2021.

The Eagle, Idaho-based home health, hospice and senior living operator expects more growth for the segment over the rest of the year, too, thanks to rising demand for home-based care and the nation’s continued efforts to end the public health emergency.

“We’re excited to report a record quarter for our home health and hospice segment, as our local leaders continue to produce excellent results across the board,” Pennant CEO Daniel Walker said Friday during the company’s Q1 earnings call. “The extraordinary financial and clinical development throughout the segment is further evidence that our unique operating model provides the toolkit for leaders to drive significant long-term value.”

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Originally part of The Ensign Group (Nasdaq: ENSG), one of the few skilled nursing operators to be largely immune from COVID-era pressures, Pennant became its own publicly traded company in October 2019.

Similar to how Ensign runs its organization, Pennant is the holding company of various independent operating subsidiaries across 14 states. Today, the overall Pennant network provides home health and hospice services across 85 agencies, with 54 senior living communities also in the mix.

The home health and hospice segment has thrived amid challenges, but the senior living business hasn’t been as shielded from the pandemic, according to Walker.

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“In our senior living segment, the first quarter of 2021 marked perhaps the most challenging period of our history,” he said. “As we described during our last earnings call, we experienced relative stability in our segment occupancy in September and October of 2020. However, from November to February, our occupancy declined at an accelerated rate due to the rapid rise of COVID, which peaked in mid-January in many of our key markets and severely depressed our operating results.”

Pennant’s total revenue for the quarter was $105.7 million, a 15% increase compared to $91.8 million in Q1 2020. Home health and hospice segment revenue was $74.6 million, a more than 31% increase compared to $56.8 million during the same period a year ago.

Home health and hospice admissions in the first quarter were up 48% and 36%, respectively, compared to Q1 2020.

Since spinning off from Ensign two years ago, Pennant has been an active acquirer of both home health and hospice assets. The company acquired Pasco Southwest Home Health in April, for example, later buying parts of Cardiovascular Home Care in May.

Yet much of Pennant’s home health and hospice growth in early 2021 came from locations already under its umbrella, according to the company.

“While we continued to acquire both home health and hospice agencies over the prior 12 months, it is noteworthy that much of this growth occurred in agencies acquired prior to 2020, thanks to the locally tailored, quality care provided by our local operational and clinical leaders,” Walker said.

Pennant expects to get more deals done in coming months. The company specifically plans to look for strategic home health and hospice deals that provide new platforms to serve additional patients in markets in which it already operates.

It has not — and does not expect to — allocate any capital for acquisitions in the senior living space in the near term.

“Overall, we’re positioned to do very well as we continue our acquisition strategy,” Derek Bunker, Pennant’s chief investment officer, said on Friday’s call. “And we’re excited for the growth opportunities for the rest of 2021 and beyond.”

Apart from M&A activity, Pennant will also have millions of dollars to pay back to the U.S. Centers for Medicare & Medicaid Services (CMS) as it moves further into 2021. Like most home health providers, the company used CMS’s advance and accelerated payments to mitigate some of COVID-19’s financial impact.

Pennant received $28 million in CMS loans, according to the company. Recoupment began in April, with Pennant already paying back $1.4 million.