For The Pennant Group, Home Health Final Rule Is Far From The Be-All, End-All

The Pennant Group Inc. (Nasdaq: PNTG) leaders believe that they’re in the middle of a constantly changing home health market. They also believe it’s an environment the company can survive and thrive in based on its operating model.

“Our model enables us to adapt and respond to changing circumstances and market needs on a macro and local level,” Pennant CEO Brent Guerisoli said Wednesday during the company’s third-quarter earnings call. “It also allows us to be nimble and take advantage of unique opportunities, including payer relationships, preferred provider networks and localized reimbursement programs. In this dynamic environment, our local leaders, and clusters, use technology and transparent data reporting to accelerate their clinical and financial results.”

Eagle, Idaho-based Pennant is a holding company of independent operating subsidiaries located across the U.S., with a network that includes 99 home health and hospice agencies and 51 senior living communities.


At Pennant, M&A also remains top of mind. The company has been one of the more active buyers in home health and hospice over the past year. Acquiring community-driven home-based care agencies that have a strong presence in their individual markets — with an emphasis on local leadership — has been the company’s calling card.

During the call, Guerisoli described Pennant’s current M&A strategy as “disciplined.”

“[Our] acquisition strategy begins with answering the questions: first who, and then what,” he said. “Our relentless focus on recruiting and developing talented leaders has created a bench of prepared CEO-caliber leaders capable of stepping into transitions and driving immediate improvement through the principles of our operating model.”


Guerisoli is, of course, referring to the company’s goal of building a pipeline of 100 CEOs. Last month, Guerisoli told Home Health Care News that the company was a third of the way toward its stated goal.

Part of Pennant’s M&A strategy is also focused on growing in areas where the company already has existing leaders and operations in place.

Additionally, Pennant is looking for potential opportunities in the marketplace to meet the company’s valuation criteria.

“Over the last decade, we have seen that our disciplined approach to pricing has created unique opportunities for local leaders to generate solid financial returns,” Guerisoli said. “Today, we are seeing more potential acquisitions that are consistent with our valuation expectations. This existing strong alignment between able and eager local leaders, and compelling acquisitions and growth opportunities, will be a powerful catalyst for future growth under our model.”

Aside from breaking down Pennant’s M&A strategy, the company’s leaders also took the time to comment on the release of the 2024 home health final payment rule.

“Based on our initial modeling, we anticipated net point 1% positive impact across our episodes of care,” John Gochnour, president and COO of Pennant, said. “In delaying some of the behavioral adjustment cut originally proposed, CMS has acknowledged a financial headwind home health providers face due to the current inflationary environment. While the final rule leaves some level of uncertainty regarding future reimbursement, we will continue to work with CMS and policymakers to ensure that patients have access to high-quality, critically needed home health services.”

That said, Gochnour was quick to remind stakeholders that Medicare-certified home health is only a portion of Pennant’s overall business.

“Specifically, Medicare home health revenue comprises 17.2% of Pennant’s consolidated revenue, and 23.7% of our home health and hospice segment revenue,” he said. “Despite the flat Medicare home health rate update, our growth profile is promising.”

Pennant’s total revenue for the third quarter was $140.2 million, an 18.5% increase compared to $118.3 million during the same period last year.

The company’s home health and hospice services segment revenue for Q3 was $101.5 million, an 18.3% increase compared to $85.7 million last year.

“This improvement was driven by robust growth in our hospice business, where average daily census increased 17.7%,” Gochnour said. “Our home health business showed remarkable resiliency, and despite the negative impacts of last year’s rate adjustment, home health revenue grew to 51.1 million, a 12.7% increase and an admission growth of 6.7%, each over the prior year quarter.”

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