The Pennant Group (NASDAQ: PNTG) has a number of hospice and home health transactions in its pipeline as the company steps away from senior living acquisitions due to pandemic headwinds. While pursuing these deals, Pennant has seen substantial growth in its hospice and home health segment.
Pennant in February increased its revolving line of credit by $75 million to a total $150 million this week, pledging to apply those resources to buying new operations.
“We are excited about the prospects in our home health and hospice deal pipeline, and our ability to continue growing through the acquisition of strategic and underperforming agencies,” Derek Bunker, Pennant’s Chief Investment Officer, said in an earnings call. “Overall, we’re positioned to do very well and to continue our acquisition strategy.”
Pennant, which owns and operates hospice provider Cornerstone Healthcare, was spun off in 2019 from The Ensign Group (NASDAQ: ENSG). Pennant retained Ensign’s hospice, home health and senior living operations.
Pennant operates 65 home health and hospice agencies, 51 senior living operations, and mobile diagnostics and lab operations located across 14 states, with 23 of the senior living assets subject to leases with third-party landlords, as well as mobile diagnostic services and clinical laboratory operations. Pennant also manages 28 senior living communities pursuant to new, long-term triple-net leases with Ensign subsidiaries.
Pennant completed several transactions during the second half of 2020. Last October brought the acquisition of Harmony Hospice in Las Vegas, which had been affiliated with two other hospices that Pennant had purchased: Prime Hospice, located near Phoenix, and Harmony Hospice of Arizona. Financial terms of these deals were undisclosed.
In July, Pennant also acquired hospice and home health assets of Signature Health Care at Home for an undisclosed sum, each with multiple locations throughout southeastern Idaho and northern Utah. Pennant also completed a number of home health acquisitions.
The company last November announced the launch of two start-ups, one in Washington state and one in California.
“Many of these strategic deals provide new platforms to serve additional patients in markets in which we already operate, while a few represent market entry into new but adjacent markets,” Bunker said.
The company’s home health and hospice revenue hit $74.6 million in Q1 2021, up 31.4% from the prior year’s quarter. This was in part driven by a sizable boost in average daily census and total hospice admissions.
Pennant’s hospice census rose to 2,308 during the first quarter, up 23.4% from Q1 2020. Hospice admissions saw a 28.5% increase from Q1 of last year, reaching 2,154 patients.
Like many other providers the company’s average length of stay saw a decline due to a shifting referral mix. Due to the pandemic, hospices have received fewer referrals from skilled nursing, assisted living and other facilities. These patients tend to be in hospice longer than those that come in from other referral sources, such as physician offices. Pennant’s average length of stay took an 8% dip during Q1.
“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,” CEO Daniel Walker said. “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.”