The Pennant Group (NASDAQ: PNTG) expects emerging rebounds in skilled nursing and assisting living — and its pipeline of forthcoming acquisitions — to offset the impact of continuing labor headwinds.
The company reduced its guidance for calendar year 2022 in the wake of falling hospice lengths of stay, rising wages, the return of Medicare sequestration, and a slower rate of census growth than executives had anticipated.
“This quarter’s earnings didn’t fully reflect the progress we expected as we navigated continued wage pressures, full sequestration, and a softer hospice [average daily census],” Pennant CEO Brent Guerisoli said in a Q3 earnings call. “We’re seeing notable progress as measured by revenue, admissions, occupancy, and cashflow. We’re seeing strength build in many of our markets and clusters. We are on track to make significant improvement in the second half of 2022 and are positioned to produce strong results going into 2023.”
The average daily census for Pennant’s hospice segment for the third quarter was 2,293, up 0.4% sequentially. However, the numbers represent a 1.9% drop from the prior year’s quarter.
The company also saw the average length of stay for hospice patients fall by nine days in Q3.
The company fared better in terms of hospice admissions, reaching 2,392 in the third quarter, a 7.8% increase from the same period in 2021.
Guerisoli indicated that referral trends were looking up in early Q4, particularly among its hospital partners. Pennant is also starting to see occupancy rates improve among its skilled nursing and assisted living referral partners. The company expects both of these trends to have a positive impact on its hospice census going forward, according to Guerisoli.
In terms of individual markets, California has been a bright spot for Pennant. The company’s home health and hospice operations in that state saw a 31.7% spike in revenue in Q3 and EBITDA growth of 148%.
Pennant’s hospice census in California rose 35%, and home health admissions were up 11.2%.
These results come on the heels of its home health and hospice joint venture with Scripps Health, the acquisition of Sacramento-based First Call Hospice, and additional expansion in the Riverside and Palm Springs communities.
“During the quarter, we acquired the operations of Ardent Hospice and Palliative Care with locations in the Central Valley and Palm Springs, California, to our hospice portfolio,” COO John Gochnour said in the earnings call. “This is a highly strategic acquisition for us, as we build on strong proven leaders in our California market with deep partnerships throughout the state now drive these locations forward.”
All told, Pennant brought in $118.4 million in revenue during Q3, up 5.7% from the prior year’s quarter. Its home health and hospice segment accounted for $85.8 million, an 8.6% increase from Q3 2021.
Pennant expects acquisitions to remain an engine for growth in the coming year.
The company has been aggressive on acquisitions for the past two years but paused in early 2022 to integrate its most recently acquired assets and accumulate capital. But executives indicated that they would be back on the hunt during the second half of 2022 and into 2023.
“We’ve always been focused on some of these small-to-midsize providers and then taking advantage of larger opportunities when they presented themselves,” Gardner said. “As far as the pipeline, we’re excited about what we have. It’s pretty robust.”