As The Pennant Group (NASDAQ: PNTG) searches out more hospice and home health assets, the company is focusing heavily on developing its next generation of leaders.
Pennant has its sights on multiple potential transactions across its hospice, home health and senior living business lines. The company targets sellers largely based on “long-term upside value” and the availability of qualified local executives who can take their new operations in hand, according to CEO Brent Guerisoli.
The Idaho-based provider announced yesterday that it has acquired the assets of Benefit Home Healthcare and Benefit By Your Side, a Colorado-based company that offers home health care, private duty, and community health services.
More such transactions are on the way this year.
“Our home health and hospice pipeline is ripe with opportunities we expect to execute on over the next few quarters …,” Pennant President John Gochnour said in an earnings call. “We will continue to invest consistently in home health and hospice through multiple avenues. These include traditional acquisitions, operational expansions, such as branch expansion, strategic partnerships and startup operations.”
The company’s acquisition strategy includes a focus on speedy integration. It stipulates that acquired operations must “meaningfully contribute to earnings” by the ninth quarter after closing, Guerisoli indicated.
Case in point, Arizona home health locations that Pennant purchased in 2021 saw year-over-year revenue increases of 48% within four quarters of sealing the deal. By the 9th quarter, those operations achieved a 135% boost in revenue and a 200% increase in earnings, Guerisoli said.
The Pennant Group, Inc. is a holding company of independent operating subsidiaries that provide health care services through 97 home health and hospice locations in 14 western and midwestern states.
The company earned $126 million in revenue during Q1, up 11% from $12.6 million in the prior year’s quarter. Its hospice business accounted for nearly $43.3 million, an increase from 37.8 million in Q1 2022.
Hospice admissions for the first quarter reached 2,451, a 1.7% bump year-over-year and a 9.1% increase sequentially. Hospice average daily census for the first quarter was 2,439, an increase of 9.3% compared to Q1 of last year.
“On the hospice side, you one run an important and exciting return to our historically robust growth trajectory,” Gochnour said. “We expect to see a continued ramp of growth in the home health and hospice segment throughout 2023.”
As it pursues growth in both existing and acquired agencies, Pennant is emphasizing leadership development for its local markets, which Guerisoli called his “top priority.”
Pennant is actively seeking executives who could eventually lead their operation in a particular market or geographic cluster. Within the next several years, the company plans to develop 100 local CEOs. To that end, it has implemented a revamped executive training program.
The company appointed seven local CEOs during Q1, bringing their total number to 29, as well as 10 other c-suite executives. Pennant has 11 more CEOs in training, and “many more in the pipeline,” Guerisoli said.
CEOs generate nearly $1 million in annual earnings, Guerisoli indicated in the earnings call.
“Leadership development continues to be our top priority — where I’m personally investing much of my time and attention — very diligently focused on finding, hiring and developing a robust pipeline of exceptional operational leaders that can optimize the many exciting growth opportunities that lay before us,” Guerisoli said. “To earn the title of CEO our leaders must not only achieve extraordinary clinical outcomes, culture and growth, but also drive significant financial improvement in their operations.”