The Pennant Group Acquires Valor HospiceCare

The Pennant Group, Inc. (NASDAQ: PNTG) has acquired Arizona-based Valor HospiceCare. Financial terms were undisclosed.

The Idaho-headquartered home health, hospice and senior living company has been building out its acquisition pipeline, executives indicated in earnings calls. Interest in hospice deals is rising as record-high valuations begin to come down, according to Pennant President and COO John Gochnour.

“We’re seeing more opportunities coming to market in the valuation zone that we feel comfortable pursuing in our disciplined acquisition strategy,” Gochnour said during a second-quarter earnings call. “Primarily, we’re seeing home health, but also hospice, multiples return to more normalized rates. Valuations in hospice are becoming more realistic.”

Multiples in the home health and hospice space reached a peak of 29 times EBITDA in 2020, outpacing the previous year’s record high of 26 times, reported the PwC Health Research Institute.

The Pennant Group, Inc. is a holding company of independent operating subsidiaries that provide health care services through 99 home health and hospice locations and 51 senior living communities in 14 western and midwestern states.

Net service revenue for Pennant’s home health and hospice segment reached $95 million in Q2, up 11.3% year-over-year.

The company’s most recent transaction was its June acquisition of Bluebird Home Health, Bluebird Hospice and Bluebird Home Care.

That transaction follows Pennant’s purchase of Benefit Home Healthcare and Benefit By Your Side, a Colorado-based company that offers home health care, private duty and community health services. Financial terms for both transactions were undisclosed.

Demographic tailwinds are driving increased demand for hospice and palliative care in Arizona. The state’s 1.3 million seniors represent 18.3% of its overall population, according to the U.S. Census Bureau. By 2050, nearly 2.5 million people in the state will be 65 and older, the Arizona Department of Health Services projected.

Nearly 48,470 Medicare decedents in Arizona elected the hospice benefit in 2021, according to the U.S. Centers for Medicare & Medicaid Services (CMS).

Further acquisitions are likely, according to Pennant CEO Brent Guerisoli

[For] some of that investment, it just takes time for that to pay off, but we’re also seeing that especially acutely on the home health and hospice side,” Guerisoli said in the q2 earnings call. “We strategically made a decision to invest in a number of additional market leaders and build those teams so that we can grow. And we can grow strategically from an acquisition and expansion standpoint”