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The Pennant Group (Nasdaq: PNTG) is one of the largest home health providers in the country, and has also been one of the more acquisitive ones over the last year. Now, it’s moving eastward, in a move that could set the table for an aspirational future.
In June, the company announced a partnership with the Connecticut-based Hartford HealthCare at Home (HHCAH), the home health and hospice segment of Hartford HealthCare. Previously, the Idaho-based Pennant had not had any home health locations east of Wisconsin.
The deal with HHCAH is unique in its own right, too. It includes a management and consulting services agreement.
It’s also hard to oversell. In fact, some of Pennant’s “key leaders” are even moving out to Connecticut permanently, according to president and COO John Gochnour. The company is establishing an East Coast service center, which clears the way for further expansion in the region moving forward.
“When we think about going to a new market, we think about how we create a center of strength, a center where from that we can build and impact the communities that we’re going to serve,” Gochnour told Home Health Care News.
Pennant is the holding company of independent operating subsidiaries, including 115 home health and hospice locations and 54 senior living communities across a dozen states. In all likelihood, that state-count will increase in the coming years.
Pennant’s focus had generally been from Texas, all the way to the West, and then up the coast into the Pacific Northwest. Its footprint in Wisconsin was a bit of an outlier. But now, with a service center on the East Coast, that’s expected to change.
On its end, HHCAH is a nonprofit integrated health system that has more than 1,000 employees. Over the past 12 months prior to the agreement with Pennant, the health system had 33,000 home health admissions and 4,000 hospice admissions.
“There’s a cultural alignment [with HHCAH],” Gochnour said. “There’s an alignment around innovation and our belief in the future of home health care, and what we can do in home health and hospice to reduce rehospitalization rates, to affect clinical outcomes. And not just for the patients who are currently on service, but across the integrated health system and across the state. And that’s what I think resonated with them – the commitment that they saw from us on that.”
Gochnour believes its proof of concept elsewhere will work in Connecticut, particularly when it comes to driving efficiencies through technology.
“We have the resources focused and dedicated to the East Coast, they’re all going to be focused and dedicated on this venture in the foreseeable future,” he said. “We can foresee a time when it makes sense to grow further on the East Coast, because we have a service center developed out there, we have a group of people who are part of those communities and are excited to continue to make a deeper impact.”
Specifically, that service center has created a base of support for “New England operations,” according to Pennant.
That will provide financial support services to its home health locations, as well as human resources advising, information technology and other management consulting services.
“We just feel so strongly about this venture and feel so strongly about the opportunity to impact lives out there,” Gochnour said.
Bucking the trend
Over the last three years, home health M&A has been down significantly. That’s for a variety of reasons, but namely high interest rates and fee-for-service Medicare cuts.
But Pennant has been one of the more active players in M&A, particularly over the last year.
Even just year to date, the company acquired the Utah-based South Davis Home Health and South Davis Hospice, as well as the Texas-based Nurses on Wheels. It also established a joint venture with the San Francisco-based John Muir Health.
Just last week, it agreed to an $80 million purchase of certain Signature Healthcare at Home assets. Signature has a footprint in Washington, Oregon and Idaho. It has more than 650 home health and hospice staff members.
“This Signature deal has actually been five years in the making,” Gochnour said. “We purchased their assets in northern Utah and southeastern Idaho about five years ago. … It was just a really natural opportunity to expand our footprint with partners that we’ve known for a long time and have a lot of trust in. And it fits within our disciplined acquisition strategy.”
The deal also will allow Pennant to expand in Washington and Oregon, which are Certificate-of-Need (CON) states.
Over the last few years, Medicare Advantage (MA) penetration has hurt home health providers considerably. But it hasn’t with Pennant, which developed a sound MA strategy long before penetration became a significant issue.
And, all the while, the company has continued to grow through acquisition.
Its stock price has also steadily risen – from about $12 to $27 – over the last year.
Ultimately, it wasn’t set up to be a home health powerhouse when it spun off of the Ensign Group Inc. (Nasdaq: ENSG) in 2019. Now, it has all the makings of one.
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