Despite Wage Pressures, Pennant Continues Racking Up Home Health Wins

The Pennant Group (Nasdaq: PNTG) just achieved a record quarter.

“This was highlighted by a double digit year-over-year percentage increases in same store total home health admissions and hospice average daily census,” Pennant CEO Brent Guerisoli said during the company’s first-quarter earnings call Tuesday. “This same store growth exemplifies the meaningful potential that exists at our established operations as they mature and expand.”

Eagle, Idaho-based Pennant is a holding company of independent operating subsidiaries located across the U.S., with a network that includes 112 home health and hospice agencies and 53 senior living communities.

Guerisoli also revealed Pennant is still on the road to its goal of nurturing 100 local CEOs, as well as chief clinical officers and other C-suite level leaders.

“As a reminder, to earn the title of CEO our local leaders must not only achieve extraordinary clinical performance, culture and growth, but also drive significant financial improvement in their operations,” he said.

The company now has 44 CEOs and 42 COOs. Continuing to beef up this pipeline remains a key priority for the company.

During the call, Pennant’s leadership also opened up about the wage pressures the company has been experiencing.

“We continue to see some significant wage pressure, and I think you’re seeing that it’s translating to about a 5% increase in both service lines, in an overall wage inflation pressure,” John J. Gochnour, president and COO of Pennant, said during the call. “I think in the first quarter, we actually saw a little bit of a tick back in the wrong direction, which was disappointing. We continue to hope that we’ll see more and more normalization, back to wage inflation that sort of corresponds with the changes in reimbursement that we’re receiving. That’s not the case yet.”

However, Gochnour noted that Pennant has seen improvements in turnover, employee engagement scores and margins.

“You’re seeing improvement on the margin side, in part because we’re able to manage that labor [in a more effective manner], even in spite of inflation and the cost pressure that we’re experiencing,” he said.

More broadly, Guerisoli believes that Pennant has been able to evolve as a company.

“Since our spin-off and through the challenges of a global pandemic, we have matured as an organization, and added leaders across the company in our management team throughout the field and at the service center,” he said. “As a result, we have produced nine consecutive quarters of strong performance with earnings each quarter that exceeded the prior year period, and have experienced triple digit percentage growth and adjusted EBITDA. We have repeatedly and consistently done what we said we were going to do. While we are encouraged by the progress that we’ve made, we’re even more excited about the foundation that we’ve built and the future that lies ahead.”

In Q1, Pennant’s total revenue for the quarter was $156.9 million, a 24.1% increase compared to $126.4 million during the same period last year.

The home health and hospice services segment revenue for the first quarter was $116.5 million, compared to $91 million last year, a 27.9% increase over the prior year quarter.

“Roughly 50% of the year over year rise in segment revenue was same store growth, while the other 50% is attributable to the successful transition and improvement of new operations,” Gochnour said.