Pennant Group Acquires First Call Hospice

The Pennant Group, Inc. (NASDAQ: PNTG) has purchased Sacramento, Calif.-based First Call Hospice. Pennant remains bullish on hospice and home health acquisitions, with a number of deals in its pipeline. The company in February increased its revolving line of credit by $75 million to a total $150 million, pledging to apply those resources to buying new operations.

Pennant, which owns and operates hospice provider Cornerstone Healthcare, was spun off in 2019 from The Ensign Group (NASDAQ: ENSG). Pennant retained Ensign’s hospice, home health and senior living operations.

“We are pleased to expand our presence in Northern California through this high quality off-market acquisition,” said Danny Walker, Pennant’s CEO. “First Call Hospice expands our ability to provide quality care in a strategic market and joins a growing cluster of successful agencies across the state,” he added.

Pennant operates 65 home health and hospice agencies, 51 senior living operations, and mobile diagnostics and lab operations located across 14 states, with 23 of the senior living assets subject to leases with third-party landlords, as well as mobile diagnostic services and clinical laboratory operations. Pennant also manages 28 senior living communities pursuant to new, long-term triple-net leases with Ensign subsidiaries.

Pennant completed several transactions during the second half of 2020. Last October brought the acquisition of Harmony Hospice in Las Vegas, which had been affiliated with two other hospices that Pennant had purchased: Prime Hospice, located near Phoenix, and Harmony Hospice of Arizona. Financial terms of these deals were undisclosed.

In July last year, Pennant also acquired hospice and home health assets of Signature Health Care at Home for an undisclosed sum, each with multiple locations throughout southeastern Idaho and northern Utah. Pennant also completed a number of home health acquisitions.

The company last November announced the launch of two start-ups, one in Washington state and one in California.

“We are excited about the prospects in our home health and hospice deal pipeline, and our ability to continue growing through the acquisition of strategic and underperforming agencies,” Derek Bunker, Pennant’s Chief Investment Officer, said in an earnings call. “Overall, we’re positioned to do very well and to continue our acquisition strategy.”

The company’s home health and hospice revenue hit $74.6 million in Q1 2021, up 31.4% from the prior year’s quarter. This was in part driven by a sizable boost in average daily census and total hospice admissions.

Pennant’s hospice census rose to 2,308 during the first quarter, up 23.4% from Q1 2020. Hospice admissions saw a 28.5% increase from Q1 of last year, reaching 2,154 patients.

Demographic tailwinds run strong in California. About 6 million California residents are currently older than 65, according to the Public Policy Institute of California. That is more than the entire population of Oregon, an adjacent state. By 2030, that number is expected to balloon to 9 million. By 2027, more than 20% of the state’s population will be Medicare eligible, representing a higher proportion of seniors than currently resides in Florida.

California ranked 36th in the nation in 2018 in terms of hospice utilization among Medicare Decedents at 46.1%, according to the National Hospice & Palliative Care Organization. The national average that year was 50.3%.

“For more than 25 years, First Call Hospice has provided compassionate care to patients and families throughout the Sacramento region,” said Pennant President Brent Guerisoli. “We welcome First Call’s dedicated team and look forward to building upon the agency’s legacy of clinical excellence and community involvement.”