The UnitedHealth Group (NYSE: UNH), Amedisys acquisition, grabbed headlines throughout the year and set the stage for another major home-based care deal.
Last month, The Pennant Group Inc. (Nasdaq: PNTG) — which had long earned a reputation as a ubiquitous acquirer — completed its purchase of the home health and hospice agencies divested as part of the UnitedHealth, Amedisys deal.
This transaction also included some LHC Group assets that were previously sold to the UnitedHealth Group. In total, the deal amounted to $187 million worth of revenue across 54 reported locations, about 70% home health and about 30% hospice.
An attractive geography and strong existing operations and teams are just a few of the considerations that made this deal appealing to Pennant. John J. Gochnour, the company’s president and chief operating officer, described the acquisition as a “rare opportunity.”
“We would never have bought all of Amedisys,” he told Home Health Care News. “It would have been way too big for us, but we had this unique opportunity to purchase a solid group of assets that stretch geographically from the Tri Cities in north eastern Tennessee, all the way to Memphis and southwestern Tennessee, all the way down to Chattanooga in the southeastern corner.”
Eagle, Idaho-based Pennant is a holding company with independent operating subsidiaries that provide health care services. It operates 141 home health and hospice agencies and 61 senior living communities.
Over the years, positioning health care as a local business has become a driving force behind the company’s acquisition and operating strategy, part of which involves centering local leaders. Gochnour believes this latest acquisition aligns with the larger strategy.
“Our operating model is unique,” he said. “It’s focused on local ownership and empowering local leaders to make decisions. What that means is when we bring on new operations, we’ve got to have strong operations to implement our model and help transition those operations.”
Signature as an integration model
Pennant is currently integrating its newly acquired assets. The company is no stranger to this process. In fact, CEO Brent Guerisoli recently stated that Pennant’s integration of Signature Healthcare at Home, following the purchase of its assets, would serve as a model.
“The Signature acquisition was similar, in many respects, to this most recent deal,” Guerisoli said, earlier this month during the company’s Q3 earnings call. “Signature enjoyed a deserved reputation as a quality operator, and we saw that we could build on their legacy through the Pennant model. Signature’s transition has been a tremendous success.”
Gochnour believes that Pennant has been building up the muscle that prepared the company to take on the UnitedHealth Group, Amedisys deal. Prior to this, the Signature acquisition marked the company’s largest deal to date.
“[The Signature deal] required new things of us, as an organization, and we grew because of it,” Gochnour said. “Now, we’re again doing something that is larger than what we’ve done previously, but is consistent with our disciplined approach. We believe that, right now, this continues to push a flywheel.”
The company has divided its integration process into three phases: implementing Pennant’s operating model, rebranding these assets and transitioning systems.
Despite having a streamlined process in place, Pennant has prepared for potential challenges, according to Gochnour.
“We have tried to be very productively paranoid, and tried to identify those challenges early on and then navigate through them,” he said. “UnitedHealth and Amedisys have been great partners through that process, so we have been able to respond and adapt to the unique challenges that we faced.”
Ultimately, Gochnour stressed that Pennant will remain consistent in its approach to acquisitions.
“If there’s a single side opportunity that fits that criteria, we’re going to jump on it,” he said. “If there’s a multi-site opportunity that fits that criteria, and it makes sense, we’re going to do that too. Our focus is on accomplishing our mission, which is to provide life-changing services for patients, and to create life-changing opportunities for leaders and their teams.”