The Pennant Group (Nasdaq: PNTG) is experiencing “natural” disruption due to the integration of former UnitedHealth and Amedisys home health and hospice assets in the Southeast as it anticipates a rosier payment landscape in the years to come.

The Amedisys acquisition was Pennant’s largest-ever acquisition. The company is approaching the end of the fourth “wave” of integration efforts and entered into one of the largest waves of integration efforts on Aug. 1, according to the company’s Q2 earnings call.

“We are currently in the thick of our largest transition waves, which will continue through October. This will naturally cause some ongoing disruption,” John Gochnour, the company’s chief operating officer, said on the call on Thursday. “In the long term, we see so much potential in these operations and their local leaders and teams.”

The teams working on integration efforts have done a “remarkable” job of integrating the new brands, leadership said, and the new assets’ patient volumes stayed above expected levels throughout the transition. The company’s leadership reports feeling “a little bit ahead of schedule” in terms of the assets’ performance.

While the Southeast integration is creating near-term operational disruption, Pennant’s leadership is framing the work against a more favorable long-term backdrop for home health reimbursement. After four consecutive years of base-rate cuts, the company sees CMS’ proposed 2027 payment update as an early sign that the sector’s payment environment may be stabilizing.

The home health industry has seen several years of Medicare base payment rate cuts, representing a reimbursement “down cycle” — but Pennant’s CEO Brent Guerisoli sees the 2027 proposed rule as a positive break in this cycle.  

The Centers for Medicare & Medicaid Services (CMS) is increasingly rewarding quality outcomes and focusing on value-based care, Guerisoli said on the company’s Q2 earnings call, which signals a more stable payment landscape for the years ahead.  

“It appears now that the payment pendulum is moving in a better direction with a 2.4% increase in the 2027 proposed rule, which we’re modeling as a 1.7% increase as applied to our operations,” Guerisoli said. “We see this as a positive signal. … As payers in CMS increasingly focus on rewarding quality outcomes and value-based care, we are well positioned to be a solution in the healthcare continuum.”

Pennant said its year-to-date performance put it on pace to exceed the top end of its original full-year guidance, prompting it to raise 2026 guidance.

“As a testament to the strength of our operating model, we have experienced remarkable progress and organic growth across our core operations, even as we have outperformed internal expectations thus far in the transition of the largest acquisition in our history,” Guerisoli said.

Pennant reported Q2 total revenue of $298.0 million, a 35.8% increase year-over-year. Its home health revenue for the quarter rang in at $119.4 million.  

Home health admissions increased 62.3% year-over-year, reaching a total of 28,947 for the quarter. Same-store admissions increased 9.7%, to 17,854.