Despite an estimated 1% hit to its Medicare home health revenue next year, Pennant Group executives are finding a silver lining in the Centers for Medicare & Medicaid Services home health final rule.
Pennant Group President John Gochnour told analysts during an earnings call Tuesday the company thinks there will be buying opportunities for larger firms now that there is certainty over the rule.
“We have always been focused on some of these small to mid-sized providers and larger opportunities when they have presented themselves,” Gochnour said during the call. “As far as the pipeline, it’s pretty robust. I would say the change to the final rule is in the process of spurring some additional folks to make a decision [on selling].”
The final home health rule CMS announced early last week phases in a 7.85% behavioral cut — with half of the cut coming in 2023 — and increases Medicare payments to home health agencies 0.7% next year, rather than cutting payments an anticipated 4.2%.
Still, Gochnour admitted the Medicare behavioral cut is a headwind at a time when worker wages, transportation and other costs are rising. However, he was confident the company is prepared for the challenge.
“We’ve still got operational work to do in order to offset it,” Gochnour explained. “The good news is we’ve been working on that, projecting a much larger cut. In the face of this new information, we’re able to continue to dilate our operations.”
Despite rising ongoing headwinds from the pandemic and inflationary pressure, Pennant Group reported a solid third quarter. The company earned $0.14 per adjusted diluted share in the quarter on revenues of $118.3 million. That exceeded the $0.11 a share on revenues of $111.9 the company reported during the same period in 2021. Still, the company fell $.04 cents short of the $.18 Wall Street analysts forecast.
For the three months ending Sept. 30, the company saw a 10% increase in home health admissions, a 10.1% increase in Medicare home health admissions and a 7.8% increase in hospice admissions.
Eagle, ID-based Pennant Group provides home health, home care and hospice services in 14 states, primarily in the West.
