Although its 2021 results fell short of expectations, Pennant Group executives said Tuesday that momentum is building in senior living
“Overall, our fourth-quarter results were lower than we anticipated as we navigated through another surge of COVID-19, and our efforts to fully mitigate these headwinds fell short of our expectations,” Pennant Group CEO Daniel Walker said during a fourth-quarter earnings call. “Our senior living segment weathered three waves of COVID-19 surges in 2021 and is poised for a stronger 2022, with deeper leadership throughout the segment, stronger clusters and markets, better data and systems, and indications of an improving operating environment.”
Walker said the demands of completing a spinoff of several senior living communities, an overhaul of its senior living community leadership, a complete revamping of the company’s IT infrastructure, the high volume of home health and hospice acquisitions, and the investment of time and resources into new business ventures led to the holding company’s shortfall.
But Pennant executed on several key initiatives in the fourth quarter to “limit distractions” and improve performance, he said.
Transactions to tighten Pennant footprint
Earlier this year, the holding company announced a series of transactions meant to reposition its senior living segment, including a one-time transfer of operations of five senior living communities to affiliates of The Ensign Group. The five communities share a campus with skilled nursing facilities operated by Ensign subsidiaries.
Walker said the changes will allow senior leadership to focus on fewer operations across a tighter geographic footprint. That transaction is expected to close in the second quarter.
The company also entered into a letter of intent to operate a senior living community in a “key market,” which is expected to close in the second quarter.
Chief Investment Officer Derek Bunker said the transactions will help the company achieve better results in 2022 while establishing an avenue for future expansion. He called the Ensign deal a “win-win” for both organizations.
“Our retooled portfolio allows our growing senior living talent to concentrate our resources on a tighter portfolio of predominantly stand-alone communities in core markets, and immediately improves our segment earnings,” Bunker said.
COVID affects operations
COVID-19 cases affected staffing and census in the fourth quarter, as they did throughout 2021, President Brent Guerisoli said.
“While the effects of this most recent wave will spill over into the first quarter, in the fourth quarter and since, we made significant progress in building a stronger leadership foundation, developing market and cluster leaders, expanding our marketing and sales expertise by elevating and recruiting talented professionals and equipping them with better data analytics and tools and driving rigorous accountability around the key focus areas that will accelerate our ongoing turnaround in the segment,” Guerisoli said.
Those efforts, he said, drove segment revenue growth 1.4% over the prior-year quarter, despite average occupancy declining by 310 basis points (3.1%) during the same period.
Thanks to better data and resident assessment tools, Guerisoli said, Pennant operators implemented “modest” rent and care rate increases in the fourth quarter. Pennant operators anticipate implementing rate increases between 4% and 6%, Chief Financial Officer Jennifer Freeman said.
As the senior living segment continues its recovery, Guerisoli said, there is “significant potential” to drive further revenue growth through occupancy and rate improvements into 2022.
