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With “sobering” third-quarter results, Pennant Group Chairman and CEO Daniel Walker said the Eagle, ID-based company is reviewing its actions over the past two years to identify missteps it made.
“The demands of completing the spinoff [in 2019 from the Ensign Group] successfully, the high volume of home health and hospice acquisitions, the leadership overhaul of our senior living segment, the investment of time and resources in early stage new business ventures — all when coupled with the unique pressures of the COVID-19 pandemic — have diluted our effectiveness in operating to our standards,” Walker said Tuesday during a third-quarter earnings call.
Walker said the firm hasn’t struck the “delicate balance” well enough over the past 18 months between the health of its operations and the bandwidth of its leaders and resources. A spinoff from the Ensign Group, the Pennant Group is a holding company of independent operating subsidiaries that provide care and services through 54 senior living communities and 80 home health and hospice agencies.
“We are taking immediate actions to ensure each local team is executing at a high level without distractions, retrenching around the core opportunities across both segments, and reinforcing the core principles of our operating model that have led to our historical success,” Walker said. “We believe these efforts will yield significant results in the short term and ensure long-term health.”
Sharp spikes in COVID-19 cases in the Pennant Group’s senior living markets halted occupancy improvements seen in the second quarter, as well as amplified labor pressures, executives said.
Senior living average occupancy dipped by 36 basis points (0.36%) in September compared with August. Occupancy for the quarter was 73.7%, an increase of 100 basis points (1%) over the second quarter.
The implementation of a full suite of IT systems, Walker said, is providing the tools and analytics to improve sales and marketing processes, wellness program delivery and management. Communities also are implementing rent and care rate hikes to offset wage and occupancy pressures.
“Our segment margins were impacted by ongoing labor pressures and rent expense increases that occurred in the quarter,” Walker said. “Overall, although we are not through the woods and continue to experience lingering softness in occupancy, we are excited about the progress we are seeing from our ongoing efforts to add and develop leadership strength and equip them with resources to build healthy operations, and we are confident in the significant long-term value in our senior living communities.”
Chief Financial Officer Jennifer Freeman said the pandemic hurt third-quarter results to the tune of $2.3 million in lost revenues and at least $300,000 in COVID-19-related expenses across its senior living and home and hospice segments. There was also $1.6 million in increased wages, including overtime, compared with the second quarter. She said she anticipated that the effects will continue through year-end.
