Pennant Group CEO: Payers Recognize That Home Health Care is 'not a Mass Business.' - Latest Global News

Pennant Group CEO: Payers Recognize That Home Health Care is ‘not a Mass Business.’

Pennant Group (Nasdaq: PNTG), like its competitors, has had to adapt to the penetration of Medicare Advantage (MA) in home health care. However, unlike its competitors, the adjustments went smoothly for the most part.

For over a decade, the company has been building relationships with MA plans and health systems in the communities it serves to build a sustainable MA business in its home healthcare segment.

“It comes back to the idea that health care is local and that these decisions are made at the local level,” John J. Gochnour, president and COO of Pennant, said Wednesday at the RBC Global Healthcare Conference. “Our strategy as a company over the last 12 years has been to meet the needs of the community. Even before some of these changes, we took out and built a network of insurance contracts. This business has a lower margin but meets the needs of the community. And as we meet the needs of the community, we will see patients at higher margins.”

Based in Eagle, Idaho, Pennant is a holding company of independent subsidiaries including 112 home health and hospice agencies and 52 senior living communities in 13 states.

Pennant’s local leaders understand the financial impact of admitting a particular patient, but also the “community impact,” Gochnour said. This has allowed the company to maintain a healthy traditional Medicare MA mix over the years, which has also eased the transition that comes with greater MA penetration.

“When you balance the needs of the community with the financial impact of your business, you can grow in a way that increases volume, but you do it in a healthy and balanced way,” he said. “And that’s what’s really preserved – the overall value creation, even if the Medicare mix has declined somewhat. It hasn’t slipped anywhere near what some other people have struggled with.”

Some publicly traded home health companies have joined managed care companies, but others have struggled with financial performance as they adapt to MA penetration.

However, this was not the case with Pennant. As of Wednesday afternoon, Pennant’s share price was up nearly 90% year-over-year.

About half of Pennant’s MA mix is ​​episodic, the other half is paid per visit. In the latter area, the company has been rewarded with rate increases of 10-15% over the past two years, exceeding rate increases in the previous decade, Gochnour said.

“We have a really high quality product,” he said. “Payers are recognizing this more and more and are paying a little more for the best clinical outcomes. We’re more in a position to say to the payer, “Look, we’re taking a lot of your volume right now, we can’t keep doing that at the rates you’re paying us.” Either we back out and you lose the best clinical provider in your community, or you will have to pay us more.’”

Pennant CEO Brent Guerisoli added that payers are increasingly viewing home health care less as a commodity, which has been a problem for home care providers in the past.

“I think payers are recognizing that this is not a commodity business, but that there is a real need to partner with high-quality providers in communities,” Guerisoli said. “That’s also why these discussions have been positive for us, because they recognize the value of [partnering with] a quality provider.”

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