Healthcare

How Pennant, LiveWell, Grow With A Density-First Mindset

Home-based care providers – even active acquirers – are demonstrating that operational density has become the top priority when growing their businesses.

The trend toward operational density over a broad geographic footprint has grown over the past two to three years, and the Pennant Group and LiveWell Partners have exemplified this trend, coupling the density-first strategy with a focus on local leadership. 

For LiveWell, future growth will focus on increasing density within its existing markets or in new markets within states where it already has a presence, rather than entering new states.

“As we think about creating value for our enterprise, creating density within a state is a highly valued thing, and so that’s really where we focus our efforts,” Jason Growe, CEO at LiveWell Partners, said on a recent Home Health Care News webinar. “Not to say that we can’t go to new states, or we won’t go to new states, and we will with the right opportunities, but what we don’t want is sort of a bunch of dots around the country in disparate areas. Not only does that not create the type of value that we want to see ourselves grow into, but it’s also just operationally difficult to manage.”

St. Louis-based LiveWell Partners provides home health and hospice services from ten branches across five states. The company recently entered a new market, Chicago, with its acquisition of Empower Home Health Services. LiveWell was attracted to Empower because of its “all-star” local leadership, Growe said. He also reported that the branch continues to grow at double-digit rates and has expanded its margin profile. 

For Eagle, Idaho-based Pennant, density is also the primary consideration when executing its acquisition strategy – even as the organization executes large and notable deals, like its $146.5 million acquisition of 54 home health and hospice agencies divested as part of UnitedHealth Group’s (NYSE: UNH) acquisition of Amedisys. 

Pennant is a holding company that operates nearly 200 home health and hospice agencies and 65 senior living communities across the U.S.

“Our operational model is that we cluster nearby agencies together, and they have a pure accountability model, rather than sort of a top-down corporate accountability model,” Brian Mills, vice president of acquisitions at the Pennant Group, said on the webinar. “So we really encourage and look for opportunities to create density. And actually, this acquisition was an opportunity for us to get immediate density in the state of Tennessee, for example. Whenever we’re going to go into a new state … we need enough of a footprint there that we’re able to grow from that, but also that there’s able to be the support that we want to have.”

Now with a foothold in Tennessee, Alabama and Georgia, Pennant can grow its footprint organically from the east, in addition to expanding from its existing footprint in the west.

Future growth will most likely include counties and cities near its existing footprint, Mills said. Having existing connections and information about a specific market provides key data points when Pennant is determining which geographies to grow into.

“When we’re making a decision, I really think of three things,” Mills said. “The first one is, ‘Do we have the strength to support the acquisition, and then the neighboring locations?’ And then the second one is, ‘Do we have a leader that’s ready to be able to help, to take over and to grow that opportunity?’ And then the last one is the deal itself. ‘What are the clinical outcomes? How have they been? That’s the core part of our diligence on any deal that always comes back to clinical quality.”

Overall, there is significant interest in the home-based care investment space, Growe said – though he also described investors as “highly cautious.”

Interest stems from the affordability of and desire for home-based services, Growe said. Caution, meanwhile, stems from a mix of reimbursement instability, with the future of Medicare reimbursement and the rise of Medicare Advantage, and operational concerns.

“Investors have learned that you need to invest in the right way with the right targets, and what that means in terms of operational discipline, quality, outcomes, etc.,” Growe said.

The post How Pennant, LiveWell, Grow With A Density-First Mindset appeared first on Home Health Care News.

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