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What changed in Pennant Group, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Pennant Group, Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+290 added−307 removedSource: 10-K (2025-02-27) vs 10-K (2024-02-28)

Top changes in Pennant Group, Inc.'s 2024 10-K

290 paragraphs added · 307 removed · 242 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

115 edited+19 added−22 removed103 unchanged
Biggest changeWe believe that our strategy of acquiring strategic and underperforming operations in these highly fragmented markets will be an instrumental to our future growth. Changing Regulatory Framework . Regulations and reimbursement change frequently in our industries. Our model is designed to successfully navigate these regulatory and reimbursement changes.
Biggest changeAs with the home health and hospice industries, there is significant fragmentation in the senior housing industry, with the top 25 operators owning approximately 28% of the licensed beds within the US. We believe that our strategy of acquiring strategic and underperforming operations in these highly fragmented markets will be an instrumental to our future growth. Changing Regulatory Framework .
To accomplish this goal, our leaders work closely with their clinical staff and our expert resources to identify unique patient and resident needs and priorities in their communities and to create superior service offerings tailored to those needs.
To accomplish this goal, our leaders work closely with their clinical staff and our expert resources to identify unique patient and resident needs and priorities in their communities and to create superior service offerings tailored to those needs and priorities.
We also operate joint ventures with leading health systems, which allows us to expand our partnership in the space, and may undertake additional joint ventures in the future.
We also operate joint ventures with leading health systems, which allows us to expand our partnership in the space, and we may undertake additional joint ventures in the future.
Periodically, market forces, which vary by region, require that we increase wages in excess of general inflation or in excess of increases in reimbursement rates we receive. We believe that we staff appropriately, focusing primarily on the acuity level and day-to-day needs of our patients and residents.
Periodically, market forces, which vary by region, require that we increase wages in excess of general inflation or increases in reimbursement rates we receive. We believe that we staff appropriately, focusing primarily on the acuity level and day-to-day needs of our patients and residents.
(To be eligible, HHAs must meet a 90% target full provisional affirmation rate based on a minimum 10 requests/claims submitted.) This program is designed to reduce the number of Medicare appeals, improve provider compliance with Medicare program requirements, should not delay care to Medicare beneficiaries, and does not alter or reduce the Medicare home health benefit.
(To be eligible, HHAs must meet a 90% target full provisional affirmation rate based on a minimum 10 requests or claims submitted.) This program is designed to reduce the number of Medicare appeals, improve provider compliance with Medicare program requirements, should not delay care to Medicare beneficiaries, and does not alter or reduce the Medicare home health benefit.
On January 25, 2024, the HHS Office for Civil Rights (“OCR”) issued guidance to healthcare providers, services, and facilities emphasizing the importance of non-discriminatory visitation policies consistent with CMS regulations and the U.S. National Strategy to Counter Antisemitism, highlighting the prohibition of discrimination based on religion or other protected characteristics during public health emergencies.
Civil Rights. On January 25, 2024, the HHS Office for Civil Rights (“OCR”) issued guidance to healthcare providers, services, and facilities emphasizing the importance of non-discriminatory visitation policies consistent with CMS regulations and the U.S. National Strategy to Counter Antisemitism, highlighting the prohibition of discrimination based on religion or other protected characteristics during public health emergencies.
We believe that the primary competitive factors in the post-acute care industry are: • ability to attract and to retain qualified leaders and caregivers; • reputation and achievements of quality healthcare outcomes and patient and resident satisfaction; • attractiveness and location of senior living communities and other physical assets; • the expertise and commitment of operational leaders and employees; and • private equity and other firms with greater financial resources and/or lower costs of capital with similar asset acquisition objectives.
We believe that the primary competitive factors in the post-acute care industry are: • ability to attract and to retain qualified leaders and caregivers; • reputation and achievements of quality healthcare outcomes and patient and resident satisfaction; • attractiveness and location of senior living communities and other physical assets; • the expertise and commitment of operational leaders and employees; and • private equity, payors, and other firms with greater financial resources and/or lower costs of capital with similar asset acquisition objectives.
We believe our home health and hospice businesses are able to achieve quality outcomes—as measured by multiple industry and value-based metrics (such as hospital readmission rates)—in cost-effective settings. We believe our senior living business is able to offer our residents a safe and tailored quality-of-life at an affordable cost, thus appealing to a broad population.
We believe our home health and hospice businesses achieve quality outcomes—as measured by multiple industry and value-based metrics (such as hospital readmission rates)—in cost-effective settings. We believe our senior living business is able to offer our residents a safe and tailored quality-of-life at an affordable cost, thus appealing to a broad population.
SB 261 requires companies with annual revenues of $500 million or more to disclose their climate-related risks and the measures they use to reduce and adapt to those risks. These reports are first due from companies in 2026. Additional details regarding the application and requirements of these laws will be included in future regulations.
SB 261 requires companies with annual revenues of $500 million or more to disclose their climate-related risks and the measures they use to reduce and adapt to those risks. These reports are first due from companies in 2026. Additional details regarding the application and requirements of these laws will be included in future regulations. Antitrust Laws.
Medicare payments are subject to two fixed annual caps, which are assessed on a provider number basis, and are broken into an inpatient cap amount and an overall payment cap. These cap amounts are calculated and published by the Medicare fiscal intermediary on an annual basis covering the fiscal year, measured as the period from October 1 through September 30.
Medicare payments are subject to two fixed annual caps, which are assessed on a provider-number basis and are broken into an inpatient cap amount and an overall payment cap. These cap amounts are calculated and published by the applicable Medicare fiscal intermediary on an annual basis covering the fiscal year, measured as the period from October 1 through September 30.
Our senior living operations provide a variety of services tailored to our residents’ needs, including residential accommodations, activities, meals, housekeeping and assistance in the activities of daily living to seniors who are independent or who require some support not at the level of clinical care provided in a skilled nursing facility.
Our senior living operations provide a variety of services tailored to our residents’ needs, including residential accommodations, activities, meals, housekeeping and assistance in the activities of daily living to seniors who are independent or who require some support, but not at the level of clinical care provided in a skilled nursing facility.
Other competitors may have lower expenses or other competitive advantages than us and, therefore, provide services at lower prices than we offer. There are few barriers to entry in the home health and hospice business in jurisdictions that do not require certificates of need or permits of approval.
Other competitors may have lower expenses or other competitive advantages than we do and, therefore, provide services at lower prices than we offer. There are few barriers to entry in the home health and hospice business in jurisdictions that do not require certificates of need or permits of approval.
We seek to compete effectively in each market by establishing a reputation within the local community as the “provider of choice.” This means that the operation leaders are generally free to discern and address the unique needs and priorities of healthcare professionals, customers and other stakeholders in the local community or market, and then create superior service offerings for that particular community or market that are calculated to encourage prospective customers and referral sources to choose or recommend the operation.
We seek to compete effectively in each market by establishing a reputation within the local community as the “provider of choice.” This means that the operation leaders are generally free to discern and address the unique needs and priorities of healthcare professionals, customers and other stakeholders in the local community or market, and then create superior service offerings that are calculated to encourage prospective customers and referral sources to choose or recommend the operation.
To qualify for home health services, Medicare CoPs require that beneficiaries (1) be homebound (meaning that the beneficiary is unable to leave his/her home without a considerable and taxing effort); (2) require intermittent skilled nursing, physical therapy, or speech therapy services; (3) have a face to face encounter that (a) has occurred no more than 90 days prior to the start of care or within 30 days after the start of care, (b) was related to the primary reason the patient requires home health services, and (c) was performed by a physician or allowed non-physician provider; and (4) receive treatment under a plan of care established and periodically reviewed by a physician.
To qualify for home health services, Medicare CoPs require that beneficiaries (1) be homebound (meaning that the beneficiary is unable to leave their home without a considerable and taxing effort); (2) require intermittent skilled nursing, physical therapy, or speech therapy services; (3) have a face to face encounter that (a) has occurred no more than 90 days prior to the start of care or within 30 days after the start of care, (b) was related to the primary reason the patient requires home health services, and (c) was performed by a physician or allowed non-physician provider; and (4) receive treatment under a plan of care established and periodically reviewed by a physician.
Federal law also provides that the Office of the Inspector General for HHS (“OIG”) has the authority to exclude individuals and entities from federally funded health care programs on a number of grounds, including, but not limited to, certain types of criminal offenses, licensure revocations or suspensions, and exclusion from state or other federal healthcare programs.
Federal law also provides that the Office of the Inspector General for HHS (“OIG”) has the authority to exclude individuals and entities from federally funded healthcare programs on a number of grounds, including, but not limited to, certain types of criminal offenses, licensure revocations or suspensions, and exclusion from state or other federal healthcare programs.
By effectively using data systems and analytics and embracing a culture of transparency and accountability, we tend to see our local leaders steadily improving operational results. We believe our unique operating model will continue to cultivate steady and consistent organic growth in the future. Pursue Disciplined Acquisition Strategy .
By effectively using data systems and analytics and embracing a culture of transparency and accountability, we expect to see our local leaders steadily improving operational results. We believe our unique operating model will continue to cultivate steady and consistent organic growth in the future. Pursue Disciplined Acquisition Strategy .
Using the CMS five-star quality rating criteria, our home health agencies achieved an average of 4.1 out of 5 stars across all agencies for the for the year ended December 31, 2023, compared to the industry average of 3.0 stars (see Government Regulation below for further discussion on the five-star quality rating system).
Using the CMS five-star quality rating criteria, our home health agencies achieved an average of 4.1 out of 5 stars across all agencies for the for the year ended December 31, 2024, compared to the industry average of 3.0 stars (see Government Regulation below for further discussion on the five-star quality rating system).
We must pass these inspections to maintain our licensure under state law, to obtain or maintain certification under the Medicare and Medicaid programs, to continue participation in the Veterans Administration (VA) program at some operations, and/or to comply with our provider contracts with managed care clients at many operations.
We must pass these inspections to maintain our licensure under state law, to obtain or maintain certification under the Medicare and Medicaid programs, to continue participation in the Veterans Administration (“VA”) program at some operations, and/or to comply with our provider contracts with managed care clients at many operations.
Washington and Montana are the only CON state in which we operate home health or hospice agencies. Patient Protection and Affordable Care Act (“ACA”). Various healthcare reform provisions became law upon enactment of the ACA in 2010.
Washington and Montana are the only CON states in which we operate home health or hospice agencies. Patient Protection and Affordable Care Act (“ACA”). Various healthcare reform provisions became law upon enactment of the ACA in 2010.
Agency and Unit Growth Since 2014 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Home health and hospice agencies 25 32 39 46 54 63 76 88 95 111 Senior living communities (a) 15 36 36 43 50 52 54 54 49 51 Senior living units (a) 1,587 3,184 3,184 3,434 3,820 3,963 4,127 4,127 3,500 3,588 Total number of home health, hospice, and senior living operations 40 68 75 89 104 115 130 142 144 162 (a) During January 2022, affiliates of the Company entered into certain operations transfer agreements with affiliates of Ensign, providing for the transfer of the operations of five senior living communities.
Agency and Unit Growth Since 2014 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Home health and hospice agencies 25 32 39 46 54 63 76 88 95 111 123 Senior living communities (a) 15 36 36 43 50 52 54 54 49 51 57 Senior living units (a) 1,587 3,184 3,184 3,434 3,820 3,963 4,127 4,127 3,500 3,588 3,960 Total number of home health, hospice, and senior living operations 40 68 75 89 104 115 130 142 144 162 180 (a) During January 2022, affiliates of the Company entered into certain operations transfer agreements with affiliates of Ensign, providing for the transfer of the operations of five senior living communities.
This “cluster” operating model is the same model used by local leaders prior to our spin-off from Ensign in 2019 (further discussed below under Company History ) and is key to the success of our future operations.
This “cluster” operating model is the same model used by local leaders prior to our spin-off from The Ensign Group, Inc. in 2019 (further discussed below under Company History ) and is key to the success of our future operations.
Section 1877 of the Social Security Act, commonly known as the “Stark Law,” provides that a physician may not refer a Medicare or Medicaid patient for a “designated health service” to an entity with which the physician or an immediate family member has a financial relationship unless the financial arrangement meets an exception under the Stark Law or its regulations.
Section 1877 of the Social Security Act, commonly known as the “Stark Law,” provides that a physician may not refer a 14 Table of Contents Medicare or Medicaid patient for a “designated health service” to an entity with which the physician or an immediate family member has a financial relationship unless the financial arrangement meets an exception under the Stark Law or its regulations.
These rates are subject to annual adjustments based on inflation and geographic wage considerations. Reimbursement for Senior Living Services . Assisted living, independent living and memory care community revenue is primarily derived from private pay residents at rates we establish based upon the services we provide and market conditions in the area of operation.
These rates are subject to annual adjustments based on inflation and geographic wage considerations. Reimbursement for Senior Living Services . Assisted living, independent living and memory care community revenue is primarily derived from private pay residents at rates we establish based upon the services we provide and market conditions 8 Table of Contents in the area of operation.
Hospice Reimbursement and Cap Amounts . Payments are based on daily rates for each day a beneficiary is enrolled in the hospice benefit and are subject to two annual caps. Rates are set based on specific levels of care, are adjusted by a wage index to reflect healthcare labor costs across the country and are established annually through federal legislation.
Payments are based on daily rates for each day a beneficiary is enrolled in the hospice benefit and are subject to two annual caps. Rates are set based on specific levels of care, are adjusted by a wage index to reflect healthcare labor costs across the country and are established annually through federal legislation.
Our organizational structure empowers our highly dedicated leaders and staff at the local level to make key decisions and creates a sense of ownership over operational and clinical results and the overall employee experience. Each operation’s leader and his or her staff are encouraged to make their operations the “provider of choice” in the communities they serve.
Our organizational structure empowers our highly dedicated leaders and staff at the local level to make key decisions and creates a sense of ownership over operational and clinical results and the overall employee experience. Each operation’s leader and their staff are encouraged to make their operations the “provider of choice” in the communities they serve.
Accordingly, operations 15 Table of Contents that have poor regulatory histories before we acquire them may be more likely to have sanctions imposed upon them by CMS or state regulators. Regulations Regarding Patient Record Confidentiality. We are also subject to laws and regulations enacted to protect the confidentiality of patient health information.
Accordingly, operations that have poor regulatory histories before we acquire them may be more likely to have sanctions imposed upon them by CMS or state regulators. Regulations Regarding Patient Record Confidentiality. We are also subject to laws and regulations enacted to protect the confidentiality of patient health information.
Consequently, we are required to file reports and information with the Securities and Exchange Commission (“SEC”), 16 Table of Contents including reports on the following forms: annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act.
Consequently, we are required to file reports and information with the Securities and Exchange Commission (“SEC”), including reports on the following forms: annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act.
The laws and statutes affecting the regulatory landscape of the home health, hospice and senior living industries continue to expand. We expect that these changes will continue. In addition to this changing regulatory environment, federal, state and local officials are increasingly focusing their efforts on the enforcement of these laws.
The laws and statutes affecting the regulatory landscape of the home health, hospice and senior living industries continue to expand. We expect that these changes will continue. In addition to this changing regulatory environment, 10 Table of Contents federal, state and local officials are increasingly focusing their efforts on the enforcement of these laws.
Associated costs may not be covered by insurance. Available Information We are subject to the reporting requirements under the Securities Exchange Act of 1934, as amended (the Exchange Act).
Associated costs may not be covered by insurance. Available Information We are subject to the reporting requirements under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
Under the qui tam 14 Table of Contents or “whistleblower” provisions of the FCA, a private individual with knowledge of fraud may bring a claim on behalf of the federal government and receive a percentage of the federal government’s recovery. Due to these whistleblower incentives, lawsuits have become more frequent.
Under the qui tam or “whistleblower” provisions of the FCA, a private individual with knowledge of fraud may bring a claim on behalf of the federal government and receive a percentage of the federal government’s recovery. Due to these whistleblower incentives, lawsuits have become more frequent.
Requirements vary from state to state and these requirements can affect, among other things, personnel education and training, patient and personnel records, services, 11 Table of Contents staffing levels, monitoring of patient wellness, patient furnishings, housekeeping services, dietary requirements, emergency plans and procedures, certification and licensing of staff prior to beginning employment, and patient rights.
Requirements vary from state to state, and these requirements can affect, among other things, personnel education and training, patient and personnel records, services, staffing levels, monitoring of patient wellness, patient furnishings, housekeeping services, dietary requirements, emergency plans and procedures, certification and licensing of staff prior to beginning employment, and patient rights.
The IMPACT Act requires the submission of standardized assessment data for quality improvement, payment and discharge planning purposes across the spectrum of post-acute care providers (“PACs”), including home health agencies. Failure to report such data when required subjects a PAC to a 2% reduction in market basket prices then in effect. Hospice Quality Reporting Requirements (“HQRP”) .
The IMPACT Act requires the submission of standardized assessment data for quality improvement, payment and discharge planning purposes across the spectrum of post-acute care providers (“PACs”), including home health agencies. Failure to report such data when required subjects a PAC to a 2% reduction in market basket prices then in effect. 13 Table of Contents Hospice Quality Reporting Requirements .
With experienced leaders in place at the local level and demonstrated success in improving operating conditions at acquired businesses, we believe we are well positioned to continue expanding our footprint through disciplined acquisitions. Leverage Our Operational Capabilities to Expand Partnerships.
With experienced leaders in place at the local level and demonstrated success in improving operating conditions at acquired businesses, we believe we are well positioned to continue expanding our footprint through strategic and opportunistic acquisitions. Leverage Our Operational Capabilities to Expand Partnerships.
In addition, CMS can recover overpayments from health care providers up to five years following the year in which payment was made. We may also face adverse consequences if we violate federal law related to certain Medicare physician referrals.
In addition, CMS can recover overpayments from healthcare providers up to five years following the year in which payment was made. We may also face adverse consequences if we violate federal law related to certain Medicare physician referrals.
The Review Choice Demonstration for Home Health Services (RCD) is mandatory for our HHAs in Texas and allows them to select from three initial options for payment review: • Pre-claim review • Post-payment review • Minimal post-payment review with a 25% payment reduction After a 6-month period, HHAs demonstrating compliance with Medicare rules through pre-claim review or post-payment review will have additional choices, including relief from most reviews except for a review of a small sample of claims.
The Review Choice Demonstration for Home Health Services (“RCD”) is mandatory for our HHAs in Texas and allows them to select from three initial options for payment review: 12 Table of Contents • Pre-claim review • Post-payment review • Minimal post-payment review with a 25% payment reduction After a 6-month period, HHAs demonstrating compliance with Medicare rules through pre-claim review or post-payment review will have additional choices, including relief from most reviews except for a review of a small sample of claims.
We believe we have been successful in attracting, developing and retaining outstanding business and clinical leaders to lead our independent operating subsidiaries. Our unique operating model, which emphasizes local decision making and team building, supported by our platform of expert resources and best-in-class systems, attracts a highly talented and entrepreneurial group of leaders.
We believe we have an advantage and are successful in attracting, developing, and retaining outstanding business and clinical leaders to lead our independent operating subsidiaries. Our unique operating model, which emphasizes local decision making and team building, supported by our platform of expert resources and best-in-class systems, attracts a highly talented and entrepreneurial group of leaders.
Conditions of Participation . Our home health and hospice operations must comply with regulations promulgated by the United States Department of Health and Human Services (“HHS”) and CMS in order to participate in the Medicare program and receive Medicare payments.
Conditions of Participation . Our home health and hospice operations must comply with regulations promulgated by the United States Department of Health and Human Services (“HHS”) and CMS in order to participate 11 Table of Contents in the Medicare program and receive Medicare payments.
The inpatient cap limits hospice care provided on an inpatient basis. This cap limits the number of days that are 13 Table of Contents paid at the higher inpatient care rate to 20.0% of the total number of days of hospice care that are provided to all Medicare beneficiaries served by a provider.
The inpatient cap limits hospice care provided on an inpatient basis. This cap limits the number of days that are paid at the higher inpatient care rate to 20.0% of the total number of days of hospice care that are provided to all Medicare beneficiaries served by a provider.
Item 1. Business Overview The Pennant Group, Inc. is a leading provider of high-quality healthcare services to patients or residents of all ages, including the growing senior population, in the United States. Through our innovative operating model, we strive to be the provider of choice in the communities we serve.
Item 1. Business Overview The Pennant Group, Inc. is a leading provider of high-quality healthcare services to patients or residents of all ages, including the growing senior population, in the United States. Through our innovative operating model and unique core values, we strive to be the provider of choice in the communities we serve.
We generate revenue in these communities primarily from private pay sources, with a portion earned from Medicaid or other state-specific programs. We derived approximately 68.8%, 71.3% and 71.3% of our senior living revenue from private pay sources during the years ended December 31, 2023, 2022 and 2021, respectively.
We generate revenue in these communities primarily from private pay sources, with a portion earned from Medicaid or other state-specific programs. We derived approximately 69.4%, 68.8% and 71.3% of our senior living revenue from private pay sources during the years ended December 31, 2024, 2023 and 2022, respectively.
We believe that our localized approach to program development and care leads prospective patients or residents and referral sources to choose or recommend our operations to others. Similarly, our emphasis on empowering local decision-makers encourages leaders to strive to become the “employer of choice” in the communities they serve.
We believe that our localized approach to program development and care leads prospective patients or residents and referral sources to choose or recommend our operations. 2 Table of Contents Similarly, our emphasis on empowering local decision-makers encourages leaders to strive to become the “employer of choice” in the communities they serve.
Home health agencies that do not submit quality measure data to CMS incur a 2% reduction in their annual home health payment update.
Home health agencies that do not submit quality measure data to CMS incur a 4% reduction in their annual home health payment update.
In addition, Medicaid or other state-specific programs in some states where we operate supplement payments for board and care services provided in assisted living and memory care communities. 8 Table of Contents Competition The post-acute care industry is highly competitive, and we expect that the industry will become increasingly competitive in the future.
In addition, Medicaid or other state-specific programs in some states where we operate supplement payments for board and care services provided in assisted living and memory care communities. Competition The post-acute care industry is highly competitive, and we expect that the industry will become increasingly competitive in the future.
These partnerships have resulted in significant benefits to payors, patients, residents and other providers, including reduced hospital readmission rates, appropriate transitions within the care continuum, overall cost savings, increased patient satisfaction and improved quality outcomes. Positive, repeated interactions and data sharing result in strong local relationships and encourage referrals from our acute and post-acute care partners.
These solutions have produced significant benefits to patients, residents, payors, and other providers, including reduced hospital readmission rates, appropriate transitions within the care continuum, overall cost savings, increased patient satisfaction and improved quality outcomes. In addition, positive, repeated interactions and data sharing result in strong local relationships and encourage referrals from our acute and post-acute care partners.
The primary competitive factors in these businesses include reputation, cost of services, quality of clinical services, responsiveness to patient/resident needs, location and the ability to provide support in other areas such as third-party reimbursement, information management and patient recordkeeping.
The primary competitive factors in these businesses include reputation, attractiveness and location of physical assets, cost of services, quality of clinical services, responsiveness to patient or resident needs, location and the ability to provide support in other areas such as third-party reimbursement, information management and patient recordkeeping.
We will continue to 4 Table of Contents expand formal and informal partnerships across the healthcare continuum by strategically investing in programs and data analytics that help us and our partners improve care transitions, achieve better outcomes and reduce costs.
We will continue to expand formal and informal partnerships across the healthcare continuum by strategically investing in programs and data analytics that help us and our partners improve care transitions, achieve better outcomes and reduce costs.
According to the November 2023 quarterly refresh of CMS Home Health Compare star rating criteria, our home health agencies have achieved an average of 4.1 out of 5 stars across all agencies compared to the industry average of 3.0 stars. Home Health Reimbursement Under PDGM .
According to the January 2025 quarterly refresh of CMS Home Health Compare star rating criteria, our home health agencies have achieved an average of 4.1 out of 5 stars across all agencies compared to the industry average of 3.0 stars. Home Health Reimbursement Under PDGM .
The disciplined acquisition and integration of strategic and underperforming operations is a key element of our past success and is integral to our future growth plans. Historically, we have successfully transitioned both turnaround and stable target businesses, transforming them into top-quality operations preferred by referral sources.
The disciplined acquisition and integration of strategic and underperforming operations is a key element of our past success and is integral to our future growth plans. Historically, we have successfully transitioned both turnaround and stable target businesses, transforming them into top-quality operations preferred by referral 4 Table of Contents sources and community partners.
We believe that our achievement of high-quality clinical outcomes positions us as a solution for patients, residents and referral sources, leading to census growth and improved profitability. Diversified Portfolio by Payor and Services. As of December 31, 2023, we operated 111 home health and hospice agencies and 51 senior living communities across 13 states.
We believe that our achievement of high-quality clinical outcomes positions us as a solution for patients, residents and referral sources, leading to census growth and improved profitability. Diversified Portfolio by Payor and Services. As of December 31, 2024, we operated 123 home health and hospice agencies and 57 senior living communities across 13 states.
We provide home health and hospice services through 111 agencies, and senior living services at 51 communities with 3,588 total units in our assisted living, independent living and memory care business. We derive revenue from a diversified blend of payors including Medicare and Medicaid programs, private pay patients and residents and managed care payors.
We provide home health and hospice services through 123 agencies, and senior living services at 57 communities with 3,960 total units in our assisted living, independent living and memory care business. We derive revenue from a diversified blend of payors including Medicare and Medicaid programs, private pay patients and residents, and managed care payors.
This guidance also addresses instances of non-compliance, such as unequal treatment based on religious beliefs or dietary restrictions, and outlines the support OCR provides to ensure compliance, encouraging affected individuals to file complaints for potential enforcement actions. Civil and Criminal Fraud and Abuse Laws and Enforcement .
This guidance also addresses instances of non-compliance, such as unequal treatment based on religious beliefs or dietary restrictions, and outlines the support OCR provides to ensure compliance, encouraging affected individuals to file complaints for potential enforcement actions. This guidance could be amended by the current administration. Civil and Criminal Fraud and Abuse Laws and Enforcement .
Our operational leaders are committed to ongoing training and participate in regular leadership development and educational programs. We believe that our commitment to professional development strengthens the quality of our operational leaders and staff and will continue to differentiate us from our competitors.
Our operational leaders are committed to ongoing training and participate in regular leadership development and educational programs. We believe that our commitment to professional development strengthens the quality of our operational leaders and staff and will continue to differentiate us from our competitors. Proven Track Record of Successful Acquisitions.
Human Capital The operation of our home health and hospice operations and senior living communities requires a large number of highly skilled healthcare professionals and support staff. As of December 31, 2023, we had 5,791 employees who were employed by our independent operating subsidiaries or our Service Center.
Human Capital The operation of our home health and hospice operations and senior living communities requires a large number of highly skilled healthcare professionals and support staff. As of December 31, 2024, we had approximately 7,000 employees who were employed by our independent operating subsidiaries or our Service Center.
Payment adjustments could be as high as 5 percent in 2025 based on data obtained in CY 2023 and CMS could increase the payment adjustment percentage in future years. Review Choice Demonstration for Home Health Services .
Payment adjustments could be as much as 5% in 2025 based on data obtained in FY 2023 and CMS could increase the payment adjustment percentage in future years. Review Choice Demonstration for Home Health Services .
We believe this decentralized organizational structure will continue to improve the quality of our recruiting and facilitate successful acquisitions. We have two reportable segments: (1) home health and hospice services, which includes our home health, hospice and home care businesses; and (2) senior living services, which includes our assisted living, independent living and memory care communities.
We believe this decentralized organizational structure will continue to improve the quality of our recruiting and facilitate successful acquisitions. 3 Table of Contents We have two reportable segments: (1) home health and hospice services, which includes our home health, hospice, home care, and geriatric primary and palliative care businesses; and (2) senior living services, which includes our assisted living, independent living and memory care services.
Our Growth Strategy We believe that the following strategies are primarily responsible for our growth to date and will continue to drive the growth of our business: Grow Talent Base and Develop Future Leaders. Our growth strategy is focused on expanding our talent base and developing future leaders.
Our Growth Strategy We believe that the following strategies are primarily responsible for our growth to date and will continue to drive the growth of our business: Grow Talent Base and Develop Future Leaders. We view ourselves as a leadership company. Our growth strategy is focused on expanding our talent base and recruiting and developing future leaders.
Presidential and congressional elections may result in significant changes in legislation, regulation, and implementation of Medicare, Medicaid, and government policy, along with potential changes to tax rates and other tax treatment of our operations. We continually monitor these developments so we can respond to the changing regulatory environment impacting our business. Civil Rights.
Presidential and congressional elections may result in significant changes in legislation, regulation, and implementation of Medicare, Medicaid, and government policy, along with potential changes to tax rates and other tax treatment of our operations. We continually monitor these developments so we can respond to the changing regulatory environment impacting our business. These rules could be amended by the current administration.
Enforcement of the antitrust laws against healthcare providers is common, and antitrust liability may arise in a wide variety of circumstances, including third party contracting, physician relations, joint venture, merger, affiliation and acquisition activities.
We are also subject to federal and state antitrust laws. Enforcement of the antitrust laws against healthcare providers is common, and antitrust liability may arise in a wide variety of circumstances, including third party contracting, physician relations, joint venture, merger, affiliation and acquisition activities.
Because of this diversified portfolio, our blended payor mix was 48.4% Medicare, 14.2% Medicaid, 13.5% managed care and 23.9% private pay for the year ended December 31, 2023. Our balanced payor mix can provide greater business stability through economic cycles and mitigates volatility arising from government-driven reimbursement changes.
Because of this diversified portfolio, our blended payor mix was 48.3% Medicare, 13.2% Medicaid, 13.3% managed care and 25.2% private pay and other for the year ended December 31, 2024. Our balanced payor mix can provide greater business stability through economic cycles and mitigates volatility arising from government-driven reimbursement changes.
We plan to continue to take advantage of the fragmented home health, hospice and senior living industries by being disciplined in acquiring strategic and underperforming operations within both our existing and new geographic markets.
We plan to continue to take advantage of the fragmented home health, hospice and senior living industries by being proactive yet disciplined in acquiring strategic and underperforming operations with high upside potential within both existing and new geographic markets.
GDP, or $253 billion, in 1980 to an estimated 17.3% of GDP, or $4.5 trillion, in 2022. CMS projects national healthcare spending will grow by an average of 5.1% annually from 2021 through 2030, accounting for approximately 19.6% of U.S. GDP, or approximately $6.8 trillion, in 2030.
GDP, or $253 billion, in 1980 to an estimated 17.6% of GDP, or $4.8 trillion, in 2023. CMS projects national healthcare spending will grow by an average of 5.6% annually from 2023 through 2032, accounting for approximately 19.7% of U.S. GDP, or approximately $7.7 trillion, in 2032.
The Hospice Payment Final Rule’s hospice payment update percentage is 3.1%, which is an estimated increase of $780 million in payments from fiscal year 2023. The payment update percentage of 3.1% is based on a 3.3% market basket percentage increase, which is reduced by a 0.2% productivity adjustment.
The Hospice Payment Final Rule’s payment update percentage is 2.9%, which is an estimated increase of $790 million in payments from fiscal year 2024. The payment update percentage is based on a 3.4% market basket percentage increase, which is reduced by a 0.5% productivity adjustment.
If payments received by any one of our hospice provider numbers exceeds either of these caps, we are required to reimburse Medicare for payments received in excess of the cap amounts. The hospice cap amount for the 2023 fiscal year was $32,486.92.
If payments received by any one of our hospice provider numbers exceeds either of these caps, we are required to reimburse Medicare for payments received in excess of the cap amounts. The hospice cap amount for the 2024 fiscal year was $33,494.01.
As discussed in greater detail below under Government Regulation , this reimbursement structure involved case mix calculation methodology refinements, changes to low-utilization payment adjustment (“LUPA”) thresholds, the elimination of therapy thresholds, a change to the unit of payment from a 60-day episode to a 30-day period of care, and reduction in fiscal year 2020 and full elimination in fiscal year 2021 of requests for anticipated payments (“RAPs”).
As discussed in greater detail below under Government Regulation , and adjusted in subsequent calendar years’ payment rules, this reimbursement structure involved case mix calculation methodology refinements, changes to low-utilization payment adjustment (“LUPA”) thresholds, the elimination of therapy thresholds, a change to the unit of payment from a 60-day episode to a 30-day period of care, and reduction in fiscal year 2020 and full elimination in fiscal year 2021 of requests for anticipated payments (“RAPs”), which were no longer available by January 1, 2022.
HQRP, mandated by the Patient Protection and Affordable Care Act, requires hospice agencies to submit required quality data for inclusion on the public facing Hospice Compare website hosted by CMS. Hospices that fail to meet quality reporting requirements receive a 2.0% reduction to the annual market basket update for the fiscal years 2022 and 2023.
HQRP, mandated by the Patient Protection and Affordable Care Act, requires hospice agencies to submit required quality data for inclusion on the public facing Hospice Compare website hosted by CMS. Hospices that fail to meet quality reporting requirements receive a 4.0% reduction to the annual market basket update for the next fiscal year. Licensure and Certificates of Need (“CON”).
The HIPAA regulations have and will continue to impose significant costs on our facilities in order to comply with these standards. Our operations are also subject to any federal or state privacy-related laws that are more restrictive than the privacy regulations issued under HIPAA. These laws vary and could impose additional penalties for privacy and security breaches.
The HIPAA regulations have and will continue to impose significant costs on our facilities in order to 15 Table of Contents comply with these standards. Our operations are also subject to any federal or state privacy-related laws that are more restrictive than the privacy regulations issued under HIPAA.
As of December 31, 2023, we provided assisted living, independent living and memory care services in 51 communities with 3,588 total available units.
As of December 31, 2024, we provided assisted living, independent living and memory care services in 57 communities with 3,960 total available units.
From 2014 to 2023, we grew our home health and hospice services and senior living services revenue by 502.8% or a compounded annual growth rate of 22.1%. 5 Table of Contents From December 31, 2014 to December 31, 2023, we grew the number of our home health and hospice agencies and senior living units by 344.0% and 126.1%, respectively.
From 2014 to 2024, we grew our home health and hospice services and senior living services revenue by 669.0% or a compounded annual growth rate of 22.6%. 5 Table of Contents From December 31, 2014 to December 31, 2024, we grew the number of our home health and hospice agencies and senior living units by 392.0% and 149.5%, respectively.
As described in Part 1, Item 1., Grow Talent Base and Develop Future Leaders, our CEO-in-Training program provides significant in-person instruction and extensive training with key leaders from across the organization to empower local leaders. For the year ended December 31, 2023, 58.3% of our total expenses were payroll related.
As described in Part 1, Item 1., Grow Talent Base and Develop Future Leaders, our CEO-in-Training and Clinical Operations Leadership Training programs provide significant in-person instruction and extensive training with key leaders from across the organization to empower local leaders. For the year ended December 31, 2024, 67.7% of our total expenses were payroll related.
We believe that we have a significant opportunity to drive organic growth within our current portfolio, including recently acquired operations. As we improve clinical outcomes, quality of care and operational results at each of our existing and newly acquired operations, we believe we will become a provider of choice in the communities we serve, which leads to census growth.
As we improve clinical outcomes, quality of care and operational results at each of our existing and newly acquired operations, we believe we will become a provider of choice in the communities we serve, which leads to census growth.
The home health and hospice segment is growing within the overall healthcare landscape in the United States. According to Grandview Research, Inc., the home health market is estimated at approximately $142.9 billion and is expected to grow at a compounded annual growth rate (“CAGR”) of 7.5% from 2022 to 2030.
The home health and hospice segment is growing within the overall healthcare landscape in the United States. According to Grandview Research, Inc., the home health market is expected to grow at a compounded annual growth rate (“CAGR”) of 8.0% from 2024 to 2030.
For 3 Table of Contents more information about our operating segments, as well as financial information, see “ Management’s Discussion and Analysis of Financial Condition and Results of Operations ” and Note 6, Business Segments , to the Consolidated Financial Statements. Services Home Health and Hospice.
For more information about our operating segments, as well as financial information, see “ Management’s Discussion and Analysis of Financial Condition and Results of Operations ” and Note 6, Business Segments , to the Consolidated Financial Statements. Services Home Health and Hospice. As of December 31, 2024, we provided home health and hospice services through 123 agencies.
The hospice industry is estimated at approximately $34.5 billion and is projected to grow at an estimated CAGR of 8.2% from 2022 to 2030. The senior living market is estimated at approximately $91.8 billion and is expected to expand at an estimated CAGR of 5.5% between 2022 to 2030.
The hospice industry is estimated at approximately $37.9 billion and is projected to grow at an estimated CAGR of 8.1% from 2024 to 2030. The senior living market is expected to expand at an estimated CAGR of 4.2% between 2024 to 2030.
You may also find on our website at www.pennantgroup.com electronic copies of our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act.
These reports and other information concerning our company may be accessed through the SEC’s website at http://www.sec.gov. 16 Table of Contents You may also find on our website at www.pennantgroup.com electronic copies of our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act.
Under this CoP, all home health agencies are required to timely submit both a Start of Care or Resumption of Care OASIS assessment and a Transfer or Discharge OASIS assessment for a minimum of 90% of all episodes.
Under this CoP, all home health agencies are required to timely submit both a Start of Care or Resumption of Care OASIS assessment and a Transfer or Discharge OASIS assessment for a minimum of 90% of all episodes. In addition, CMS requires that all Medicare certified home health and hospice agencies participate in CAHPS surveys.
The following table sets forth our total revenue by payor source as a percent of revenue generated by each of our reportable segments and as a percentage of total revenue for the year ended December 31, 2023: Year Ended December 31, 2023 Home Health and Hospice Services Home Health Services Hospice Services Senior Living Services Total Revenue Medicare 48.1 % 86.2 % — % 48.4 % Medicaid 4.8 10.7 31.2 14.2 Subtotal 52.9 96.9 31.2 62.6 Managed care 34.2 2.8 — 13.5 Private and other (a) 13.0 0.3 68.8 23.9 Total revenue 100.0 % 100.0 % 100.0 % 100.0 % (a) Private and other payors in our home health and hospice services segment includes revenue from all payors generated in our home care operations.
The following table sets forth our total revenue by payor source as a percent of revenue generated by each of our reportable segments and as a percentage of total revenue for the year ended December 31, 2024: Year Ended December 31, 2024 Home Health and Hospice Services Home Health Services Hospice Services Senior Living Services Total Revenue Medicare 45.8 % 86.6 % — % 48.3 % Medicaid 4.3 10.8 30.6 13.2 Subtotal 50.1 97.4 30.6 61.5 Managed care 31.5 2.0 — 13.3 Private and other (a) 18.4 0.6 69.4 25.2 Total revenue 100.0 % 100.0 % 100.0 % 100.0 % (a) Private and other payors in the Company’s home health services includes revenue from all payors generated in the Company’s home care operations and management services agreement.
For the year ended December 31, 2023, we generated 72.4% of our revenue from home health and hospice services and 27.6% of our revenue from senior living services. Our diversified service portfolio allows us to opportunistically execute on our acquisition strategy as valuations fluctuate over industry cycles. Effective Talent Recruitment, Development and Retention.
For the year ended December 31, 2024, we generated 74.7% of our revenue from home health and hospice services and 25.3% of our revenue from senior living services. Our diversified service portfolio allows us to opportunistically execute on our acquisition strategy as valuations fluctuate over industry cycles.
As of December 31, 2023, we operate multiple lines of business, including home health, hospice and senior living, throughout Arizona, California, Colorado, Idaho, Montana, Nevada, Oklahoma, Oregon, Texas, Utah, Washington, Wisconsin and Wyoming.
As of December 31, 2024, we operate multiple lines of business, including home health, hospice and senior living, throughout Arizona, California, Colorado, Idaho, Montana, Nevada, Oklahoma, Oregon, Texas, Utah, Washington, Wisconsin and Wyoming. We also provide home health and hospice operational support through a management service agreement in Connecticut.
On October 7, 2023, California enacted SB 253 and SB 261, which require new climate disclosures from companies doing business in California. SB 253 requires companies with annual revenues of $1 billion or more to disclose their greenhouse gas emissions.
These requirements could change before the proposed rule is finalized. Climate Laws. In 2023, California enacted SB 253 and SB 261, which require new climate disclosures from companies doing business in California. SB 253 requires companies with annual revenues of $1 billion or more to disclose their greenhouse gas emissions.
The hospice cap amount for the 2024 fiscal year is $33,494.01, which is a 3.1% increase over the fiscal year 2023 hospice cap. Improving Medicare Post-Acute Care Transformation Act of 2014 (“IMPACT Act”) .
The hospice cap amount for the 2025 fiscal year is $34,465.34, which is a 2.9% increase over the 2024 fiscal year hospice cap. Improving Medicare Post-Acute Care Transformation Act of 2014 (“IMPACT Act”) .

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeAs an example, the failure of the 2011 Joint Select Committee to meet its Deficit Reduction goal resulted in an automatic reduction in Medicare home health and hospice payments of 2% beginning April 1, 2013 ("sequestration" - suspended from May 1, 2020 through March 31, 2022; reinstated at 1% for the period April 1, 2022 through June 30, 2022 and at 2% thereafter).
Biggest changeAs an example, the failure of the 2011 Joint Select Committee to meet its Deficit Reduction goal resulted in an automatic reduction in Medicare home health and hospice payments of 2% beginning April 1, 2013 (“sequestration” - suspended from May 1, 2020 through March 31, 2022; further extended by the Infrastructure Investment and Jobs Act of 2023, the Consolidated Appropriations Act of 2023, and the Consolidated Appropriations Act of 2024; the continuing resolution for further spending passed in the American Relief Act of 2025 (“ARA”) did waive the 4% pay-as-you-go sequestration, but the ARA did not halt reductions found in Medicare payment rules that took effect for fiscal year 2025, including those reductions that exceeded 2%).
Projections of self-insured retention losses are estimates that are subject to significant variability, and as a result, actual losses and expenses may be more or less than recorded liabilities. Our self-insurance programs may expose us to significant and unexpected costs and losses.
Projections of self-insured retention losses are estimates that are subject to significant variability, and as a result, our actual losses and expenses may be more or less than recorded liabilities. Our self-insurance programs may expose us to significant and unexpected costs and losses.
Changes in the acuity level of patients we attract, as well as our payor mix among Medicare, Medicaid, managed care organizations and private payors, significantly affect our profitability because we generally receive higher reimbursement rates for high acuity patients and because the payors reimburse us at different rates.
Changes in the acuity level of patients we attract, as well as our payor mix among Medicare, Medicaid, managed care organizations and private payors, may significantly affect our profitability because we generally receive higher reimbursement rates for high acuity patients and because the payors reimburse us at different rates.
Further, labor disputes and unionization efforts, among our own employees or among the employees of our referral partners, payors, vendors, joint venture partners, acquisition targets, or other parties, could lead to work stoppages, slowdown, strikes, lockouts, and increased costs, which could materially impact our operations.
Further, labor disputes and unionization efforts, among our own employees or among the employees of our referral partners, payors, vendors, joint venture partners, acquisition targets, or other parties, could lead to work stoppages, slowdown, strikes, lockouts, and increased costs, which could materially and adversely impact our operations.
We intend to continue financing operations through long-term operating leases, mortgage financing and other types of financing, including borrowings under our future credit facilities we may obtain. We may not generate sufficient cash flow from operations to cover required interest, principal and lease payments.
We intend to continue financing operations through long-term operating leases, mortgage financing and other types of financing, including borrowings under future credit facilities we may obtain. We may not generate sufficient cash flow from operations to cover required interest, principal and lease payments.
Further, because our self-insured retentions under our general and professional liability and workers’ compensation program apply on a per claim basis, there is no limit to the maximum number of claims or the total amount for which we could be responsible in any policy period. We also self-insure our employee health benefits.
Further, because our self-insured retentions under our general and professional liability and workers’ compensation program apply on a per claim basis, there is no limit to the maximum number of claims or the total amount for which we could be responsible during any policy period. We also self-insure our employee health benefits.
We operate and are subject to long term leases in areas particularly susceptible to damage or losses caused by catastrophic or extreme weather and other natural events, including fires, snow, rain or ice storms, windstorms, tornadoes, hurricanes, earthquakes, flooding and other severe weather. Many of our services require our employees to travel to patients’ homes by car.
We operate and are subject to long term leases in areas particularly susceptible to damage or losses caused by catastrophic or extreme weather and other natural events, including fires, snow, rain or ice storms, windstorms, tornadoes, hurricanes, earthquakes, landslides or mudslides, flooding and other severe weather. Many of our services require our employees to travel to patients’ homes by car.
Additionally, both federal and state government agencies have heightened and coordinated civil and criminal enforcement efforts as part of numerous ongoing investigations of healthcare companies. The focuses of these investigations includes, among other things: cost reporting and billing practices; quality of care; financial relationships with referral sources; and medical necessity of services provided.
Additionally, both federal and state government agencies have heightened and coordinated civil and criminal enforcement efforts as part of numerous ongoing investigations of healthcare companies. The focuses of these investigations include among other things: cost reporting and billing practices; quality of care; financial relationships with referral sources; and medical necessity of services provided.
Since California’s passage of AB 35, Iowa and Nevada have enacted similar laws that increase the non-economic damages that may serve as the basis for the recovery for attorney’s fees in those states, which may stimulate additional litigation in those states and could have an adverse material affect on our financial performance.
Since California’s passage of AB 35, Iowa and Nevada have enacted similar laws that increase the non-economic damages that may serve as the basis for the recovery for attorney’s fees in those states, which may stimulate additional litigation in those states and could have an adverse material effect on our financial performance.
Adverse weather events could impair our ability to provide services and could cause substantial damages or losses to our communities or operations, which may not be covered by insurance. These events may also indirectly effect our business by increasing the cost of (or making unavailable) insurance on terms we find acceptable.
Adverse weather events could impair our ability to provide services and could cause substantial damages or losses to our communities or operations, which may not be covered by insurance. These events may also indirectly affect our business by increasing the cost of (or making unavailable) insurance on terms we find acceptable.
With respect to our health benefits self-insurance, our reserves and premiums are computed based on a mix of company specific and general industry data. Even with a combination of limited company-specific loss data and general industry data, our loss reserves are based on actuarial estimate that may not correlate to actual loss experience in the future.
With respect to our health benefits self-insurance, our reserves and premiums are computed based on a mix of company-specific and general industry data. Even with a combination of limited company-specific loss data and general industry data, our loss reserves are based on actuarial estimates that may not correlate to actual loss experience in the future.
We may also experience an unexpectedly large number of successful claims or claims that result in costs or liability significantly in excess of our projections. For these and other reasons, our self-insurance reserves could prove to be inadequate, resulting in liabilities in excess of our available insurance and self-insurance.
We may also experience an unexpectedly large number of successful claims or claims that result in costs or liability significantly exceeding our projections. For these and other reasons, our self-insurance reserves could prove to be inadequate, resulting in liabilities exceeding our available insurance and self-insurance reserves.
Based upon factors such as our ability to identify suitable acquisition candidates, the purchase price of the operations, prevailing market conditions, the availability of leadership to manage new operations and our own willingness to take on new operations, the rate at which we have historically acquired home health, hospice and senior living operations has fluctuated and we anticipate similar fluctuation in the future.
Based upon factors such as our ability to identify suitable acquisition candidates, the purchase price of the operations, prevailing market conditions, the availability of leadership to manage new operations and our own willingness to take on new operations, 21 Table of Contents the rate at which we have historically acquired home health, hospice and senior living operations has fluctuated and we anticipate similar fluctuation in the future.
As a result of the uncertain domestic and global political, credit and financial market conditions, investments in these types of instruments pose risks arising from liquidity and credit concerns. Inflation may negatively impact profitability. The annual inflation rate in 2023 has impacted our operations, placing upward pricing pressure on all things from wages to supplies to energy costs.
As a result of the uncertain domestic and global political, credit and financial market conditions, investments in these types of instruments pose risks arising from liquidity and credit concerns. Inflation may negatively impact profitability. The annual inflation rate in recent years has impacted our operations, placing upward pricing pressure on all things from wages to supplies to energy costs.
In addition, from time to time, we may opt to voluntarily stop accepting new patients pending completion of a new state survey, to avoid straining staff and other resources while retraining staff, upgrading operating systems or making other operational improvements, all of which can impact our financial results.
In addition, from time to time, we may opt to voluntarily stop accepting new patients pending completion of a new state survey, to 18 Table of Contents avoid straining staff and other resources while retraining staff, upgrading operating systems or making other operational improvements, all of which can impact our financial results.
If there are any delays in receiving regulatory approvals from the applicable federal, state or local government agencies, or from independent accreditation authorities that may be required by federal, state or local government agencies, or the inability to receive such approvals, such delays could result in delayed or lost reimbursement related to periods of service prior to the receipt of such approvals.
If there are any delays in receiving regulatory approvals from the applicable federal, state or local government agencies, or from independent accreditation authorities that may be required by federal, state or local government agencies, or the inability to receive such 20 Table of Contents approvals, such delays could result in delayed or lost reimbursement related to periods of service prior to the receipt of such approvals.
Although most inspection deficiencies are resolved through an agreed-upon plan of corrective action, the reviewing agency typically has the authority to take further action against a licensed or certified operation, which could result in the imposition of fines and penalties, imposition of a provisional or conditional license, suspension or revocation of a license, suspension of new admission or bed holds, loss of certification as a provider under state or federal healthcare programs or termination of the operations’ payment relationships with those programs, or imposition of other sanctions, including criminal penalties.
Although most inspection deficiencies are resolved through an agreed-upon plan of corrective action, the reviewing agency typically has the authority to take further action against a licensed or certified operation, which could result in the imposition of fines and penalties, reports to the national practitioner data bank, imposition of a provisional or conditional license, suspension or revocation of a license, suspension of new admission or bed holds, loss of certification as a provider under state or federal healthcare programs or termination of the operations’ payment relationships with those programs, or imposition of other sanctions, including criminal penalties.
Seventeen of our affiliated senior living communities are currently subject to regulatory agreements with HUD that give the Commissioner of HUD broad authority to require us to be replaced as the operator of those communities in the event that the Commissioner determines there are operational deficiencies at such communities under HUD regulations.
Seventeen of our affiliated senior living communities are currently subject to regulatory agreements with HUD that give the Commissioner of HUD broad authority to have us replaced as the operator of those communities in the event that the Commissioner determines there are operational deficiencies at such communities under HUD regulations.
Under certain master leases, a breach at a single community could subject one or more of the other communities covered by the same master lease to the same default risk. Failure to comply with provider requirements is a default under several of the leases and master lease agreements.
Under certain master leases, a breach at a single community 23 Table of Contents could subject one or more of the other communities covered by the same master lease to the same default risk. Failure to comply with provider requirements is a default under several of the leases and master lease agreements.
Risks Related to Our Business and Industry Our revenue could be impacted by federal changes to reimbursement and other aspects of Medicare. We derived 48.4% of our revenue from the Medicare program for the year ended December 31, 2023, which is typical. In addition, other payors may use published Medicare rates as a basis for reimbursements.
Risks Related to Our Business and Industry Our revenue could be impacted by federal changes to reimbursement and other aspects of Medicare. We derived 48.3% of our revenue from the Medicare program for the year ended December 31, 2024, which is typical. In addition, other payors may use published Medicare rates as a basis for reimbursements.
In addition, enrollment in Medicare Advantage programs continues to grow nationwide, and an increasing proportion of Medicare and Medicaid funds are managed by companies that are also third-party payors who may seek to reduce reimbursement as described above.
In addition, enrollment in Medicare Advantage programs continues to grow nationwide, and an increasing proportion of Medicare and Medicaid funds are managed by MCOs that also act as third-party payors who may seek to reduce reimbursement as described above.
If funds are raised through the issuance of additional equity securities, the percentage ownership of our stockholders would be diluted, and any newly issued equity securities may have rights, 21 Table of Contents preferences or privileges senior to those of our common stock.
If funds are raised through the issuance of additional equity securities, the percentage ownership of our stockholders would be diluted, and any newly issued equity securities may have rights, preferences or privileges senior to those of our common stock.
Some states in which we operate experience or have experienced budget deficits or could have a budget deficit in the future, which may delay 24 Table of Contents reimbursement in a manner that would adversely affect our liquidity. In addition, from time to time, procedural issues require us to resubmit claims before payment is remitted, which contributes to aged receivables.
Some states in which we operate experience or have experienced budget deficits or could have a budget deficit in the future, which may delay reimbursement in a manner that would adversely affect our liquidity. In addition, from time to time, procedural issues require us to resubmit claims before payment is remitted, which contributes to aged receivables.
Because we lease most of our affiliated senior living communities, we could experience risks associated with leased property, including risks relating to lease termination, lease extensions and special charges, which could adversely affect our business, financial position or results of operations. As of December 31, 2023, we leased all of our senior living communities, except for one.
Because we lease most of our affiliated senior living communities, we could experience risks associated with leased property, including risks relating to lease termination, lease extensions and special charges, which could adversely affect our business, financial position or results of operations. As of December 31, 2024, we leased all of our senior living communities, except for three.
Risks Related to Ownership of Our Common Stock Anti-takeover provisions in our organizational documents and Delaware law might discourage or delay acquisition attempts for us that you might consider favorable.
Risks Related to Ownership of Our Common Stock 25 Table of Contents Anti-takeover provisions in our organizational documents and Delaware law might discourage or delay acquisition attempts for us that you might consider favorable.
If state or federal regulators were to determine, formally or otherwise, that one operation’s regulatory history ought to impact another of our existing or prospective communities, this could also increase costs, result in additional fines or penalties, result in increased scrutiny by state and 18 Table of Contents federal survey agencies, and impact our expansion plans as well as our ongoing operations.
If state or federal regulators were to determine, formally or otherwise, that one operation’s regulatory history ought to impact another of our existing or prospective businesses, this could also increase costs, result in additional fines or penalties, result in increased scrutiny by state and federal survey agencies, and impact our expansion plans as well as our ongoing operations.
Our insurance carriers may 22 Table of Contents require us to pay substantially higher premiums for the same or reduced coverage for insurance, including workers compensation, property and casualty, automobile, employment practices liability, directors and officers liability, employee healthcare and general and professional liability coverages. Further, many claims and other risks we face are not insurable.
Our insurance carriers may require us to pay substantially higher premiums for the same or reduced coverage for insurance, including workers compensation, property and casualty, automobile, employment practices liability, directors and officers liability, employee healthcare insurance benefits, and general and professional liability coverages. Further, many claims and other risks we face are not insurable.
Inflation is expected to remain relatively consistent in 2024, but may continue to affect the Company’s profit in providing services. We have historically derived a substantial portion of our revenue from the Medicare program. We also derive revenue from state Medicaid and similar reimbursement programs. Payments under these programs generally provide for reimbursement levels that are adjusted for inflation annually.
Inflation is expected to ease in 2025 but may continue to affect the Company’s profit in providing services. We have historically derived a substantial portion of our revenue from the Medicare program. We also derive revenue from state Medicaid and similar reimbursement programs. Payments under these programs generally provide for reimbursement levels that are adjusted for inflation annually.
The Company recognizes obligations associated with these costs in the period in which a claim is incurred, including with respect to both reported claims and claims incurred but not reported. These costs generally are estimated based on our historical claims experience.
We recognize obligations associated with these costs in the period in which a claim is incurred, including with respect to both reported claims and claims incurred but not reported. These costs generally are estimated based on our historical claims experience.
Seniors often use the proceeds of home sales to fund their admission to assisted living communities. A downturn in the housing markets, such as the downturn that was ongoing in 2022 and 2023 as a result of higher than normal mortgage interest rates, could adversely affect seniors’ ability to afford our 23 Table of Contents resident fees and entrance fees.
Seniors often use the proceeds of home sales to fund their admission to assisted living communities. A downturn in the housing markets, such as the slowdown in activity that was ongoing in 2023 and 2024 as a result of higher-than-normal mortgage interest rates, could adversely affect seniors’ ability to afford our resident fees and entrance fees.
If we lose, or fail to maintain, existing relationships with our referral resources, fail to develop new relationships, or if we are perceived by our referral sources as not providing high quality patient care, our census could decline and our patient mix could change.
If we lose, or fail to maintain, existing relationships with our referral resources, fail to develop new relationships, or if we are perceived by our referral sources as not providing high quality patient care, our independent subsidiaries’ respective censuses could decline and our patient mix could change.
Most of our leases are triple-net leases, which means that, in addition to rent, we are required to pay for the costs related to the property (including property taxes, insurance, and maintenance and repair costs), the cost of which have increased since 2020 and may adversely affect us with future increases and operating expense reconciliations due for prior years.
Most of our leases are triple-net leases, which means that, in addition to rent, we are required to pay for the costs related to the property (including property taxes, insurance, and maintenance and repair costs), the cost of which tend to increase year-over year and may adversely affect us with future increases and operating expense reconciliations due for prior years.
As discussed in greater detail in Item 1., Government Regulation , as a result of our participation in the Medicaid and Medicare programs, we are frequently subject to various governmental reviews, audits and investigations to verify our compliance with these programs. Private pay sources also reserve the right to conduct audits.
As discussed in greater detail in Item 1., Government Regulation , as a result of our participation in the Medicaid and Medicare programs, we are frequently subject to various governmental reviews, audits and investigations to verify our compliance with these programs.
Under its insurance policies, the Company bears the risk of loss up to specified deductible limits, which may be substantial if there is a surge in the volume of claims subject to the deductible.
Under our insurance policies, we bear the risk of loss up to specified deductible limits, which may be substantial if there is a surge in the volume of claims subject to the deductible.
The failure to make required payments on our debt or operating leases or the delay or abandonment of our planned growth strategy could result in an adverse effect on our future ability to generate revenue and sustain profitability and subject us to foreclosure.
The failure to make required payments on our debt or operating leases or the delay or abandonment of our planned growth strategy could adversely affect our future ability to generate revenue and sustain profitability and subject us to foreclosure.
For the year ended December 31, 2023, 62.6% of our revenue was provided by government payors that reimburse us at predetermined rates, which is typical.
For the year ended December 31, 2024, 61.5% of our revenue was provided by government payors that reimburse us at predetermined rates, which is typical.
Additionally, the annual increase in Medicare beneficiary caps may not keep pace with the rate of inflation or increased operating costs as it applies to the costs of caring for such patients, potentially resulting in our hospice independent operating subsidiaries treating these patients at a loss. 19 Table of Contents Security breaches and other cyber-security incidents could subject us to significant liability.
Additionally, the annual increase in 19 Table of Contents Medicare beneficiary caps may not keep pace with the rate of inflation or increased operating costs as it applies to the costs of caring for such patients, potentially resulting in our hospice independent operating subsidiaries treating these patients at a loss.
Throughout 2022 and 2023, however, there has been a nationwide trend of increasing union activity, including strikes in the health care industry and in locations, such as California, in which we operate.
Throughout 2023 and 2024, however, there has been a nationwide trend of increasing union activity, including strikes in the healthcare industry and in states, such as California, in which we operate.
Disagreements about billing and reimbursement are common in our industry due in part to the subjectivity inherent in patient diagnosis and care, record keeping, claims processing and other aspects of the patient service and reimbursement processes.
Private pay sources also reserve the right to conduct audits. Disagreements about billing and reimbursement are common in our industry due in part to the subjectivity inherent in patient diagnosis and care, record keeping, claims processing and other aspects of the patient service and reimbursement processes.
We can expect continuing cost containment pressures on Medicaid outlays for our services. Reforms to the U.S. healthcare system continue to impose new requirements upon us and may lower our reimbursements. Health care reform is a key political and legislative focal point.
We can expect continuing cost containment pressures on Medicaid outlays, whether administered directly by a state program or through an MCO, for our services. Reforms to the U.S. healthcare system continue to impose new requirements upon us and may lower our reimbursements. Healthcare reform is a key political and legislative focal point.
In addition, our home health payment rates could be reduced, as described in Item 1., Government Regulation - Home Health Value Based Purchasing (HHVBP ); further, our star ratings measured by CMS on a five-star basis may decrease, resulting in lower estimation by potential residents and patients and reducing the likelihood of having those potential residents and patients use our services, as described in Item 1., Our Competitive Strengths - Superior Clinical Outcomes and Quality Care.
In addition, our home health payment rates could be reduced, as described in Item 1., Government Regulation - Home Health Value Based Purchasing (HHVBP ); further, our star ratings measured by CMS on a five-star basis may decrease, resulting in lower estimation by potential residents and patients and reducing the likelihood of having those potential residents and patients use our services, as described in Item 1., Our Competitive Strengths - Superior Clinical Outcomes and Quality Care. 22 Table of Contents If we are unable to obtain insurance, or if insurance becomes more costly for us to obtain, our business may be adversely affected.
It is possible new laws may lower reimbursement or increase the cost of doing business and adversely affect our business. 17 Table of Contents We are subject to various government reviews, audits and investigations that could adversely affect our business, including an obligation to refund amounts previously paid to us, potential criminal charges, the imposition of fines, and/or the loss of our right to participate in Medicare and Medicaid programs.
We are subject to various government reviews, audits and investigations that could adversely affect our business, including an obligation to refund amounts previously paid to us, potential criminal charges, the imposition of fines, and/or the loss of our right to participate in Medicare and Medicaid programs.
Inflation has led, and may continue to lead, to increased interest rates, which have and could continue to increase our cost of capital, impair consumers’ ability to purchase our services, or otherwise harm us financially. Extreme weather, natural disasters, or other catastrophic events could adversely effect our results from operations.
Inflation has led, and may continue to lead, to increased interest rates, which have and could continue to increase our cost of capital, impair consumers’ ability to purchase our services, or otherwise harm us financially. Changes to immigration law or enforcement could adversely affect our results from operations.
Therefore, our reserves may prove to be insufficient and we may be exposed to significant and unexpected losses. The unionization of our workers may adversely affect our revenue and profitability. To date, with the exception of one preexisting bargaining unit at an operation acquired as part of a joint venture, our employees have chosen not to unionize.
Therefore, our reserves may prove to be insufficient, and we may be exposed to significant and unexpected losses. The unionization of our workers may adversely affect our revenue and profitability. To date, with the exception of one joint venture, where certain employees had elected to unionize prior to our acquisition, our employees have chosen not to unionize.
Our claims history, asset mix, or other factors may adversely affect our ability to obtain insurance at favorable rates. Recent legislation in Nevada that prohibits the reduction of available funds based on the costs of defending claims or litigation may result in higher premiums for our operations within that state.
Recent legislation in Nevada that prohibits the reduction of funds available to pay claims based on the costs of defending claims or litigation may result in higher premiums for our operations within that state.
Data breaches and leaks, which represent a material risk to our business, are reported to have occurred with greater frequency in 2023 than in 2022 and 2021. Our business depends on the proper functioning and availability of our computer systems and networks.
Security breaches and other cyber-security incidents could subject us to significant liability. Data breaches and leaks, which represent a material risk to our business, are reported to have occurred with greater frequency and severity in 2024 than in prior years. Our business depends on the proper functioning and availability of our computer systems and networks.
These adjustments may not continue in the future, and even if continued, such adjustments may not reflect the actual increase in our costs for providing healthcare services. Labor and supply expenses make up a substantial portion of our cost of services. Those expenses are subject to increase in periods of rising inflation and when labor shortages occur in the marketplace.
Labor and supply expenses make up a substantial portion of our cost of services. Those expenses are subject to increase in periods of rising inflation and when labor shortages occur in the marketplace.
The Medicare program and its reimbursement rates, caps, deductibles and rules are subject to frequent change for a variety of reasons, which is discussed in Item 1., Government Regulation . Budget pressures also frequently lead the federal government to reduce or limit reimbursement rates under Medicare, and to adjust when or how those reductions or limitations are implemented.
The Medicare program and its reimbursement rates, caps, deductibles and rules are subject to frequent change for a variety of reasons, which is discussed in Item 1., Government Regulation .
These provisions could also discourage proxy contests and make it more difficult for our stockholders to elect directors of their choosing and to cause us to take other corporate actions desired. Risks Related to COVID-19 COVID-19 has created new regulatory risks that impact our operations.
These provisions could also discourage proxy contests and make it more difficult for our stockholders to elect directors of their choosing and to cause us to take other corporate actions desired. Item 1B. Unresolved Staff Comments None.
If we are unable to obtain insurance, or if insurance becomes more costly for us to obtain, our business may be adversely affected. It may become more difficult and costly for us to obtain coverage for patient care liabilities and other risks, including property and casualty insurance.
It may become more difficult and costly for us to obtain coverage for patient care liabilities and other risks, including property and casualty insurance. Our claims history, asset mix, or other factors may adversely affect our ability to obtain insurance at favorable rates.
Any budget reductions or funding restrictions, discontinuance or reduction of federal matching, change in payment methodology or delays in states in which we operate could adversely affect our net patient service revenue and profitability, including the reduction of federal funds contributed to state Medicaid budgets during the COVID-19 public health emergency.
We derived 13.2% of our revenue from Medicaid programs for the year ended December 31, 2024, which is typical. Any budget reductions or funding restrictions, discontinuance or reduction of federal matching, change in payment methodology or delays in states in which we operate could adversely affect our net patient service revenue and profitability.
We may not be able to obtain licensure, CON approval, Medicare or Medicaid certification, Attorney General approval or other necessary approvals for future expansion projects.
We may not be able to obtain licensure, CON approval, Medicare or Medicaid certification, Attorney General approval or other necessary approvals for future expansion projects. In recent years, states including, but not limited to, California and Oregon have introduced additional regulatory reviews and other barriers to health care transactions.
Reductions in Medicaid reimbursement rates or changes in the rules governing the Medicaid program could have a material, adverse effect on our revenues, financial condition and results of operations. We derived 14.2% of our revenue from Medicaid programs for the year ended December 31, 2023, which is typical.
Our operations may not successfully implement or adapt to these changes and our operations could be materially impacted. Reductions in Medicaid reimbursement rates or changes in the rules governing the Medicaid program could have a material, adverse effect on our revenues, financial condition and results of operations.
By way of example, in 2022 California passed Assembly Bill 2673 which prohibits issuance of new hospice licenses and limits transfer of existing licenses. 20 Table of Contents Compliance with federal and state fair housing, fire, safety and other regulations may require us to make unanticipated expenditures, which could be costly to us.
Compliance with federal and state fair housing, fire, safety and other regulations may require us to make unanticipated expenditures, which could be costly to us.
Additionally, Medicare payments can be delayed or denied (including retroactively) due to determinations that certain costs, services or providers are not covered.
Budget pressures also frequently lead the federal government to reduce or limit reimbursement rates under Medicare, and to adjust when or how those reductions or limitations are implemented, including sometimes doing so retroactively. Additionally, Medicare payments can be delayed or denied (including retroactively) due to determinations that certain costs, services or providers are not covered.
The consequences of elections are not yet fully known for this industry, and our industry may be affected by the Presidential primary campaigns that began in 2023 and will continue this year, culminating with the presidential election in November of 2024.
The consequences of elections are not yet fully known for this industry, and our industry may be affected by presidential and congressional election outcomes. It is possible new laws may lower reimbursement or increase the cost of doing business and adversely affect our business.
Attributable to the COVID-19 pandemic, insurers may increase their exclusions of infectious diseases or raise costs of coverage significantly affecting our ability to obtain insurance coverage. We retain certain risks related to our insurance coverage.
Climate change and the proliferation of natural disasters may increase the cost of coverage or make coverage impossible to obtain. We retain certain risks related to our insurance coverage.
Removed
Our operations may not successfully implement or adapt to these changes and our operations could be materially impacted. Medicare reimbursement and participation may also be tied to the vaccination of employees against COVID-19 pursuant to a CMS rule which took effect in March 2022 and was in effect until August of 2023 when CMS withdrew this requirement.
Added
Additionally, in many states where we operate Medicaid benefits are administered through Medicaid Managed Care Organizations (“MCOs”), which are operated by private insurance companies. These MCOs may apply different, stricter standards for reimbursement and prior authorization of our services, which may further adversely affect our ability to be paid for our services.
Removed
When CMS’s COVID-19 vaccine mandate was in effect, it required employees of certain Medicare-participating facilities and services including home health agencies and hospices to be vaccinated, which affected our businesses and employees during that time period.
Added
In addition to routine audits, in its November 2023 Final Rule, CMS finalized a provisional period of enhanced oversight, including prepayment medical reviews, for all 17 Table of Contents hospice providers that are newly enrolled or undergo a change of ownership, which expanded in June 2024 to include reactivated hospice providers in states where we operate.
Removed
A Medicare overpayment audit of one of our independent operating subsidiaries could result in a material loss. From June 2021 to May 2022, a united program integrity contractor (“UPIC”) for the Medicare program suspended one of our independent operating subsidiary’s rights to submit claims to and obtain reimbursement from Medicare for its hospice agency services.
Added
By way of example, in 2022 California passed Assembly Bill 2673 which prohibits issuance of new hospice licenses and limits transfer of existing licenses, and other states where we operate may introduce similar legislation in the future. In 2024, CMS implemented a rule prohibiting hospice ownership from being transferred more than once in a 36-month period.
Removed
The suspension concluded in May 2022 and Medicare has resumed payment on new claims submitted by the agency. The payments suspended as of June 30, 2022 totaled $5.2 million and represented all Medicare payments due to that independent operating subsidiary’s provider number during the suspension.
Added
Similarly, recent legislation in California and Nevada increasing the amounts of non-economic damages recoverable in actions based on professional negligence against healthcare providers may also result in higher premiums for our operations within those states and limit the options for available coverage.
Removed
During the suspension, the UPIC reviewed 107 patient records from a 10-month period to determine whether a Medicare overpayment was made to this independent operating subsidiary and whether repayment of any identified overpayment is due.
Added
These inflation-based increases may not continue in the future, such as in the case of Medicare payments subject to reduction under sequestration required by prior legislation. Even if these reimbursement rate increases continued, such adjustments may not reflect the actual increase in our costs for providing healthcare services.
Removed
Based on the results of its claim review, the UPIC alleged actual overpayments of $0.4 million and extrapolated overpayments of $5.2 million based upon its sampled and extrapolated data. In September and October 2022, the Company submitted requests for redetermination of the alleged overpayments.
Added
Changes to immigration laws and policies, or increased enforcement of existing laws and regulations, could impact our employees or the labor pool from which we hire future employees.
Removed
The UPIC’s redetermination decision was partially favorable, reducing the alleged overpayment from $5.2 million to $1.9 million. The Company plans to continue to contest the UPIC’s initial overpayment determination for the claim samples redetermined adversely to the Company.
Added
Such changes could reduce the number of eligible workers and increase wage costs, including for skilled workers who may work or receive professional training in the United States under various visa programs, making it more difficult or impossible for us to staff our operations. 24 Table of Contents Extreme weather, natural disasters, or other catastrophic events could adversely affect our results from operations.
Removed
This suspension and overpayment allegation may increase the likelihood that this or other of our independent operating subsidiaries may be subjected to additional scrutiny in the future.
Removed
A Medicare contractor may review patient records from one or more of our other independent operating subsidiaries, which may lead to those agencies having their Medicare payments 25 Table of Contents suspended, whether temporarily or on an indefinite or permanent basis, potentially leading to their closure and resulting adverse impacts on our revenues and profits.
Removed
COVID-19 generated dramatic and rapid changes in the laws affecting our operations, and the unwinding of pandemic-related activities may continue to affect our business in the foreseeable future. U.S. Federal, state, and local regulators implemented new laws, rules, regulations, and orders, or waived or modified existing laws, rules and regulations for the duration of the COVID-19 public health emergency (“PHE”).
Removed
The PHE concluded on May 11, 2023, which required us to navigate the termination of federal and state waivers and flexibilities. The resumption of pre-COVID-19 regulatory requirements at the conclusion of the public health emergency may continue to require significant operational changes on short notice.
Removed
COVID-19 and related risks have affected and could materially affect our results of operations, financial position and/or liquidity. The global spread of COVID-19 and the various attempts to contain it created significant volatility, uncertainty and economic disruption, and we continue to see the after-effects of these changes today.
Removed
Many of the direct and indirect consequences of COVID-19 on our business are now known; however, new developments in the wake of the PHE’s termination, as well as legacy consequences from the COVID-19 pandemic including COVID-19 variants, second-order effects such as inflation, consumer demand, and labor supply issues are ongoing.
Removed
Similarly, not all the risks and consequences of the COVID-19 PHE’s termination and conclusion of emergency responses to COVID-19 in states and localities where we operate are not yet fully known, and may yet adversely affect our business in ways that are evolving or may only be evident with the passage of time.
Removed
Risks presented by the effects of COVID-19 include the following: • Disruption caused by repeated waves of COVID-19 variants, including breakthrough infections of fully vaccinated individuals, poses a risk to the Company for the foreseeable future due to the potential consequences of such variants on Company personnel, labor pool participants, availability of necessary supplies, continued adverse impact on move-in rates within senior living, and consequences for the broader economy. • Decreased home health and hospice volumes and senior living occupancy, which may lead to decreased revenue. • Increased costs and staffing requirements related to implementation of COVID-19 infection prevention protocols, including increased utilization of personal protective equipment (“PPE”), COVID-19 diagnostic testing and vaccination for staff and residents, and additional labor and cleaning supplies to frequently sterilize equipment and surfaces. • Increased labor costs due to increased overtime or premium pay, paid leave, reduced labor force participation, wage pressure from competitors, workers becoming ineligible for employment due to COVID-19 vaccination requirements, mandatory testing costs, reduction of the qualified workforce due to burnout and qualified personnel leaving the caregiving field, and the increased need for temporary labor to supplement our existing staffing as our front-line employees may become unable to work while awaiting the results of COVID-19 tests or as they recover from a COVID-19 infection. 26 Table of Contents • Increased scrutiny by regulators of visitation requirements, infection control and prevention measures, including imposition of new COVID-19 disease and mortality reporting requirements, and increased enforcement of resident rights’ violations related to visitation. • Disruptions to supply chains which could negatively impact consistent and reliable delivery of PPE, sanitizing supplies, food, pharmaceuticals, and other goods. • COVID-19 related illnesses in staff may impact the quality of care, which could lead to temporary staffing shortages or reliance on less experienced personnel. • Employee concerns related to workplace safety, including potential for increase in workers’ compensation claims. • Potential increase in insurance premiums and COVID-19 related claims. • Inconsistent application or interpretation of modifications to regulatory requirements by surveyors, including both COVID-19 survey standards and the resumption of pre-COVID-19 survey standards and practices. • Potential for continued inflation and price increases of certain goods or services resulting from changes in economic conditions and steps taken by the federal government and the Federal Reserve, which could lead to higher inflation rates or longer-lasting inflation than anticipated, which could in turn lead to an increase in expenses, including payroll, insurance, and rent expense under our triple net leases.
Removed
All of the triple net leases in our senior living business contain annual rent escalators tied to year-over-year increases in various consumer price indices.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeThrough these processes, the Board of Directors is apprised of, and given the opportunity to discuss at length, any meaningful cybersecurity risks we face. Directors Scott E. Lamb, Gregory K. Morris, and John G. Nackel, Ph.D. provide key oversight on cybersecurity matters. Our executive team is also briefed on any significant security risks during monthly leadership meetings.
Biggest changeNackel, Ph.D. provide key oversight on cybersecurity matters. Our executive team is also regularly briefed on any significant security risks during monthly leadership meetings.
Removed
Item 1C. Cybersecurity As a health care provider, we regularly process and store patient and resident information. We are committed to the protection of the personal information of our and our independent operating subsidiaries’ patients, residents, and employees.
Added
Item 1C. Cybersecurity We leverage information technology to enable our teams to share best practices, stay informed, adapt to challenges and opportunities promptly, improve the quality of care, mitigate risks, and enhance both clinical outcomes and financial performance. Additionally, we have invested in specialized healthcare technology systems to support our nursing and support staff.
Removed
We have robust security tools, practices, and policies in place to help ensure the confidentiality, integrity, and accessibility of the data with which we are entrusted.
Added
Our software and technology in each operation allows our clinical staff to monitor and deliver patient care and record patient information more efficiently, but the use of information systems also introduces cybersecurity risks, including system disruption, security breaches, ransomware, theft, espionage, and inadvertent release of information.
Removed
Certain of the numerous tools and processes that we use to assess, identify and manage material risks include, without limitation: • Automated third-party tools to screen and block malicious content 27 Table of Contents • Dedicated IT security staff who review threats in real time and escalate issues as needed • Regular security tests and audits performed by internal and external parties • Ongoing security training for all employees Our Chief Information Officer (“CIO”), Bryant Saxon, oversees our cybersecurity program and dedicated security resources.
Added
Risk Management and Strategy Risk Management We assess and identify security risks to the organization by: • Conducting regular risk assessments to determine the likelihood and magnitude of an attack from unauthorized access, use, disclosure, disruption, modification, or destruction of information systems and related information processes, stored, or transmitted; • Performing annual security assessments and producing security assessment reports for review by Information Technology (“IT”) senior leadership, including the service center's Chief Information Officer (“CIO”) and Chief Information Security Officer (“CISO”); • Regularly assessing security controls for effectiveness, proper functioning, and satisfactory results; and • Continuously monitoring and addressing vulnerabilities.
Removed
Mr. Saxon has over 15 years of direct cybersecurity experience in Chief Information Officer and other key leadership roles in the healthcare industry. His experience includes HIPAA compliance, systems design, security audits, and incident response.
Added
Monitoring We have established a monitoring strategy and program, which includes: • Active, automated threat detection and screening; • Clearly defined security metrics to be monitored; • Regular security control assessments; • Regular communication about security issues with the executive team and board of directors; • Monitoring information systems to detect attacks and indicators of potential attacks or compromises; • Identifying unauthorized use of information system resources; and • Deploying monitoring systems and agents strategically within the information system environment.
Removed
Our Board of Directors is also committed to data security and is regularly updated by the CIO on cybersecurity and other relevant technology risks facing the Company. Each quarter, the Audit Committee receives an IT risk update from the CIO, and discusses emerging technology and cybersecurity risks.
Added
Data Protection We have implemented policies and programs to secure sensitive data.
Removed
This risk update includes an overview and discussion of our cybersecurity and risk management programs. In addition, technology risk is a key component of our overall enterprise risk assessment, which is conducted annually and presented to the Board of Directors.
Added
These include: • Data security policies for the Company and its subsidiaries; • Frequent security training; 26 Table of Contents • Establishing controls over network devices, actively tracking, monitoring, and evaluating them for new, missing, or updated software needed to strengthen security, patch known vulnerabilities, or stabilize software or operating system issues; • Protecting sensitive data through encryption techniques; and • Utilizing systems with backup and recoverability principles, such as periodic data backups and safeguards in case of a disaster.
Removed
We emphasize that everyone has a role to play in data security. All employees are provided with data security and privacy training upon hire and as part of annual refresher training. All employees are required to complete this training, and we also provide periodic updates and guidance related to cybersecurity.
Added
Incident Management Our cybersecurity incident management plan includes the following five-step process: 1. The service center's CIO and CISO lead the Information Security (“IS”) team in developing, documenting, reviewing, and testing security and incident management procedures; 2.
Removed
In addition, we regularly conduct phishing simulations or other tests to identify cyber threats. To address and mitigate cybersecurity risks from third-party systems, the Company implements a stringent process that includes SOC 1 and SOC 2 compliance. These standards help ensure that our third-party vendors maintain appropriate security controls and processes.
Added
The IS team works with the executive team to identify, assess, verify, and classify incidents to determine affected stakeholders and appropriate parties for contact; 3.
Removed
Additionally, we enter into Business Associate Agreements (BAAs) with relevant third-party vendors. These agreements are critical for reinforcing our cybersecurity framework, as they require vendors to maintain the confidentiality, integrity, and availability of protected health information according to our standards and federal regulations.
Added
In the event of a security incident, the service center's CIO and CISO are responsible for launching an Incident Response Team (“IRT”) if necessary and notifying the executive team, who will contact the board of directors and the Audit Committee to validate the response; 4.
Removed
Additionally, through third-party risk assessments, regular audits, and the enforcement of security requirements, we seek to ensure that all vendors adhere to our standards of data security and privacy. This layered security approach, incorporating both technical compliance and legal agreements, helps to create a defense against external cyber threats. We did not experience any material cybersecurity incidents in 2023.
Added
The IRT, in consultation with outside experts if needed, is responsible for initial containment, analysis, incident containment, incident eradication, and recovery. The IS team also coordinates with our legal and compliance teams as needed; and 5. After each significant incident, analyses are conducted to improve prevention and make incident response processes more efficient and effective.
Removed
Although we incur numerous costs in the ordinary course of business to address the risks and implement the policies described above, risks from cybersecurity threats did not materially affect our strategy, results of operations, or financial condition in 2023. Although we are deeply committed to cybersecurity, we cannot fully mitigate all technology risks.
Added
We have not experienced a material cybersecurity breach as an organization in the past five years. Moreover, cybersecurity threats have not materially affected our business strategy, results of operations, or financial condition.
Removed
Cybersecurity threats, including data breaches, ransomware, and similar threats, could materially impact our future results in the future. For further discussion of how any risks from cybersecurity threats may materially affect the Company, including our business strategy, results of operations or financial condition, see Part 1, Item 1A.
Added
While we have implemented processes and procedures to address and mitigate cybersecurity threats, there can be no assurances that such an incident will not occur despite our efforts, as described in Item 1A. Risk Factors .
Removed
Risk Factors , which is incorporated by reference into this Part 1, Item 1C. Cybersecurity ..
Added
Governance Our Audit Committee receives quarterly reports on our information security and cyber fraud prevention programs from the service center's CIO and CISO, each of whom has over 15 years of experience in IT, including various leadership roles at other large corporations. Directors Scott E. Lamb, Gregory K. Morris M.D., and John G.
Added
The IS team, established by the service center's CIO and CISO, has dedicated cybersecurity staff focusing on security monitoring, vulnerability management, incident response, risk assessments, employee training, security engineering, and management of cybersecurity policies, standards, and regulatory compliance. The Company implements security standards that include SOC 1 and SOC 2 compliance.
Added
We align with a Cyber Security Framework and take a risk-based approach during control assessment and implementation, following the National Institute of Standards and Technology (“NIST”) framework. We are committed to protecting our data, systems, and network and continually invest in enhancements to mitigate or reduce the impact of cybersecurity threats.
Added
We conduct periodic tests to maintain readiness and resiliency while regularly reviewing policies to protect data security. External companies or agencies may provide consulting, guidance, assistance, or support in response to a cybersecurity incident. Employees receive regular training, at least annually, on cybersecurity threats and best practices to maintain information security.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties Service Center We lease two office locations to accommodate our Service Center. We lease approximately 16,794 square feet of office space located at 1675 East Riverside Drive, Suite 150, Eagle, ID 83616, pursuant to a lease that expires March 31, 2025. Our principal executive offices are located at the Service Center in Eagle, Idaho.
Biggest changeItem 2. Properties Service Center We lease office space to accommodate our Service Center. Our primary Service Center is located in Eagle, Idaho. The leased property consists of approximately 16,794 square feet of office space and the lease term expires March 31, 2025. We also have leased office space for service centers in Midvale, Utah and Farmington, Connecticut.
Office space is leased within geographies served by our agencies. 28 Table of Contents As of December 31, 2023, we operated 51 affiliated senior living communities in Arizona, California, Idaho, Nevada, Texas, and Wisconsin with 3,588 Senior Living units. We lease all of our communities, save one which we own, through long-term, triple-net lease arrangements.
Office space is leased within geographies served by our agencies. 27 Table of Contents As of December 31, 2024, we operated 57 affiliated senior living communities in Arizona, California, Idaho, Nevada, Texas, Utah, and Wisconsin with 3,960 Senior Living units. We lease 54 of our communities through long-term, triple-net lease arrangements, and own the remaining 3 properties.
The following table provides summary information regarding the locations of our home health and hospice agencies and our senior living communities and operational units as of December 31, 2023: State Home Health Agencies Hospice Agencies Senior Living Communities Senior Living Units Arizona 7 13 5 841 California 8 12 7 629 Colorado 9 2 — — Idaho 5 4 2 175 Montana 1 1 — — Nevada 1 2 4 385 Oklahoma 2 2 — — Oregon 2 1 — — Texas 5 9 12 712 Utah 7 4 — — Washington 5 4 — — Wisconsin 2 1 21 846 Wyoming 1 1 — — Total 55 56 51 3,588
The following table provides summary information regarding the locations of our home health and hospice agencies and our senior living communities and operational units as of December 31, 2024: State Home Health Agencies Hospice Agencies Senior Living Communities Senior Living Units Arizona 7 13 5 840 California 9 12 7 629 Colorado 9 2 — — Idaho 6 5 3 232 Montana 1 1 — — Nevada 1 2 4 385 Oklahoma 2 2 — — Oregon 2 1 — — Texas 6 10 12 709 Utah 8 5 2 188 Washington 10 4 — — Wisconsin 2 1 24 977 Wyoming 1 1 — — Total 64 59 57 3,960
We have one option to extend our lease term at this location for one additional five-year term. Home Health and Hospice Agencies and Senior Living Communities As of December 31, 2023, we operated 111 home health, hospice and home care agencies in Arizona, California, Colorado, Idaho, Montana, Nevada, Oklahoma, Oregon, Texas, Utah, Washington, Wisconsin and Wyoming.
Home Health and Hospice Agencies and Senior Living Communities As of December 31, 2024, we operated 123 home health, hospice and home care agencies in Arizona, California, Colorado, Idaho, Montana, Nevada, Oklahoma, Oregon, Texas, Utah, Washington, Wisconsin and Wyoming.
Removed
We have two options to extend our lease term at this location for an additional five-year term for each option. In addition, we currently lease 4,839 rentable square feet of office space located at 7440 South Creek Road, Suite 100, Sandy, Utah 84093, pursuant to a lease that expires January 31, 2026.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+0 added−0 removed2 unchanged
Biggest changeSee Note 16, Commitments and Contingencies , to the Audited Consolidated Financial Statements for a description of claims and legal actions arising in the ordinary course of our business. Item 4. Mine Safety Disclosures None. Part II.
Biggest changeSee Note 16, Commitments and Contingencies , to the Consolidated Financial Statements for a description of claims and legal actions arising in the ordinary course of our business. Item 4. Mine Safety Disclosures None. Part II.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeNo cash dividends have been paid on our common stock. 10/1/2019 12/2019 6/2020 12/2020 6/2021 12/2021 6/2022 12/2022 6/2023 12/2023 PNTG 100 219 150 385 271 152 85 73 81 92 NASDAQ 100 113 127 163 183 199 139 132 174 190 Peer Group 100 110 110 140 126 119 100 105 111 117 Item 6. [Reserved]
Biggest changeNo cash dividends have been paid on our common stock. 1/1/2020 12/2020 12/2021 12/2022 12/2023 12/2024 PNTG $ 100.0 $ 175.6 $ 69.8 $ 33.2 $ 42.1 $ 80.1 NASDAQ 100.0 144.9 177.1 119.5 172.8 223.9 Peer Group 100.0 130.3 102.6 92.3 105.8 116.6 Item 6. [Reserved]
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our Common stock trades under the symbol “PNTG” on the NASDAQ Global Select Market. As of February 28, 2024, there are approximately 69 holders of record of our stock.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our Common stock trades under the symbol “PNTG” on the NASDAQ Global Select Market. As of February 24, 2025 , there are approximately 71 holders of record of our stock.
The graph below compares the cumulative total stockholder return on our common stock, $0.001 par value per share, during the period from the date of the Spin-Off on October 1, 2019, through December 31, 2023, with the cumulative total return on the NASDAQ composite index and an industry peer group over the same period (assuming the investment of $100 in our common stock, the NASDAQ composite index and the industry peer group on October 1, 2019 and the reinvestment of dividends).
The graph below compares the cumulative total stockholder return on our common stock, $0.001 par value per share, during the period from January 1, 2020, through December 31, 2024, with the cumulative total return on the NASDAQ composite index and an industry peer group over the same period (assuming the investment of $100 in our common stock, the NASDAQ composite index and the industry peer group on January 1, 2020 and the reinvestment of dividends).
Dividend Policy We do not intend to pay dividends on our common stock for the foreseeable future. Instead, we anticipate that all of our future earnings will be retained to support our operations and to finance the growth and development of our business.
Dividend Policy We do not intend to pay dividends on our common stock for the foreseeable future.
Removed
Issuer Repurchases of Equity Securities On December 12, 2022, the Board of the Directors of the Company approved a share repurchase program under which the Company could repurchase up to $1.0 million of its common stock.
Added
Instead, we anticipate that all of our future earnings will be retained to support our operations and to finance the growth and development of our business. 28 Table of Contents Issuer Repurchases of Equity Securities The Company did not repurchase any shares in 2024, nor did it approve any share repurchase program.
Removed
Under the share repurchase program, the Company 29 Table of Contents could repurchase shares from time to time through open market purchases, including through the use of trading plans intended to comply with Rule 10b5-1 under the Securities Exchange Act of 1934.
Removed
The timing and total amount of stock repurchases was dependent upon business, economic and market conditions, corporate and regulatory requirements, prevailing stock prices, and other considerations. The authorization expired on December 12, 2023. No shares were repurchased during the year ended December 31, 2023 and 2022.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeGeneral and administrative expenses are not allocated to the reportable segments and are included in “All Other”: Home Health and Hospice Services Senior Living Services All Other Total (In thousands) Segment GAAP Financial Measures: Year Ended December 31, 2023 Revenue $ 394,464 $ 150,427 $ — $ 544,891 Segment Adjusted EBITDAR from Operations $ 65,606 $ 45,294 $ (31,704) $ 79,196 Year Ended December 31, 2022 Revenue $ 342,249 $ 130,992 $ — $ 473,241 Segment Adjusted EBITDAR from Operations $ 61,827 $ 37,563 $ (31,435) $ 67,955 Year Ended December 31, 2021 Revenue $ 309,570 $ 130,124 $ — $ 439,694 Segment Adjusted EBITDAR from Operations $ 55,565 $ 37,517 $ (26,208) $ 66,874 The table below provides a reconciliation of Segment Adjusted EBITDAR from Operations above to income from operations: Year Ended December 31, 2023 2022 2021 (In thousands) Segment Adjusted EBITDAR from Operations (a) $ 79,196 $ 67,955 $ 66,874 Less: Depreciation and amortization 5,130 4,900 4,784 Rent—cost of services 39,759 38,018 40,863 Other (expense) income 339 (31) (24) Adjustments to Segment EBITDAR from Operations: Less: Costs at start-up operations (b) 102 1,435 1,045 Share-based compensation expense (c) 5,565 3,363 10,040 Acquisition related costs and credit allowances (d) 476 731 80 Transition services costs (e) — — 2,008 Costs associated with transitioning operations (f) 612 6,103 2,835 Unusual or non-recurring charges (g) 2,575 1,297 — Add: Net income (loss) attributable to noncontrolling interest 531 600 (548) Income from operations $ 25,169 $ 12,739 $ 4,695 36 Table of Contents (a) Segment Adjusted EBITDAR from Operations is net income attributable to the Company's reportable segments excluding interest expense, provision for income taxes, depreciation and amortization expense, rent, and, in order to view the operations performance on a comparable basis from period to period, certain adjustments including: (1) costs at start-up operations, (2) share-based compensation expense, (3) acquisition related costs and credit allowances, (4) transition services costs, (5) costs associated with transitioning operations, (6) unusual, non-recurring or redundant charges, and (7) net income (loss) attributable to noncontrolling interest.
Biggest changeGeneral and administrative expenses are not allocated to the reportable segments: Home Health and Hospice Services Senior Living Services All Other Total Year Ended December 31, 2024 Segment Revenue $ 515,344 $ 174,767 $ 5,129 $ 695,240 Segment Cost of Services 427,635 123,107 Segment Adjusted EBITDAR from Operations $ 87,709 $ 51,660 $ 139,369 Year Ended December 31, 2023 Segment Revenue $ 385,652 $ 148,198 $ 11,041 $ 544,891 Segment Cost of Services 320,046 102,904 Segment Adjusted EBITDAR from Operations $ 65,606 $ 45,294 $ 110,900 Year Ended December 31, 2022 Segment Revenue $ 337,371 $ 126,758 $ 9,112 $ 473,241 Segment Cost of Services 275,544 89,195 Segment Adjusted EBITDAR from Operations $ 61,827 $ 37,563 $ 99,390 The table below provides a reconciliation of Segment Adjusted EBITDAR from Operations above to income from operations: 2024 2023 2022 Segment Adjusted EBITDAR from Operations (a) $ 139,369 $ 110,900 $ 99,390 Less: Unallocated corporate expenses 43,587 31,704 31,435 Less: Depreciation and amortization 6,119 5,130 4,900 Rent—cost of services 43,029 39,759 38,018 Other income 207 339 (31) Adjustments to Segment EBITDAR from Operations: Less: Costs at start-up operations (b) 137 102 1,435 Share-based compensation expense (c) 8,242 5,565 3,363 Acquisition related costs and credit allowances (d) 1,278 476 731 Costs associated with transitioning operations (e) (570) 612 6,103 Unusual, non-recurring or redundant charges (f) 1,004 2,575 1,297 Add: Net income attributable to noncontrolling interest 1,780 531 600 Income from operations $ 38,116 $ 25,169 $ 12,739 35 Table of Contents (a) Segment Adjusted EBITDAR from Operations is net income attributable to the Company's reportable segments excluding interest expense, provision for income taxes, depreciation and amortization expense, rent, unallocated corporate and administrative expenses, and, in order to view the operations performance on a comparable basis from period to period, certain adjustments including: (1) costs at start-up operations, (2) share-based compensation expense, (3) acquisition related costs and credit allowances, (4) costs associated with transitioning operations, (5) unusual, non-recurring or redundant charges, and (6) net income (loss) attributable to noncontrolling interest.
The amounts reported exclude rent and depreciation and amortization expense related to such operations and include legal settlement costs associated with one of the entities transitioned to Ensign.
The amounts reported exclude rent and depreciation and amortization expense related to such operations and include legal settlement costs associated with one of the entities transitioned to Ensign.
During January 2022, affiliates of the Company entered into Transfer Agreements with affiliates of Ensign, providing for the transfer of the operations of certain senior living communities (the “Transaction”) from affiliates of the Company to affiliates of Ensign.
During January 2022, affiliates of the Company entered into Transfer Agreements with affiliates of Ensign, providing for the transfer of the operations of certain senior living communities (the “Transaction”) from affiliates of the Company to affiliates of Ensign.
The closing of the Transaction was completed in two phases with the transfer of two operations on March 1, 2022 and the remainder transferred on April 1, 2022. The amount above represents the net impact on revenue and cost of service attributable to all of the transferred entities.
The closing of the Transaction was completed in two phases with the transfer of two operations on March 1, 2022 and the remainder transferred on April 1, 2022. The amount above represents the net impact on revenue and cost of service attributable to all of the transferred entities.
The PDGM payment under the Medicare program is also adjusted for certain variables including, but not limited to: (a) a low utilization payment adjustment if the number of visits is below an established threshold that varies based on the diagnosis of a beneficiary; (b) a partial payment if the patient transferred to another provider or the Company received a patient from another provider before completing the period of care; (c) adjustment to the admission source 32 Table of Contents of claim if it is determined that the patient had a qualifying stay in a post-acute care setting within 14 days prior to the start of a 30-day payment period; (d) the timing of the 30-day payment period provided to a patient in relation to the admission date, regardless of whether the same home health provider provided care for the entire series of episodes; (e) changes to the acuity of the patient during the previous 30-day period of care; (f) changes in the base payments established by the Medicare program; (g) adjustments to the base payments for case mix and geographic wages; and (h) recoveries of overpayments.
The PDGM payment under the Medicare program is also adjusted for certain variables including, but not limited to: (a) a low utilization payment adjustment if the number of visits is below an established threshold that varies based on the diagnosis of a beneficiary; (b) a partial payment if the patient transferred to another provider or the Company received a patient from another provider before completing the period of care; (c) adjustment to the admission source 31 Table of Contents of claim if it is determined that the patient had a qualifying stay in a post-acute care setting within 14 days prior to the start of a 30-day payment period; (d) the timing of the 30-day payment period provided to a patient in relation to the admission date, regardless of whether the same home health provider provided care for the entire series of episodes; (e) changes to the acuity of the patient during the previous 30-day period of care; (f) changes in the base payments established by the Medicare program; (g) adjustments to the base payments for case mix and geographic wages; and (h) recoveries of overpayments.
The Credit Agreement contains customary covenants that, among other things, restrict, subject to certain exceptions, the ability of the Company and its independent operating subsidiaries to grant liens on their assets, incur indebtedness, sell assets, make investments, engage in acquisitions, mergers or consolidations, amend certain material agreements and pay certain dividends and other restricted payments.
The Amended Credit Agreement contains customary covenants that, among other things, restrict, subject to certain exceptions, the ability of the Company and its independent operating subsidiaries to grant liens on their assets, incur indebtedness, sell assets, make investments, engage in acquisitions, mergers or consolidations, amend certain material agreements and pay certain dividends and other restricted payments.
We find that Non-GAAP Financial Measures are useful for this purpose because they do not include such costs as interest expense, income taxes, depreciation and amortization expense, which may vary from period-to-period depending upon various factors, including the method used to finance operations, the date of acquisition of a community or business, and the tax law of the state in which a business unit operates. 39 Table of Contents Non-GAAP Financial Measures have no standardized meaning defined by GAAP.
We find that Non-GAAP Financial Measures are useful for this purpose because they do not include such costs as interest expense, income taxes, depreciation and amortization expense, which may vary from period-to-period depending upon various factors, including the method used to finance operations, the date of acquisition of a community or business, and the tax law of the state in which a business unit operates. 38 Table of Contents Non-GAAP Financial Measures have no standardized meaning defined by GAAP.
Leasehold improvements are amortized on a straight-line basis over the shorter of their estimated useful lives or the remaining lease term. 33 Table of Contents Critical Accounting Policies and Estimates Our discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”).
Leasehold improvements are amortized on a straight-line basis over the shorter of their estimated useful lives or the remaining lease term. 32 Table of Contents Critical Accounting Policies and Estimates Our discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”).
See Note 14 , Income Taxes , to the Consolidated Financial Statements included elsewhere in this report filed on Form 10-K for further discussion. Comparison of Prior Year Information For a comparison of our results of operations of the fiscal year ended December 31, 2022 as compared to the year ended December 31, 2021 refer to Item 7.
See Note 14 , Income Taxes , to the Consolidated Financial Statements included elsewhere in this report filed on Form 10-K for further discussion. Comparison of Prior Year Information For a comparison of our results of operations of the fiscal year ended December 31, 2023 as compared to the year ended December 31, 2022 refer to Item 7.
The average amount of revenue for each completed 60-day home health episode generated from patients who are receiving care under Medicare reimbursement programs. 31 Table of Contents • Total hospice admissions . Total admissions of hospice patients, including new acquisitions, new admissions and recertifications. • Average hospice daily census .
The average amount of revenue for each completed 60-day home health episode generated from patients who are receiving care under Medicare reimbursement programs. 30 Table of Contents • Total hospice admissions . Total admissions of hospice patients, including new acquisitions, new admissions and recertifications. • Average hospice daily census .
Rates are set based on specific levels of care, are adjusted by a wage index to reflect healthcare labor costs across the country and are established annually through federal legislation. The following are the four levels of care provided under the hospice benefit: • Routine Home Care (“RHC”).
Rates are set based on specific levels of care, are adjusted by a wage index to reflect healthcare labor costs across the country and are established annually through federal legislation. The following are the four levels of care provided under the hospice benefit: • Routine Home Care (RHC).
The amounts reported exclude rent and depreciation and amortization expense related to such operations. (g) Represents unusual or non-recurring charges for legal services, implementation costs, integration costs, and consulting fees in general and administrative and cost of services expenses.
The amounts reported exclude rent and depreciation and amortization expense related to such operations. (e) Represents unusual or non-recurring charges for legal services, implementation costs, integration costs, and consulting fees in general and administrative and cost of services expenses.
The following table summarizes our affiliated home health and hospice agencies and senior living communities as of: 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Home health and hospice agencies 25 32 39 46 54 63 76 88 95 111 Senior living communities 15 36 36 43 50 52 54 54 49 51 Senior living units 1,587 3,184 3,184 3,434 3,820 3,963 4,127 4,127 3,500 3,588 Total number of home health, hospice, and senior living operations 40 68 75 89 104 115 130 142 144 162 Recent Activities Acquisitions.
The following table summarizes our affiliated home health and hospice agencies and senior living communities as of: 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Home health and hospice agencies 25 32 39 46 54 63 76 88 95 111 123 Senior living communities 15 36 36 43 50 52 54 54 49 51 57 Senior living units 1,587 3,184 3,184 3,434 3,820 3,963 4,127 4,127 3,500 3,588 3,960 Total number of home health, hospice, and senior living operations 40 68 75 89 104 115 130 142 144 162 180 Recent Activities Acquisitions.
Management's Discussion and Analysis of Financial Condition and Results of Operations on Form 10-K filed with the SEC on February 23, 2023. Liquidity and Capital Resources Our primary sources of liquidity are cash generated through operating activities and borrowings under our revolving credit facility.
Management's Discussion and Analysis of Financial Condition and Results of Operations on Form 10-K filed with the SEC on February 28, 2024. Liquidity and Capital Resources Our primary sources of liquidity are cash generated through operating activities and borrowings under our revolving credit facility.
The Company is permitted to prepay all or any portion of the loans under the Revolving Credit Facility prior to maturity without premium or penalty, subject to reimbursement of any LIBOR breakage costs of the lenders.
The Company is permitted to prepay all or any portion of the loans under the Amended Revolving Credit Facility prior to maturity without premium or penalty, subject to reimbursement of any SOFR breakage costs of the lenders.
Recent Accounting Pronouncements Information concerning recently issued accounting pronouncements which are not yet effective is included in Note 2, Basis of Presentation and Summary of Significant Accounting Policies in the Consolidated Financial Statements. 34 Table of Contents Results of Operations The following table sets forth details of our expenses and earnings as a percentage of total revenue for the periods indicated: Year Ended December 31, 2023 2022 2021 Total revenue 100.0 % 100.0 % 100.0 % Expense: Cost of services 80.4 79.6 79.7 Rent—cost of services 7.3 8.0 9.3 General and administrative expense 6.7 7.2 8.2 Depreciation and amortization 0.9 1.0 1.1 Loss on asset dispositions and impairment, net — 1.5 0.6 Total expenses 95.3 97.3 98.9 Income from operations 4.7 2.7 1.1 Other income (expense), net: Other income 0.1 — — Interest expense, net (1.2) (0.8) (0.5) Other expense, net (1.1) (0.8) (0.5) Income before provision for income taxes 3.6 1.9 0.6 Provision for income taxes 1.0 0.4 0.1 Net income 2.6 1.5 0.5 Less: net income (loss) attributable to noncontrolling interest 0.1 0.1 (0.1) Net income attributable to Pennant 2.5 % 1.4 % 0.6 % Year Ended December 31, 2023 2022 2021 (In thousands) Consolidated GAAP Financial Measures: Total revenue $ 544,891 $ 473,241 $ 439,694 Total expenses 519,722 460,502 434,999 Income from operations $ 25,169 $ 12,739 $ 4,695 35 Table of Contents The following table presents certain financial information regarding our reportable segments.
Recent Accounting Pronouncements Information concerning recently issued accounting pronouncements which are not yet effective is included in Note 2, Basis of Presentation and Summary of Significant Accounting Policies in the Consolidated Financial Statements. 33 Table of Contents Results of Operations The following table sets forth details of our expenses and earnings as a percentage of total revenue for the periods indicated: Year Ended December 31, 2024 2023 2022 Total revenue 100.0 % 100.0 % 100.0 % Expense: Cost of services 80.3 80.4 79.6 Rent—cost of services 6.2 7.3 8.0 General and administrative expense 7.2 6.7 7.2 Depreciation and amortization 0.9 0.9 1.0 (Gain) loss on asset dispositions and impairment, net (0.1) — 1.5 Total expenses 94.5 95.3 97.3 Income from operations 5.5 4.7 2.7 Other expense, net: Other income — 0.1 — Interest expense, net (1.0) (1.2) (0.8) Other expense, net (1.0) (1.1) (0.8) Income before provision for income taxes 4.5 3.6 1.9 Provision for income taxes 1.0 1.0 0.4 Net income 3.5 2.6 1.5 Less: net income attributable to noncontrolling interest 0.3 0.1 0.1 Net income attributable to Pennant 3.2 % 2.5 % 1.4 % Year Ended December 31, 2024 2023 2022 (In thousands) Consolidated GAAP Financial Measures: Total revenue $ 695,240 $ 544,891 $ 473,241 Total expenses 657,124 519,722 460,502 Income from operations $ 38,116 $ 25,169 $ 12,739 34 Table of Contents The following table presents certain financial information regarding our reportable segments.
The increase in the amount of cost of services was driven primarily by volume of services provided. Cost of services as a percentage of revenue increased by 80 basis points from 79.6% to 80.4% over the same time period. The increase was driven primarily by increased wages and benefits.
The increase in the amount of cost of services was driven primarily by volume of services provided and increased wages and benefits. Cost of services as a percentage of revenue decreased by 10 basis points from 80.4% to 80.3% over the same time period.
The amounts reported for the year ended December 31, 2022 include certain costs identified as redundant or non-recurring incurred by the Company for services provided by Ensign under the Transition Services Agreement, and were included in general and administrative expense. 38 Table of Contents The table below reconciles Segment Adjusted EBITDAR from Operations to Segment Adjusted EBITDA from Operations for the periods presented: Year Ended December 31, Home Health and Hospice Senior Living 2023 2022 2021 2023 2022 2021 (In thousands) Segment Adjusted EBITDAR from Operations $ 65,606 $ 61,827 $ 55,565 $ 45,294 $ 37,563 $ 37,517 Less: Rent—cost of services 5,791 5,060 4,906 33,967 32,958 35,957 Rent related to start-up and transitioning operations (313) (210) (386) (966) (1,398) (10) Segment Adjusted EBITDA from Operations $ 60,128 $ 56,977 $ 51,045 $ 12,293 $ 6,003 $ 1,570 The following discussion includes references to certain performance and valuation measures, which are non-GAAP financial measures, including Consolidated EBITDA, Consolidated Adjusted EBITDA, Segment Adjusted EBITDA from Operations, and Consolidated Adjusted EBITDAR (collectively, “Non-GAAP Financial Measures”).
The amounts reported for the year ended December 31, 2022 include certain costs identified as redundant or non-recurring incurred by the Company for services provided by Ensign under the Transition Services Agreement, and were included in general and administrative expense. 37 Table of Contents The table below reconciles Segment Adjusted EBITDAR from Operations to Segment Adjusted EBITDA from Operations for the periods presented: Year Ended December 31, Home Health and Hospice Senior Living 2024 2023 2022 2024 2023 2022 (In thousands) Segment Adjusted EBITDAR from Operations $ 87,709 $ 65,606 $ 61,827 $ 51,660 $ 45,294 $ 37,563 Less: Rent—cost of services 7,189 5,791 5,060 35,840 33,967 32,958 Rent related to start-up and transitioning operations (140) (313) (210) (393) (966) (1,398) Segment Adjusted EBITDA from Operations $ 80,660 $ 60,128 $ 56,977 $ 16,213 $ 12,293 $ 6,003 The following discussion includes references to certain performance and valuation measures, which are non-GAAP financial measures, including Consolidated EBITDA, Consolidated Adjusted EBITDA, Segment Adjusted EBITDA from Operations, and Consolidated Adjusted EBITDAR (collectively, “Non-GAAP Financial Measures”).
Rent increased 4.6% from $38.0 million to $39.8 million for the year ended December 31, 2023 compared to the year ended December 31, 2022, primarily as a result of the newly acquired senior living communities.
Rent increased 8.2% from $39.8 million to $43.0 million for the year ended December 31, 2024 compared to the year ended December 31, 2023, primarily as a result of the newly acquired senior living communities.
During 2023, we expanded our operations with the addition of three home health agencies, eight hospice agencies, two home care agencies, and two senior living communities. A subsidiary of the Company entered into a separate operations transfer agreement with the prior operator of each acquired operation as part of each transaction.
During 2024, we expanded our operations with the addition of eight home health agencies, three hospice agencies, and six senior living communities. A subsidiary of the Company entered into a separate purchase agreements with the prior operator of each acquired operation as part of each transaction.
We believe that our existing cash, cash generated through operations, and access to available borrowing capacity under our Credit Agreement, will be sufficient to provide adequate liquidity for the next twelve months for both our operating activities and opportunities for acquisition growth. 44 Table of Contents The following table presents selected data from our statement of cash flows for the periods presented: Year Ended December 31, 2023 2022 (In thousands) Net cash provided by operating activities $ 33,090 $ 9,044 Net cash used in investing activities (30,222) (24,239) Net cash provided by financing activities 1,112 12,084 Net change in cash 3,980 (3,111) Cash at beginning of year 2,079 5,190 Cash at end of year $ 6,059 $ 2,079 Year Ended December 31, 2023 Compared to the Year Ended December 31, 2022 Our net cash flow from operating activities for the year ended December 31, 2023 increased by $24.0 million when compared to the year ended December 31, 2022.
We believe that our existing cash, cash generated through operations, and access to available borrowing capacity under our Amended Credit Agreement, will be sufficient to provide adequate liquidity for the next twelve months for both our operating activities and opportunities for acquisition growth. 43 Table of Contents The following table presents selected data from our statement of cash flows for the periods presented: Year Ended December 31, 2024 2023 (In thousands) Net cash provided by operating activities $ 39,298 $ 33,090 Net cash used in investing activities (70,684) (30,222) Net cash provided by financing activities 49,573 1,112 Net change in cash 18,187 3,980 Cash at beginning of year 6,059 2,079 Cash at end of year $ 24,246 $ 6,059 Year Ended December 31, 2024 Compared to the Year Ended December 31, 2023 Our net cash flow from operating activities for the year ended December 31, 2024 increased by $6.2 million when compared to the year ended December 31, 2023.
The following table summarizes our senior living statistics for the periods indicated: Year Ended December 31, 2023 2022 Occupancy 78.5 % 75.7 % Average monthly revenue per occupied unit $ 3,969 $ 3,516 Revenue Sources Home Health and Hospice Services Home Health . We derive the majority of our home health revenue from Medicare and managed care.
The following table summarizes our senior living statistics for the periods indicated: Year Ended December 31, 2024 2023 Occupancy 78.8 % 78.5 % Average monthly revenue per occupied unit $ 4,811 $ 4,443 Revenue Sources Home Health and Hospice Services Home Health . We derive the majority of our home health revenue from Medicare and managed care.
Revenue grew due to an increase in all key performance indicators including an increase in total home health admissions of 7.6%, an increase in Medicare home health admissions of 4.0%, an increase in average Medicare revenue per 60-day completed episode of 0.1%, an increase of 6.3% in total hospice admissions, an increase of 3.9% in hospice Medicare revenue per day, and an increase of 13.5% in hospice average daily census.
Revenue grew due to an increase in almost all key performance indicators including an increase in total home health admissions of 37.3%, an increase in Medicare home health admissions of 26.9%, an increase in average Medicare revenue per 60-day completed episode of 6.0%, an increase of 25.3% in total hospice admissions, and an increase of 25.4% in hospice average daily census, while Hospice Medicare revenue per day decreased by 1.1%.
Refer to Note 2, Basis of Presentation and Summary of Significant Accounting Policies , within the Consolidated Financial Statements for further information on our critical accounting estimates and policies, which are as follows: • Self-insurance reserves - The valuation methods and assumptions used in estimating costs up to retention amounts to settle open claims of insureds and an estimate of the cost of insured claims up to retention amounts that have been incurred but not reported; • Revenue recognition - The amounts owed by private pay individuals for services and estimate of variable considerations to arrive at the transaction price, including methods and assumptions, used to determine settlements with Medicare and Medicaid adjustments due to audits and reviews; and • Acquisition accounting and goodwill - The assumptions used to allocate the purchase price paid for assets acquired and liabilities assumed in connection with our acquisitions, and the review of goodwill for impairment at the Company’s annual impairment test date or upon the occurrence of a triggering event.
The valuation methods and assumptions used in estimating costs up to retention amounts to settle open claims of insureds and an estimate of the cost of insured claims up to retention amounts that have been incurred but not reported; • Revenue recognition - The amounts owed by private pay individuals for services and estimate of variable considerations to arrive at the transaction price, including methods and assumptions, used to determine settlements with Medicare and Medicaid adjustments due to audits and reviews; and • Acquisition accounting and goodwill - The assumptions used to allocate the purchase price paid for assets acquired and liabilities assumed in connection with our acquisitions, and the review of goodwill for impairment at the Company’s annual impairment test date or upon the occurrence of a triggering event.
We calculate Consolidated Adjusted EBITDA by adjusting Consolidated EBITDA to exclude the effects of non-core business items, which for the reported periods includes, to the extent applicable: • costs at start-up operations; • share-based compensation expense; • acquisition related costs and credit allowances; 40 Table of Contents • redundant or nonrecurring costs associated with the Transition Services Agreement (as defined in Note 3, Transactions with Ensign ); • costs associated with transitioning operations ; and • unusual or non-recurring charges.
We calculate Consolidated Adjusted EBITDA by adjusting Consolidated EBITDA to exclude the effects of non-core business items, which for the reported periods includes, to the extent applicable: • costs at start-up operations; • share-based compensation expense; • acquisition related costs and credit allowances; 39 Table of Contents • costs associated with transitioning operations ; and • unusual or non-recurring charges.
Our effective tax rate for the year ended December 31, 2023 was 29.0% of earnings before income taxes compared with an effective tax rate of 18.5% for the year ended December 31, 2022. The increase in the effective tax rate is primarily due to a change in nondeductible equity compensation expenses.
Our effective tax rate for the year ended December 31, 2024 was 22.4% of earnings before income taxes compared with an effective tax rate of 29.0% for the year ended December 31, 2023. The decrease in the effective tax rate is primarily due to a change in deductible equity compensation expenses.
Segments We have two reportable segments: (1) home health and hospice services, which includes our home health, home care and hospice businesses; and (2) senior living services, which includes the operation of assisted living, independent living and memory care communities.
Segments We have two reportable segments: (1) home health and hospice services, which includes our home health, hospice, home care, and geriatric primary and palliative care businesses; and (2) senior living services, which includes our assisted living, independent living and memory care services.
General and administrative expense increased $2.7 million, or 7.9%, from $34.0 million to $36.7 million for the year ended December 31, 2023 when compared to the year ended December 31, 2022.
General and administrative expense increased $13.5 million, or 36.9%, from $36.7 million to $50.2 million for the year ended December 31, 2024 when compared to the year ended December 31, 2023.
Performance and Valuation Measures: Year Ended December 31, 2023 2022 2021 (In thousands) Consolidated Non-GAAP Financial Measures: Performance Metrics Consolidated EBITDA $ 30,107 $ 17,008 $ 10,003 Consolidated Adjusted EBITDA $ 40,716 $ 31,545 $ 26,407 Valuation Metric Consolidated Adjusted EBITDAR $ 79,196 Year Ended December 31, 2023 2022 2021 (In thousands) Segment Non-GAAP Measures: (a) Segment Adjusted EBITDA from Operations Home health and hospice services $ 60,128 $ 56,977 $ 51,045 Senior living services $ 12,293 $ 6,003 $ 1,570 (a) General and administrative expenses are not allocated to any segment for purposes of determining segment profit or loss. 37 Table of Contents The table below reconciles Consolidated Net Income to Consolidated EBITDA, Consolidated Adjusted EBITDA and Consolidated Adjusted EBITDAR for the periods presented: Year Ended December 31, 2023 2022 2021 (In thousands) Consolidated Net income $ 13,910 $ 7,243 $ 2,148 Less: Net income (loss) attributable to noncontrolling interest 531 600 (548) Add: Provision for income taxes 5,674 1,649 582 Net interest expense 5,924 3,816 1,941 Depreciation and amortization 5,130 4,900 4,784 Consolidated EBITDA 30,107 17,008 10,003 Adjustments to Consolidated EBITDA Add: Costs at start-up operations (a) 102 1,435 1,045 Share-based compensation expense (b) 5,565 3,363 10,040 Acquisition related costs and credit allowances (c) 476 731 80 Transition services costs (d) — — 2,008 Costs associated with transitioning operations (e) 612 6,103 2,835 Unusual or non-recurring charges (f) 2,575 1,297 — Rent related to items (a) and (e) above 1,279 1,608 396 Consolidated Adjusted EBITDA 40,716 31,545 26,407 Rent—cost of services 39,759 38,018 40,863 Rent related to items (a) and (e) above (1,279) (1,608) (396) Adjusted rent—cost of services 38,480 36,410 40,467 Consolidated Adjusted EBITDAR $ 79,196 (a) Represents results related to start-up operations.
Performance and Valuation Measures: Year Ended December 31, 2024 2023 2022 (In thousands) Consolidated Non-GAAP Financial Measures: Performance Metrics Consolidated EBITDA $ 42,662 $ 30,107 $ 17,008 Consolidated Adjusted EBITDA $ 53,286 $ 40,716 $ 31,545 Valuation Metric Consolidated Adjusted EBITDAR $ 95,782 Year Ended December 31, 2024 2023 2022 (In thousands) Segment Non-GAAP Measures: (a) Segment Adjusted EBITDA from Operations Home health and hospice services $ 80,660 $ 60,128 $ 56,977 Senior living services $ 16,213 $ 12,293 $ 6,003 (a) General and administrative expenses are not allocated to any segment for purposes of determining segment profit or loss. 36 Table of Contents The table below reconciles Consolidated Net Income to Consolidated EBITDA, Consolidated Adjusted EBITDA and Consolidated Adjusted EBITDAR for the periods presented: Year Ended December 31, 2024 2023 2022 (In thousands) Consolidated Net income $ 24,339 $ 13,910 $ 7,243 Less: Net income attributable to noncontrolling interest 1,780 531 600 Add: Provision for income taxes 7,028 5,674 1,649 Net interest expense 6,956 5,924 3,816 Depreciation and amortization 6,119 5,130 4,900 Consolidated EBITDA 42,662 30,107 17,008 Adjustments to Consolidated EBITDA Add: Costs at start-up operations (a) 137 102 1,435 Share-based compensation expense (b) 8,242 5,565 3,363 Acquisition related costs and credit allowances (c) 1,278 476 731 Activities associated with transitioning operations (d) (570) 612 6,103 Unusual or non-recurring charges (e) 1,004 2,575 1,297 Rent related to items (a) and (e) above 533 1,279 1,608 Consolidated Adjusted EBITDA 53,286 40,716 31,545 Rent—cost of services 43,029 39,759 38,018 Rent related to items (a) and (e) above (533) (1,279) (1,608) Adjusted rent—cost of services 42,496 38,480 36,410 Consolidated Adjusted EBITDAR $ 95,782 (a) Represents results related to start-up operations.
We operate in multiple lines of businesses including home health, hospice and senior living services across Arizona, California, Colorado, Idaho, Montana, Nevada, Oklahoma, Oregon, Texas, Utah, Washington, Wisconsin and Wyoming.
We operate in multiple lines of businesses including home health, hospice and senior living services across Arizona, California, Colorado, Idaho, Montana, Nevada, Oklahoma, Oregon, Texas, Utah, Washington, Wisconsin and Wyoming. We also provide home health and hospice operational support through a management service agreement in Connecticut.
As a percentage of revenue, rent — cost of services decreased 70 basis points when compared to the year ended December 31, 2022 due to improved senior living performance. General and Administrative Expense.
As a percentage of revenue, rent — cost of services decreased 110 basis points when compared to the year ended December 31, 2023 due to improved overall sales leverage and performance. General and Administrative Expense.
Share-based compensation expense and related payroll taxes are included in cost of services and general and administrative expense. (d) Non-capitalizable costs associated with acquisitions and credit allowances for amounts in dispute with the prior owners of certain acquired operations. (e) Costs identified as redundant or non-recurring incurred by the Company as a result of the Spin-Off.
Share-based compensation expense and related payroll taxes are included in cost of services and general and administrative expense. (d) Non-capitalizable costs associated with acquisitions and credit allowances for amounts in dispute with the prior owners of certain acquired operations.
Share-based compensation expense and related payroll taxes are included in cost of services and general and administrative expense. (c) Non-capitalizable costs associated with acquisitions and credit allowances for amounts in dispute with the prior owners of certain acquired operations. (d) Costs identified as redundant or non-recurring incurred by the Company as a result of the Spin-Off.
Share-based compensation expense and related payroll taxes are included in cost of services and general and administrative expense. (c) Non-capitalizable costs associated with acquisitions and credit allowances for amounts in dispute with the prior owners of certain acquired operations.
As of December 31, 2023, our home health and hospice business provided home health, hospice and 30 Table of Contents home care services from 111 agencies operating across 13 states, and our senior living business operated 51 senior living communities throughout six states.
As of December 31, 2024, our home health and hospice business provided home health, hospice and 29 Table of Contents home care services from 123 agencies operating across 13 states, and our senior living business operated 57 senior living communities throughout seven states.
Senior Living Services Year Ended December 31, 2023 2022 Change % Change (In thousands) Cost of service $ 106,252 $ 93,650 $ 12,602 13.5 % Cost of services as a percentage of revenue 70.6 % 71.5 % (0.9) % Cost of services related to our Senior Living services segment increased $12.6 million, or 13.5%, during the year ended December 31, 2023 in response to higher occupancy and wage rate increases.
Senior Living Services Year Ended December 31, 2024 2023 Change % Change (In thousands) Cost of service $ 124,975 $ 106,252 $ 18,723 17.6 % Cost of services as a percentage of revenue 71.1 % 70.6 % 0.5 % Cost of services related to our Senior Living services segment increased $18.7 million, or 17.6%, during the year ended December 31, 2024 in response to higher occupancy, acquisitions and wage rate increases.
The following table summarizes our overall home health and hospice services statistics for the periods indicated: Year Ended December 31, 2023 2022 Home health services: Total home health admissions 43,508 40,436 Total Medicare home health admissions 19,389 18,641 Average Medicare revenue per completed 60-day home health episode (a) $ 3,533 $ 3,531 Hospice services: Total hospice admissions 9,746 9,166 Average hospice daily census 2,607 2,296 Hospice Medicare revenue per day $ 185 $ 178 (a) The year to date average for Medicare revenue per 60-day completed episode includes post period claim adjustments for prior periods.
The following table summarizes our overall home health and hospice services statistics for the periods indicated: Year Ended December 31, 2024 2023 Home health services: Total home health admissions 59,741 43,508 Total Medicare home health admissions 24,598 19,389 Average Medicare revenue per completed 60-day home health episode (a) $ 3,677 $ 3,468 Hospice services: Total hospice admissions 12,208 9,746 Average hospice daily census 3,268 2,607 Hospice Medicare revenue per day $ 183 $ 185 (a) The year to date average for Medicare revenue per 60-day completed episode includes post period claim adjustments for prior periods.
Cost of services as a percentage of revenue for the year ended December 31, 2023 increased by 140 basis points compared to the year ended December 31, 2022 primarily due to increased wages and benefits.
As a percentage of revenue, costs of service increased by 50 basis points during the year ended December 31, 2024 when compared to the year ended December 31, 2023 primarily due to increased wages and benefits. Rent—Cost of Services .
The primary drivers of this difference was a $6.7 million increase in net income, a $12.9 million net increase in cash flows from the change in operating assets and liabilities, and an increase of $4.4 million in non-cash expenses.
The primary drivers of this difference was a $10.4 million increase in net income, offset by a $2.5 million net decrease in cash flows from the change in operating assets and liabilities and a net decrease of $1.7 million in non-cash expenses.
Home Health and Hospice Services Year Ended December 31, 2023 2022 Change % Change (In thousands) Cost of service $ 331,844 $ 282,988 $ 48,856 17.3 % Cost of services as a percentage of revenue 84.1 % 82.7 % 1.4 % Cost of services related to our Home Health and Hospice services segment increased $48.9 million, or 17.3%, primarily due to increased volume of services from the growth in admissions and average daily census.
Home Health and Hospice Services Year Ended December 31, 2024 2023 Change % Change (In thousands) Cost of service $ 433,474 $ 331,844 $ 101,630 30.6 % Cost of services as a percentage of revenue 83.4 % 84.1 % (0.7) % Cost of services related to our Home Health and Hospice services segment increased $101.6 million, or 30.6%, primarily due to increased volume of services from the growth in admissions and average daily census as well as increased wages and benefits.
Year Ended December 31, 2023 Compared to the Year Ended December 31, 2022 Revenue Year Ended December 31, 2023 2022 Revenue Dollars Revenue Percentage Revenue Dollars Revenue Percentage (In thousands) Home health and hospice services Home health $ 175,044 32.1 % $ 159,858 33.8 % Hospice 194,627 35.7 160,520 33.9 Home care and other (a) 24,793 4.6 21,871 4.6 Total home health and hospice services 394,464 72.4 342,249 72.3 Senior living services 150,427 27.6 130,992 27.7 Total revenue $ 544,891 100.0 % $ 473,241 100.0 % (a) Home care and other revenue is included with home health revenue in other disclosures in this report.
Year Ended December 31, 2024 Compared to the Year Ended December 31, 2023 Revenue Year Ended December 31, 2024 2023 Revenue Dollars Revenue Percentage Revenue Dollars Revenue Percentage (In thousands) Home health and hospice services Home health $ 239,539 34.5 % $ 175,044 32.1 % Hospice 240,102 34.5 194,627 35.7 Home care and other (a) 39,843 5.7 24,793 4.6 Total home health and hospice services 519,484 74.7 394,464 72.4 Senior living services 175,756 25.3 150,427 27.6 Total revenue $ 695,240 100.0 % $ 544,891 100.0 % (a) Home care and other revenue is included with home health revenue in other disclosures in this report.
Growth in revenue was also driven by the acquisition of two senior living communities, between December 31, 2022 and December 31, 2023, resulting in an increase of $1.9 million, or 1.4% overall. 42 Table of Contents Cost of Services The following table sets forth total cost of services by each of our reportable segments for the periods indicated: Year Ended December 31, 2023 2022 Change % Change (In thousands) Home Health and Hospice $ 331,844 $ 282,988 $ 48,856 17.3 % Senior Living 106,252 93,650 12,602 13.5 Total cost of services $ 438,096 $ 376,638 $ 61,458 16.3 % Consolidated cost of services increased $61.5 million, or 16.3%, for the year ended December 31, 2023 when compared to the year ended December 31, 2022.
Growth in revenue was also driven by the acquisition of six senior living communities during the year ended December 31, 2024, and the acquisition of two senior living communities during the year ended December 31, 2023, resulting in an increase of $12.5 million, or 8.3% overall. 41 Table of Contents Cost of Services The following table sets forth total cost of services by each of our reportable segments for the periods indicated: Year Ended December 31, 2024 2023 Change % Change (In thousands) Home Health and Hospice $ 433,474 $ 331,844 $ 101,630 30.6 % Senior Living 124,975 106,252 18,723 17.6 Total cost of services $ 558,449 $ 438,096 $ 120,353 27.5 % Consolidated cost of services increased $120.4 million, or 27.5%, for the year ended December 31, 2024 when compared to the year ended December 31, 2023.
Senior Living Services Year Ended December 31, 2023 2022 Change % Change Revenue (in thousands) $ 150,427 $ 130,992 $ 19,435 14.8 % Number of communities at period end 51 49 2 4.1 Occupancy 78.5 % 75.7 % 2.8 % Average monthly revenue per occupied unit $ 3,969 $ 3,516 $ 453 12.9 % Senior living revenue increased $19.4 million, or 14.8%, for the year ended December 31, 2023 when compared to the same period in the prior year primarily due to a 12.9% increase in average monthly revenue per occupied unit and a 2.8% increase in occupancy rate between December 31, 2022 and December 31, 2023.
Senior Living Services Year Ended December 31, 2024 2023 Change % Change Revenue (in thousands) $ 175,756 $ 150,427 $ 25,329 16.8 % Number of communities at period end 57 51 6 11.8 Occupancy 78.8 % 78.5 % 0.3 % Average monthly revenue per occupied unit $ 4,811 $ 4,443 $ 368 8.3 % Senior living revenue increased $25.3 million, or 16.8%, for the year ended December 31, 2024 when compared to the same period in the prior year primarily due to a 8.3% increase in average monthly revenue per occupied unit and a 0.3% increase in occupancy rate.
We expect these metrics to vary from period to period based upon the maturity of the operations within our portfolio.
When we acquire turnaround or start-up operations, we expect that our combined metrics may be impacted. We expect these metrics to vary from period to period based upon the maturity of the operations within our portfolio.
Our consolidated revenue increased $71.7 million, or 15.1%, driven by the net organic growth of existing operations across all segments of $58.4 million or 12.3% as well as increased revenue from acquired operations of $13.3 million, or 2.8%, during the year ended December 31, 2023. 41 Table of Contents Home Health and Hospice Services Year Ended December 31, 2023 2022 Change % Change (In thousands) Home health and hospice revenue Home health services $ 175,044 $ 159,858 $ 15,186 9.5 % Hospice services 194,627 160,520 34,107 21.2 Home care and other 24,793 21,871 2,922 13.4 Total home health and hospice revenue $ 394,464 $ 342,249 $ 52,215 15.3 % Year Ended December 31, 2023 2022 Change % Change Home health services: Total home health admissions 43,508 40,436 3,072 7.6 % Total Medicare home health admissions 19,389 18,641 748 4.0 Average Medicare revenue per 60-day completed episode (a) $ 3,533 $ 3,531 $ 2 0.1 Hospice services: Total hospice admissions 9,746 9,166 580 6.3 Average daily census 2,607 2,296 311 13.5 Hospice Medicare revenue per day $ 185 $ 178 $ 7 3.9 Number of home health and hospice agencies at period end 111 95 16 16.8 % (a) The year to date average for Medicare revenue per 60-day completed episode includes post period claim adjustments for prior periods.
Our consolidated revenue increased $150.3 million, or 27.6%, driven by the net organic growth of existing operations across all segments of $59.2 million or 10.9% as well as increased revenue from acquired operations of $91.1 million, or 16.7%, during the year ended December 31, 2024. 40 Table of Contents Home Health and Hospice Services Year Ended December 31, 2024 2023 Change % Change (In thousands) Home health and hospice revenue Home health services $ 239,539 $ 175,044 $ 64,495 36.8 % Hospice services 240,102 194,627 45,475 23.4 Home care and other 39,843 24,793 15,050 60.7 Total home health and hospice revenue $ 519,484 $ 394,464 $ 125,020 31.7 % Year Ended December 31, 2024 2023 Change % Change Home health services: Total home health admissions 59,741 43,508 16,233 37.3 % Total Medicare home health admissions 24,598 19,389 5,209 26.9 Average Medicare revenue per 60-day completed episode (a) $ 3,677 $ 3,468 $ 209 6.0 Hospice services: Total hospice admissions 12,208 9,746 2,462 25.3 Average daily census 3,268 2,607 661 25.4 Hospice Medicare revenue per day $ 183 $ 185 $ (2) (1.1) Number of home health and hospice agencies at period end 123 111 12 10.8 % (a) The year to date average for Medicare revenue per 60-day completed episode includes post period claim adjustments for prior periods.
The Revolving Credit Facility is not subject to interim amortization and the Company will not be required to repay any loans under the Revolving Credit Facility prior to maturity in 2026, except that the loans may become due immediately if the Company triggers an event of default under the terms of the Credit Agreement.
The Amended Revolving Credit Facility is not subject to interim amortization and the Company will not be required to repay any loans under the Amended Revolving Credit Facility prior to maturity in 2029.
Our net cash used in investing activities for the year ended December 31, 2023 increased by $6.0 million compared to the year ended December 31, 2022, primarily driven by a $11.9 million increase in business acquisitions and other assets, offset by a $6.1 million decrease in purchases of property and equipment during the year ended December 31, 2023 compared to the year ended December 31, 2022.
Our net cash used in investing activities for the year ended December 31, 2024 increased by $40.5 million compared to the year ended December 31, 2023, primarily driven by a $40.4 million increase in business acquisitions, asset acquisitions, and escrow deposits during the year ended December 31, 2024 compared to the year ended December 31, 2023.
The improvement in these metrics resulted in net organic revenue growth of $40.8 million for the year ended December 31, 2023. Growth was also driven by the acquisition of 11 home health, home care, and hospice operations, between December 31, 2022 and December 31, 2023, resulting in an increase in revenue of $11.4 million, or 3.3% overall.
Growth was also driven by the acquisition of eleven home health and hospice operations during the year ended December 31, 2024, and the acquisition of thirteen home health, home care, and hospice operations during the year ended December 31, 2023, resulting in an increase in revenue of $78.6 million, or 19.9% overall.
Loss on asset dispositions and impairment, net decreased $6.9 million for the year ended December 31, 2023 when compared to the year ended December 31, 2022 due to the transfer of senior living communities to Ensign in 2022. Provision for Income Taxes .
(Gain) loss on asset dispositions and impairment, net is a gain of $0.7 million for the year ended December 31, 2024 compared to a loss of $0.1 million for the year ended December 31, 2023 primarily due to insurance proceeds related to one of our senior living communities. Provision for Income Taxes .
Home health and hospice revenue increased $52.2 million, or 15.3%.
Home health and hospice revenue increased $125.0 million, or 31.7%.
The increase in general and administrative expense was due to an increase of $1.5 million in share-based compensation for the year ended December 31, 2023 when compared to the year ended December 31, 2022. Depreciation and Amortization. Depreciation and amortization expense decreased slightly as a percentage of total revenue. 43 Table of Contents Loss on Asset Dispositions and Impairment, Net.
The increase in general and administrative expense was primarily due to an increase of $12.5 million in wages and benefits for the year ended December 31, 2024 when compared to the year ended December 31, 2023. Depreciation and Amortization.
The Credit Agreement provides for a revolving credit facility with a syndicate of banks with a borrowing capacity of $150.0 million (the “Revolving Credit Facility”).
Revolving Credit Facility On July 31, 2024, Pennant amended and restated its existing credit agreement (as amended, the “Amended Credit Agreement”), which provides for an increased revolving credit facility with a syndicate of banks with a borrowing capacity of $250.0 million (the “Amended Revolving Credit Facility”).
As a percentage of revenue, costs of service decreased by 90 basis points during the year ended December 31, 2023 when compared to the year ended December 31, 2022 due to cost optimization, as occupancy increases toward approximately 80.0%. Rent—Cost of Services .
Cost of services as a percentage of revenue for the year ended December 31, 2024 decreased by 70 basis points compared to the year ended December 31, 2023 primarily due to increased efficiency in our operations.
Our net cash provided by financing activities decreased by $11.0 million for the year ended December 31, 2023 when compared to the year ended December 31, 2022 primarily due to a decrease in our net borrowings.
Our net cash provided by financing activities increased by $48.5 million for the year ended December 31, 2024 when compared to the year ended December 31, 2023 primarily due to an issuance of equity through a secondary offering totaling $118.1 million offset by a net repayment of debt totaling $65.0 million and payments for deferred financing costs of $3.9 million during the year ended December 31, 2024.
Financial covenants require compliance with certain levels of leverage ratios that impact the amount of interest. As of December 31, 2023, we were in compliance with all covenants. As of December 31, 2023 we had $6.1 million of cash and $80.8 million of available borrowing capacity on our Revolving Credit Facility.
As of December 31, 2024 we had $24.2 million of cash and $245.8 million of available borrowing capacity on our Amended Revolving Credit Facility.
Though we have seen steady improvements in occupancy throughout 2022 and 2023, the highly competitive environment for senior living residents and inflationary factors will continue to impact the rate at which we return our occupancy levels in our senior living communities to pre-pandemic levels. When we acquire turnaround or start-up operations, we expect that our combined metrics may be impacted.
Although we saw steady improvements in occupancy throughout 2023 as a result of renewed consideration of senior living communities as the negative impacts of the global pandemic subsided, and stable occupancy during 2024, the highly competitive environment for senior living residents and inflationary factors will continue to impact our occupancy levels in our senior living communities.
(e) During the year ended December 31, 2023, an affiliate of the Company placed its memory care units into transition and is actively seeking to sublease the units to an unrelated third party. The amount above represents the net operating impact attributable to the units in transition.
(e) During the year ended December 31, 2023, an affiliate of the Company placed its memory care units into transition and is converting the facility into an assisted living community. We received insurance proceeds related to the property in 2024 which were recorded as a gain on asset disposition on the consolidated statements of income.
Trends We have experienced modest senior living occupancy improvement through the year ended December 31, 2023, as a result of renewed consideration of senior living communities as a home-based care setting as the negative impacts of the global pandemic have subsided.
Trends We have experienced stable senior living occupancy through the year ended December 31, 2024.
(f) During the year ended December 31, 2023, an affiliate of the Company placed its memory care units into transition and is actively seeking to sublease the units to an unrelated third party. The amount above represents the net operating impact attributable to the units in transition.
(d) During the year ended December 31, 2023, an affiliate of the Company placed its memory care units into transition and is converting the facility into an assisted living community. We received insurance proceeds related to the property in 2024 which were recorded as a gain on asset disposition on the consolidated statements of income.
Removed
The 2021 amounts represents part of the costs incurred under the Transition Services Agreement. All amounts are included in general and administrative expense. Fees incurred under the Transition Services Agreement were $1,035, $1,561, and $3,124 for the year ended December 31, 2023, 2022 and 2021, respectively.
Added
Refer to Note 2, Basis of Presentation and Summary of Significant Accounting Policies , within the Consolidated Financial Statements for further information on our critical accounting estimates and policies, which are as follows: • Self-insurance reserves - The Company is self-insured for general and professional liability, workers’ compensation, automobile, and its employee health plans while maintaining stop-loss coverage with third-party insurers to limit its total liability exposure.
Removed
The 2021 amounts represents part of the costs incurred under the Transition Services Agreement. All amounts are included in general and administrative expense. Fees incurred under the Transition Services Agreement were $1,035, $1,561, and $3,124 for the year ended December 31, 2023, 2022 and 2021, respectively.
Added
The improvement in these metrics resulted in net organic revenue growth of $46.4 million for the year ended December 31, 2024.
Removed
Revolving Credit Facility On June 12, 2023, Pennant entered into the Second Amendment to its existing credit agreement (as amended, the “Credit Agreement”), to replace the LIBOR-based rates in the Credit Agreement with Standard Overnight Financing Rate (“SOFR”) based rates, due to the phase-out of LIBOR as a preferred global reference rate.
Added
Depreciation and amortization expense stayed flat as a percentage of total revenue. 42 Table of Contents (Gain) loss on Asset Dispositions and Impairment, Net.
Added
Financial covenants require compliance with certain levels of leverage ratios that impact the amount of interest. As of December 31, 2024, the Company was compliant with all such financial covenants. On October 2, 2024, the Company closed the public offering (the “Offering”) of 4,025 shares of its common stock, $0.001 par value per share (“common stock”).
Added
The net proceeds to the Company from the offering, after underwriting discounts, commissions, and expenses, was approximately $118.1 million. The majority of the proceeds were subsequently used to pay the outstanding balance on our Amended Revolving Credit Facility.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeItem 7A. Quantitative and Qualitative Disclosures About Market Risk Interest Rate Risk . We are exposed to risks associated with market changes in interest rates. On June 12, 2023, Pennant entered into the Second Amendment to the Credit Agreement, which replaced the reference rate under the Credit Agreement from LIBOR-based rate to SOFR-based rate.
Biggest changeItem 7A. Quantitative and Qualitative Disclosures About Market Risk Interest Rate Risk . We are exposed to risks associated with market changes in interest rates. On July 31, 2024, Pennant entered into the Amended Credit Agreement, which provides for a revolving credit facility with a syndicate of banks with a borrowing capacity of $250.0 million.
A 1.0% interest rate change would cause interest expense to change by approximately $0.7 million annually based upon our outstanding long-term debt as of December 31, 2023. We manage our exposure to this market risk by monitoring available financing alternatives.
A 1.0% interest rate change would cause interest expense to remain constant based upon our outstanding long-term debt as of December 31, 2024. We manage our exposure to this market risk by monitoring available financing alternatives.

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