We are a leading post-acute healthcare company primarily focused on delivering
high-quality skilled nursing care through a portfolio of independently operated
facilities. Founded in 2013, we are one of the largest skilled nursing providers
in the United States based on number of facilities, with over 200 post-acute
care facilities across nine states serving over 20,000 patients daily. We also
provide senior care, assisted living, and independent living options in some of
our communities. Our significant historical growth has been primarily driven by
our expertise in acquiring underperforming long-term custodial care skilled
nursing facilities and transforming them into higher acuity, high value-add
short-term transitional care skilled nursing facilities. We believe our success
is driven in significant part by our decentralized, local operating model,
through which we empower local leaders at each facility to operate their
facility autonomously and deliver excellence in clinical quality and a superior
experience for our patients. We provide our independently operated facilities
with a comprehensive suite of technology, support, and back-office services that
allow local leadership teams to focus more of their time and effort on providing
quality care to patients. We believe our operating model delivers value to all
of our healthcare stakeholders, including patients and families, referring
providers, payors, and administrators and clinicians.
The post-acute care ecosystem serves individuals who need additional help
recuperating from acute conditions, illnesses, or serious medical procedures
after they have been discharged from the hospital. This ecosystem ranges from
higher acuity, higher-cost settings, such as long-term acute care hospitals and
inpatient rehabilitation facilities, to lower acuity, lower-cost settings, such
as assisted living facilities, and home health. Skilled nursing facilities
(SNFs) are positioned at the center of this ecosystem and play an essential role
in providing cost efficient facility-based care to patients that have been
discharged from hospitals but still require 24-hour in-patient services. SNFs
can provide both long-term custodial care and higher value short-term
transitional care. The SNF industry is large and growing, with the Centers for
Medicare & Medicaid Services (CMS) expecting total industry expenditures to
increase from $193.6 billion in 2022 to $283.3 billion in 2031, representing a
compound annual growth rate (CAGR) of 4.3%. Based on the number of facilities as
reported by CMS, we are one of the largest SNF operators in the United States.
We are primarily focused on providing higher value short-term transitional care
and believe we are uniquely positioned to capitalize on the current underlying
trends within the SNF industry and to capture a growing portion of the expected
demand.
We believe that healthcare is local and we operate through a decentralized
model, recognizing that each patient, facility, and community is unique. To that
end, we believe that our local leaders and employees understand the distinct
needs and priorities of their patients, staff, and facilities and are best
positioned to make clinical and operational decisions in order to optimize
patient outcomes and experience. To facilitate this, each of our facilities
operates independently, led by a facility administrator and his or her
interdisciplinary team of medical directors, nurses, therapists, specialty
consultants, and operators. To assist these local teams in achieving their best
clinical and operating potential, we provide each facility with access to PACS
Services. PACS Services is a comprehensive suite of offerings, including
accounting, finance, human resources, payroll, accounts receivable and payable,
legal, and risk management services, as well as a robust suite of technology
tools. We operate in a highly regulated industry with stringent regulatory
compliance obligations, which requires robust regulatory compliance operations.
Failure to operate in compliance with applicable laws and regulations could
require significant expenditures and result in regulatory deficiencies and other
regulatory penalties. PACS Services functions to support our regulatory
compliance obligations across our organization, including through controlled
billing and cost reporting practices and legal, risk management, and compliance
support. PACS Services also provides teams of regional professionals available
as resources to each facility, including a regional vice president (RVP) and
regional clinical and non-clinical directors and consultants. We developed PACS
Services to be a resource to help reduce administrative burden so that local
leadership teams can focus on making decisions that improve the care,
well-being, and quality of life of their patients.
We believe that talented local leadership is critical to the success of our
model of independently operated, centrally supported facilities. At the facility
level, administrators are effectively the chief executive officers, and together
with other local licensed professionals, are ultimately responsible for the
operations of their respective facilities. We seek to recruit, train, and reward
dynamic administrators for our facilities, and rely on them to work with their
interdisciplinary teams to implement policies and procedures that are
appropriate and effective and result in positive outcomes. We support the
delivery of excellent care by building excellent teams. We believe our model
attracts high caliber, entrepreneurial professionals who value having
considerable autonomy, accountability, and aligned incentives. We provide these
professionals with leadership and industry training, guidance, and operational
support. Our model is intended to align local leaders’ incentives with facility
and organizational success, encouraging them to dedicate themselves to the
long-term future of their facilities. To create such alignment, we have
developed an administrator compensation structure that prioritizes quality of
care and operational and financial performance. Our administrators understand
that a well-performing facility is the result of providing quality care in an
environment of healing and caring, and one that is appropriately staffed,
supplied, and equipped to meet the needs of its patients. This dedicated focus
by our administrators and their local teams on patient outcomes drives demand
for our services and can ultimately result in higher patient census and
profitability. We also seek to provide opportunities for upward career mobility,
with many of our administrators being promoted from within our company to roles
of increasing levels of responsibility. Our culture of meritocracy and pride of
ownership has helped us retain experienced facility administrators as well as
RVPs who had average industry experience of 12.1 years, as of December 31, 2023.
For the year ended December 31, 2023, we had a voluntary turnover rate
of 3.1% among our facility administrators.
Excellence in clinical quality and experience for our patients is at the
forefront of our mission. We believe our focus on quality is reflected in our
CMS Quality Measures (QM) Star rating, occupancy rate, and skilled mix by
nursing patient days (which refers to the number of days our Medicare and
managed care patients receive skilled nursing services at SNFs as a percentage
of the total number of days that patients from all payor sources receive skilled
nursing services at SNFs for any given period). The QM Star rating is a number
between 1 and 5 that is assigned to SNFs that participate in Medicare or
Medicaid, and is based on an aggregate score across a range of quality reporting
program requirements. As of December 31, 2023, our average QM Star rating across
all our facilities was 4.1 Stars, compared to the industry average of 3.6 Stars.
For the years ended December 31, 2023, 2022 and 2021, our average occupancy rate
across our Mature facilities, which we define as facilities purchased more than
36 months prior to the measurement date, was 93%, 92%, and 88%, respectively,
compared to the industry average of 76%, 74% and 71%. For the year ended
December 31, 2023, our skilled mix by nursing patient days was 32%.
We have historically grown primarily through our disciplined and balanced
acquisition strategy. We aim to create value by identifying and acquiring
underperforming custodial care facilities and converting them into higher-value
short-term transitional care facilities by investing in clinical teams and
processes and upgrading technology, equipment, training, staffing, aesthetics,
and other aspects of the business. The resources and guidance offered by PACS
Services is key to rapid integration of new facilities and provides our local
leadership teams with an effective technology infrastructure, support tools, and
regional support teams that allow local leadership to focus on operational
improvements. Our facilities generally undergo an up to three-year
post-acquisition transition period. During this period, we seek to implement
best practices designed to realize and sustain the facility’s full potential.
These practices often result in significant improvements to clinical quality and
other operational metrics, including skilled mix, occupancy rates and payor
contracting. We believe the results of our acquisition strategy are demonstrated
by our high average QM Star rating and occupancy rate for Mature facilities of
4.2 and 93%, respectively, as of December 31, 2023. As of December 31, 2023, the
average QM Star rating and occupancy rate for New facilities, which we define as
facilities purchased less than 18 months prior to the measurement date,
was 3.9 and 87%, respectively.
Our portfolio of owned and leased properties is strategically located in nine
states: Arizona, California, Colorado, Kentucky, Missouri, Nevada, Ohio, South
Carolina and Texas. We anticipate that available acquisition opportunities will
enable us to further penetrate our reach into these nine states and to enter new
states in the future. We believe our current markets are attractive and that the
states in which we operate each has unique benefits, such as favorable
reimbursement dynamics, high barriers to entry, or population growth of adults
aged 65 and older, which is our primary patient demographic. We generally look
for similar attributes in new markets that we enter. As of December 31, 2023, we
leased 165 facilities, directly owned the real estate at 29 facilities, and
owned partial interests in an additional 14 facilities through joint ventures
managed by third parties. As we continue to grow, we intend to explore
additional purchases of real-estate assets, through purchase options or
right-of-first refusals in existing leases, as well as acquisitions and de novo
construction of purpose-built facilities.
For the year ended December 31, 2023, we generated total revenue of $3.1
billion, representing a CAGR of 63.3% over the last three years. A substantial
portion of our revenue is generated from payments from third-party payors,
including Medicare and Medicaid, which represent our largest sources of revenue
and accounted for 38.6% and 37.6% of our routine revenue for the year ended
December 31, 2023, respectively. For the year ended December 31, 2022, we
generated revenue of $2.4 billion, and Medicare and Medicaid accounted for 47.6%
and 30.2% of our total revenue, respectively. For the year ended December 31,
2023, we generated total net income of $112.9 million, total operating expense
of $2.9 billion and Adjusted EBITDA of $237.5 million, representing a CAGR
of 53.4%, 63.7%, and 51.1%, respectively, over the last three years. For the
year ended December 31, 2022, our total operating expenses were $2.2 billion,
and we generated net income of $150.5 million and Adjusted EBITDA of $255.5
million. As of December 31, 2023, we had total long-term liabilities of $3.0
billion. Adjusted EBITDA is a non-GAAP financial measure.
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We were initially incorporated on December 17, 2012 as Providence Group, Inc., a
California corporation. On June 30, 2023, we undertook a reorganization in
connection with our entry into a new credit agreement. Pursuant to this
reorganization, PACS Group, Inc., which was incorporated on March 24, 2023 as a
Delaware corporation, became the parent entity for our organization.
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PACS Group, Inc. is a holding company with operating subsidiaries that provide
skilled nursing, senior living, as well as other ancillary businesses. Each
facility is structured as an operating subsidiary under one of our two
subsidiary holding companies: Providence Group, Inc. and Providence Group NH,
LLC. Subsidiaries of Providence Group, Inc. are currently operating subsidiaries
(facilities) with mortgage loans insured by the U.S. Department of Housing and
Urban Affairs. Subsidiaries of Providence Group NH, LLC are currently operating
subsidiaries (facilities) without such mortgage loans.
PACS Group, Inc. and its subsidiaries that are not licensed healthcare providers
do not provide healthcare services to patients, residents or any other person,
and do not direct or control the provision of services provided. All healthcare
services are provided solely by applicable subsidiaries that are licensed
healthcare providers, under the direction and control of licensed healthcare
professionals in accordance with applicable law.
Our principal executive offices are located at 262 N. University Ave,
Farmington, Utah 84025, and our telephone number is (801) 447-9829. Our website
address is www.pacs.com.
