Addus aligns M&A strategy away from hospice towards home health and personal care

Addus HomeCare Corporation (NASDAQ: ADUS) is shifting its M&A strategy away from hospice businesses and focusing on its home health and personal care businesses.

Based in Texas, Addus provides personal, home health and hospice care at 207 locations in 22 states, reaching approximately 46,500 patients annually. While the hospice will still be an important part of the company’s growth strategy, Addus CEO Dirk Allison said the company will be more aggressive in acquiring home health and personal care products in the near term.

“While we will continue to explore the hospice market for small deals in markets where we already have hospice operations, over the next 12 to 24 months our primary focus will be on larger personal care or home health deals,” Allison said in an earnings call .

Reasons for this direction include the broader opportunities for value-based compensation for these two performance lines.

Hospices have taken their first steps toward value-based reimbursement over the past two years through the Medicare Advantage carve-in, which has been in its second year for about three quarters. The formal title of the program is Value-Based Insurance Design (VBID) Demonstration, and it remains to be seen whether the program will eventually become a permanent part of Medicare. Even if this were the case, it would take several years before it was introduced on a large scale.

Regardless of the outcome of VBID, many in the hospice sector anticipate a stronger move toward value-based payments. According to CFO and Executive Vice President Brian Poff, Addus sees “great opportunities in the future” for the hospice.

“There is really more attention paid to where the markets are going. What does that look like for future reimbursement support based on each segment,” Poff said during the conference call.

Acquisitions have contributed approximately $65 million to Addus’ bottom line in 2022 so far, including a significant hospice deal. The enterprise Bought Illinois-based hospice provider JourneyCare Inc. earlier this year for $85 million. last month it acquired Apple Home Health, Ltd. based in Chicago for an undisclosed sum.

Companywide revenue for the third quarter was $240.5 million, an increase of 11% compared to the same period in 2021. Hospice earned $51.4 million in the third quarter, up nearly a quarter (21, 4%) of the company’s total revenue. This was an increase of 31.4% over the same period last year.

According to Allison, this represents a “steady improvement” for Addus’ hospice business in the third quarter. Addus saw average hospice length of stay increase by 28 days in the third quarter, up from 23 days last quarter. The average daily census for hospices increased year-over-year, reaching 3,280 in the third quarter versus 2,629 in the same period last year.

First the company’s hospice growth strategy will focus on locating these operations along with its other businesses.

“[Apple Home Health’s] The acquisition advances our strategy to grow home health and hospice services in markets where we have a strong presence in the personal care space,” said Allison. “Our disciplined approach has placed us in a strong position to capitalize on future acquisition opportunities. We expect to see more assets and more of these scaling opportunities in the coming months.”

New Mexico is the company’s “seasoned market” where all three services operate, Poff said. Addus has seen success in its value-based contracting efforts across the state, as well as a surge in referrals to home health care and hospice services.

A second important market is Illinois, where the company also offers its trio of services. The Land of Lincoln represents “many opportunities to expand into value-based care markets,” he added.

Comments are closed.