Addus HomeCare (NASDAQ:ADUS) executives said the company exited the fourth quarter in “really good shape,” citing a strong earnings quarter and what they described as a solid start to the first quarter, despite typical holiday-season scheduling pressures and weather-related disruptions early in the year.
Speaking at Oppenheimer’s 36th Annual Healthcare Conference, Chairman and CEO Dirk Allison and CFO Brian Poff discussed operating trends across personal care and skilled services, reimbursement and Medicaid considerations, hiring conditions, compliance efforts, acquisition priorities, and early use cases for artificial intelligence.
Operating trends exiting Q4 and into Q1
Entering the first quarter, management said momentum improved. Allison cited a “nice start” that continued through the quarter, though the company faced challenges in late January and early February tied to weather. He added that hiring numbers have been up in the first quarter and said the company is “very excited” about its position, which he believes sets it up well for 2026.
Same-store growth framework: rates and volumes
In discussing the company’s 3% to 5% same-store growth target for 2026 in personal care, Poff outlined an expected split between volume and rate, pointing to recent and upcoming rate actions in several states.
- Rate factors: Poff cited Texas rate support that began in September of the prior year, an Illinois rate increase earlier in the year, and an anticipated New Mexico rate increase expected to begin in the back half of 2026.
- Volume factors: The company has targeted 2% to 2.5% “pure volume or hours growth” year over year, and management said results have been within or at the top end of that range in recent quarters, with expectations for that to continue.
Poff said the company expects personal care same-store growth to be “at or above the top end” of the 3% to 5% range for much of the year, given the rate support cited.
For skilled services, Poff said hospice had a strong year previously, with “double-digit plus” increases, while noting that CMS rate updates have generally been in the 2.5% to 3% range annually. He said management would expect hospice growth to moderate to what he described as a more reasonable “upper single digits” longer term. In home health, he said the business has faced volume challenges, but leadership and personnel changes are intended to improve consistency; given flat-to-down rates, he said mid-single-digit growth would be a more likely expectation than upper single digits.
Personal care volumes: hours per consumer and census dynamics
Allison described two components of volume growth: increased hours for existing consumers and new patient additions (average daily census). He said the company has seen “nice incremental growth” in hours per consumer in personal care, which he attributed in part to the company’s caregiver app and operational initiatives over the last two years.
On average daily census, Allison said growth has been more challenging over the last 18 months to two years, citing the impact of Medicaid redeterminations. He said the redetermination process slowed new admissions in key states, including New Mexico and Texas, causing discharges to exceed new adds for a period.
However, he said trends in New Mexico and Texas have improved, with new admits and new starts exceeding discharges for “two or three quarters,” contributing to census growth. Allison said the company saw sequential census growth for a period, followed by a decline in the fourth quarter, but he expects sequential and year-over-year growth to improve in 2026 as comparisons become less aggressive. He added that Illinois has been “behind the curve,” but management is starting to see admissions exceed discharges and expects improvements over the next couple of quarters.
Caregiver app rollout and adoption
Allison said the caregiver app was initially rolled out in Illinois, where a “little over 90%” of caregivers use it, though it is not required. He said caregivers can use the app to check pay-related hours and indicate interest in additional hours, which helps with scheduling and has supported higher hours served.
He said the company began moving the app into New Mexico roughly a year ago, and later began a Texas rollout, describing Texas as having an opportunity to increase hours. Allison said that if New Mexico and Texas see dynamics similar to Illinois, hours per caregiver could gradually increase, supporting the company’s growth targets.
Medicaid, fraud-and-abuse scrutiny, M&A, and AI
On Medicaid under what management referred to as “OB3,” Allison said the company does not believe its segment is directly in the crosshairs, though it could be tangentially affected if state budgets come under pressure from policy changes such as provider tax-related issues. He emphasized that personal care services can be a lower-cost alternative to nursing facility care and said states have been supportive of home and community-based care. Poff added that nothing in “OB3” directly impacts the company’s services, but he said the company is monitoring potential downstream budget pressures and the cadence of rate support in certain states. He noted that Illinois’ proposed budget did not include a rate increase for the next fiscal year, similar to the prior year’s initial proposal, and said the company will watch developments and continue discussions with stakeholders.
Addressing fraud and abuse concerns, Allison said the company supports enforcement efforts and highlighted the creation of a strong compliance department in 2016. He said when issues such as missing paperwork have been identified, the company has repaid amounts to the appropriate government entity. He also suggested heightened scrutiny could pressure smaller operators that lack resources to invest in compliance, potentially leading to acquisition opportunities.
On M&A, Poff said the company is primarily focused on personal care, particularly smaller transactions that increase density in existing markets at what he described as lower multiples. He said small personal care deals continue to price in the mid-single digits, rising into “7x-8x” for more sizable assets. He also referenced potential larger, private-equity-backed opportunities that could come to market later in the year, adding that geographies matter and that some past larger deals included less desirable areas such as New York. He said hospice assets remain expensive, though the company would consider smaller, reasonably priced hospice deals in markets where it already has a presence, and it remains selective in home health pending regulatory clarity and valuation.
Poff said the “ideal” acquisition would include all three lines of care—personal care, home health, and hospice—given potential revenue synergies, though he noted such targets are not common.
Regarding the Gentiva integration, Poff said integration has largely been complete for some time and described the transaction as a carve-out with limited back-office synergies. He said the integration has gone well culturally and that margins have tracked expectations. He added that the acquired operations are on their own EMR and that Addus plans to move them into its Homecare Homebase environment later, potentially late this year through 2027, when some redundant costs could be eliminated.
On labor, Allison said first-quarter hiring has been fairly strong aside from a few weather-impacted weeks, and that current hiring levels support the company’s growth goals. He said clinical hiring can be more competitive in larger markets, but overall hiring is not the company’s top concern at present.
Finally, on AI, Allison said the company is using AI in hiring and payroll/recruiting processes and has formed an AI committee with representation across departments. He said the company is evaluating back-office applications where AI could drive efficiency, potentially limiting the number of positions needed as the company grows rather than eliminating roles outright.
About Addus HomeCare (NASDAQ:ADUS)
Addus HomeCare (NASDAQ: ADUS) is a leading provider of home and community-based care services for elderly, disabled, and medically complex individuals across the United States. Through a network of company-owned and franchise locations, the company delivers a broad spectrum of non-medical personal care and licensed home health services designed to support clients’ independence and quality of life.
The company’s core offerings include personal care assistance—covering daily living activities, medication reminders, and light housekeeping—and skilled home health services delivered under the supervision of registered nurses and licensed therapists.
