Addus HomeCare (NASDAQ:ADUS) executives said the company’s personal care volumes improved through the first quarter after weather-related disruption in January, while management continued to emphasize technology adoption, Medicaid relationships and acquisitions as key drivers of future growth.
Speaking at a Bank of America healthcare providers conference session hosted by Joanna Gajuk, Addus Chairman and CEO Dirk Allison, CFO Brian Poff and President and COO Heather Dixon discussed trends across the company’s personal care, hospice and home health businesses.
Personal Care Volumes Improved After January Weather Impact
“We exited the quarter in a really good spot versus where we had sort of expected to be,” Dixon said. She added that trends in the second quarter remained consistent with the trajectory management expected after the end of the first quarter, though she said it was too early to discuss May in detail.
Dixon said the company saw similar improvement in its three largest markets, including Illinois, New Mexico and Texas. Illinois, Addus’ largest market, received additional attention because of investor questions. Dixon said starts of care exceeded discharges in Illinois during the quarter.
In Texas, Dixon attributed January softness to winter weather, saying many areas experienced about a week when people had difficulty getting out because of ice.
Caregiver App Seen Supporting Billable Hours
Dixon said Addus reported about 2.2% hours growth, which she described as another consistent quarter of growth in the range the company has targeted. She linked part of the improvement to the company’s caregiver app, which has been used in Illinois for more than a year and was deployed in Texas near the end of the first quarter.
The app allows caregivers to see how many authorized hours remain for clients during a given week and, in Illinois, to reschedule or schedule visits on their own. Dixon said the technology helps improve the percentage of authorized hours that are actually worked and billed.
In Illinois, Dixon said utilization moved from the low 80% range to the high 80% range over the first 12 to 18 months of app use. Allison added that Addus’ overall worked-hours-versus-authorized-hours rate had improved from the mid-70% range to 83%, while noting that not all of the improvement can be attributed directly to the app.
Dixon said the app’s most important benefit is giving caregivers visibility into remaining hours they can work, followed by the ability to reschedule visits and reduce missed visits. She also cited efficiency gains for office staff because some scheduling interactions become self-service.
Management Targets More Balanced Organic Growth
Allison said Addus’ organic growth in personal care had been heavily rate-driven coming out of COVID-19, helped by state reimbursement increases, including Illinois’ phased minimum wage increases. He said management wants to return to a more balanced mix of rate and volume growth.
“If we say we want to grow organic growth 5%, we’d like to see 2% to 2.5% of that hourly and 2% to 2.5% there about rates,” Allison said.
He said Addus was close to that balance in the fourth quarter, while first-quarter growth was slightly more weighted toward rate after hours growth moved from 2.4% to 2.2%.
Medicaid Budget Pressure and Compliance Scrutiny
Asked about potential state budget pressure related to federal Medicaid changes, Allison said Addus does not view current developments as a direct negative for the company. He said Addus provides lower-cost care for an elderly population that could otherwise require nursing home care.
“From Medicaid’s standpoint, we are the low-cost provider for a high-cost population,” Allison said. He added that states may prefer to fund home-based care, which he described as roughly one-third the cost of facility-based care for the same population.
Allison said he has seen only limited past instances of states attempting to reduce personal care hours or rates, and said those efforts were generally short-lived. He also said Addus maintains deep relationships with states to communicate the value of its services.
Poff said heightened scrutiny around fraud, waste and abuse in personal care could create opportunities for larger providers with stronger compliance infrastructure. Allison said Addus’ compliance program could strengthen relationships with states and managed Medicaid payers.
Acquisitions, Hospice and Home Health Outlook
Poff said Indiana is an attractive new market for Addus because it is fiscally responsible, has managed Medicaid, has shown support for the program and is geographically close to existing Addus markets including Illinois, Michigan and Ohio. He said two smaller Indiana acquisitions should provide scale and density and be “nicely accretive.”
On capital deployment, Poff said mergers and acquisitions remain the company’s priority. He said personal care is likely the largest opportunity because the sector remains fragmented, while hospice acquisitions are less likely because valuations remain elevated. Home health, though the smallest segment, remains complementary in markets where Addus also has personal care or hospice operations.
For hospice, Poff said Addus expects long-term same-store growth in the upper single digits, supported by Medicare rate updates and average daily census growth. He said the company monitors Medicare cap exposure closely and has not had cap issues.
Regarding home health reimbursement, Poff said Addus does not have specific insight into CMS’ plans for potential recoupments or clawbacks, but said the industry would benefit from clarity. He said management expects this year’s proposal to be more reasonable than last year’s, while noting that remains uncertain.
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.
