Addus HomeCare Corp. (NASDAQ: ADUS) is on the hunt for acquisitions. While its 2021 acquisition strategy is heavily weighted toward home health and personal care, the company still has its eyes out for hospice assets.

Addus provides hospice, home health and personal care services to nearly 44,000 patients through 215 locations in 25 states. The company earned $217.9 million for the second quarter of 2021, up 18.1% from $184.6 million for the second quarter of 2020. Hospice accounted for $37 million in Q2 earnings this year.

Since 2019, the company has purchased seven personal care companies and four home health and hospice companies. Most recently, Addus acquired Armada Hospice of New Mexico and Armada Hospice of Santa Fe for $29 million. The transaction also included the affiliated Armada Skilled Home Health of New Mexico.

Addus is also nearly finished with integration of its Queen City Hospice purchase in Ohio last year. In December 2020, the company bought Queen City and its affiliate Miracle City Hospice from the private equity firm Stonehenge Partners for a cash purchase price of $192 million.

Hospice News spoke with Addus Executive Vice President & Chief Strategy Officer Darby Anderson about the growth trajectory for the company’s hospice business and the advent of value-based payments for end-of-life care.

Addus had a substantial extension of credit from Capital One earlier this year to fuel acquisitions. I know from some of the earnings calls that your transaction pipeline is weighted towards home health and personal care. Do you expect more hospice transactions this year or in 2022?

Our pipeline is robust across each of our business segments, although we have a slight preference towards further developing our geographic presence in skilled home health as we have recently expanded our hospice service line to cover six states. We continue to look to strengthen our personal care presence in the markets we serve where it makes sense strategically and to add hospice services in our markets where we have a significant personal care presence.

With all the consolidation happening in the hospice space, why focus your acquisitions on the home health and personal care sides? Is it the high price tags?

Hospice transaction multiples have recently been higher than those in the skilled home health and personal care space, so that is part of the equation. The more important reason for our focus on home health and personal care acquisitions is more strategic in that we want to expand our home health segment outside of essentially New Mexico into other markets where we currently have significant personal care and/or hospice operations.

What attracted Addus to the New Mexico and the Ohio markets with the Queen City and Armada deals?

Queen City was very attractive as Ohio is a significant personal care market for us, and the Queen City geography overlapped nicely with our existing personal care footprint in Ohio. We also have the ability to operate skilled home health in Ohio. Armada significantly increases our skilled home health presence in New Mexico, effectively doubling the size of our home health operation in the state where we have a large personal care and hospice presence.

Can you talk about some of the strategies beyond acquisitions that you are considering to grow your hospice business?

Focusing on taking some of the best practices we have learned from the Queen City operations and expanding those to other markets and using expanded data analytics to make sure we are providing the right care at the right time for patients and families.

Did you see a shift in your referral mix during the pandemic? If so, can you characterize what some of the changes were and how you had to adapt?

We experienced a shift in referrals from facility based to non-facility based referral sources in many of our markets. Part of this was due to facility access being limited during the pandemic and a reduction in occupancy levels at many facilities.

Our staff did a great job working through the access issues by meeting with key referral partners off site to stay in touch with them, and have worked to develop and expand our referral base outside of the facility setting.

A lot of providers saw drops in length of stay during the past year and a half. Has Addus seen any rebound? How are you strategizing around that issue?

Since our February low point for median length of stay, we have seen a steady increase in our median length of stay. Part of this is due to a steady recovery in our facility-based referrals and also from a more normalized discussion by patients, families and physicians around hospice from a timing perspective.

I believe the pandemic significantly impacted the timing of discussions around hospice until later in a patient’s condition due to limited access by families of patients in both facility and non-facility settings and more limited contact with physicians in some areas due to the pandemic.

What is your take on the gradual movements hospice is making towards value-based care, through the Medicare Advantage carve-in and Primary Care First. How might these developments impact Addus?

We are cautiously optimistic that these changes will increase the utilization of hospice and improve the overall quality of hospice services across the industry. Hospice is one of the most incredible Medicare benefits and has always been viewed very favorably by patients, families and other stakeholders.

My only concern is that we don’t negatively impact the delivery of what is already arguably the highest-rated Medicare benefit by trying to save money simply by reducing provider rates, rather than truly focusing on the delivery of quality end-of-life care.