Addus Orients M&A Strategy Away From Hospice, Towards Home Health, Personal Care

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

Texas-based Addus provides personal, home health and hospice care across 207 locations in 22 states, reaching roughly 46,500 patients annually. Though hospice will still be an important part of the company’s growth strategy, the company will be more aggressive on home health and personal care acquisitions in the near term, according to Addus CEO Dirk Allison.

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


Among the reasons for this direction are the wider-range of options for value-based reimbursement for those two service lines.

Hospices have taken their first steps towards value-based reimbursement during the past two years through the Medicare Advantage carve-in, which is about three-quarters into its second year. The program’s formal title is the Value-Based Insurance Design (VBID) demonstration, and it remains to be seen whether the program will ultimately become a permanent fixture within Medicare. Even if it does, that would take several years to launch at scale.

Regardless of VBID’s outcome, many in the hospice space foresee greater movement towards value-based payments. This is where Addus sees “big opportunities down the road,” for hospice, according to CFO and Executive Vice President Brian Poff.


“It’s really paying more attention to where markets are going forward. What does that look like from future reimbursement support depending on each segment,” Poff said during the earnings call.

Acquisitions contributed roughly $65 million to Addus’ bottom line thus far in 2022, including one substantial hospice deal. The company purchased Illinois-based hospice provider JourneyCare Inc. earlier this year for $85 million. Last month it acquired Chicago-based Apple Home Health, Ltd. for an undisclosed sum.

Company-wide revenues reached $240.5 million in the third quarter, a rise of 11% compared to the same period in 2021. Hospice brought in $51.4 million during Q3, representing nearly a quarter (21.4%)of the company’s overall revenue. This was a 31.4% hike from the same period last year.

This represents “steady improvement” for Addus’ hospice business during the third quarter, according to Allison. Addus saw average hospice length of stay climb 28 days during Q3, up from 23 last quarter. Average daily census for hospice saw a year-over-year boost, reaching 3,280 in Q3 versus 2,629 during the prior year’s period.

For now, the company’s hospice growth strategy will concentrate on co-locating those operations with its other business lines.

“[Apple Home Health’s] acquisition furthers our strategy of building out home health and hospice services in markets where we have a strong personal care presence,” said Allison. “Our disciplined approach has put us in a strong position to take advantage of future acquisition opportunities. We expect to see a larger number of assets and more of these scale opportunities in coming months.”

New Mexico is the company’s “most mature market” in which all three services operate, Poff said. Addus has seen success in its value-based contracting efforts in the state, as well as an uptick in home health and hospice referrals.

A second key market is Illinois, where it also offers its trio of services. The Land of Lincoln represents “a lot of opportunity to expand into value-based care markets,” he added.

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