High Price Tags Pushing Addus Away from Hospice Acquisitions

High valuations have led Addus HomeCare (NASDAQ: ADUS) to pivot towards personal care and home health deals rather than hospice acquisitions.

Hospice multiples broke records in 2020, 2021 and 2022, reaching as high as 29x. And though last year’s numbers were somewhat skewed by massive deals, price tags remain high overall.

Those costs are making some buyers think twice about picking up hospices, Addus CEO Dirk Allison said at the Raymond James Investors Conference.


“Hospice is still very expensive. Most hospice owners have not got the word that we’re no longer trading at 30x. We’re down to a more normalized number,” Allison said. “So trying to get a hospice deal done at a rate that gives our shareholders a return is difficult today.”

The last major hospice transaction for Addus came early last year with its $85 million purchase of the Illinois-based nonprofit hospice provider JourneyCare Inc.

Across its business segments, the company plans to grow 10% annually through acquisitions, Allison indicated. This is in addition to anticipated organic growth.


Addus began as a personal care provider in 1979. About six years ago, it began to build its health care services segment, which includes home health and hospice. Today, the company operates in more than 200 markets in 22 states, with about 75% of its revenue coming from its personal care business. Combined, home health and hospice account for the remaining 25%.

But hospice represents the lion’s share of Addus’ health care services revenue.

Its hospice business brought in $50.6 million during Q4 2022, about 20.5% of the company’s consolidated earnings of $247 million for that period. Home health accounted for 5.3% of fourth quarter revenue at $13.1 million.

Going forward, one question on the company’s mind is whether its hospice growth indicates a long-term upward trend rather than a temporary spike due to increased mortality brought on by the pandemic.

“Hospice has probably been the most effective home care service that I’m aware of in a pandemic. One of the things that you consider when you are talking about the patient in hospice, it’s an elderly patient that is at a part of their life where they’re now in comfort care, and you’re helping them through this stage of life,” Allison said. “And what we saw with the pandemic is that the number of deaths in that population was much higher the last couple of years than it’s ever been. So the question is: Is that just a general change in hospice?”

Only time can answer that question, but current trends could leave some clues.

The national hospice utilization rate did take an uncharacteristic dip in 2020, to 47.8% among Medicare decedents, according to the Medicare Payment Advisory Commission (MedPAC). This is down from 51.6% in 2019. The commission attributed some of the decline to disruption from the pandemic, such as the limited access to patients and slower referral streams from hospitals and other facilities.

Another sobering reality behind those numbers is that people were dying faster than they could access the benefit. So, mathematically, a higher percentage of those patients did not enroll.

Nevertheless, more people did choose hospice in 2020 — 1.72 million compared to 1.61 million the previous year, according to the U.S. Centers for Medicare & Medicaid Services (CMS).

“Some of the folks that normally wouldn’t have passed quite yet did die because of the pandemic,” Allison said. “So for us, as a company, we believe that there’s still a year or so above challenge for hospice. But even so we think it’s a great service, and it’s very complementary to what we have always done.”

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