Valuations in the hospice space have led Addus Homecare (Nasdaq: ADUS) to take a more conservative approach to hospice transactions as it actively seeks home health and personal care deals.

Hospice multiples reach record highs in 2020 and 2021, as much as 26x. Since then the price tags have reportedly come down, but they haven’t gone far enough, according to Addus President and COO Brad Bickham. The company also seeks to bulk up its home health business relative to the scale of its hospice operations.

“First and foremost is the pricing aspect of it. But secondly, it’s probably sequencing to a certain extent,” Bickham said during the Stephens Annual Investment Conference. “Our hospice platform is certainly significantly larger than our home health platform. We have found that home health does a good job of feeding hospice in the markets where we do have that overlap. It’d be good to essentially catch up our home and health platform at the hospice side, and certainly it’s a cheaper valuation.”

Addus provides personal care, home health and hospice to more than 48,500 patients across 22 states. Its total revenue reached $289.8 million in the Q3 of 2024, a 7% year-over-year increase. Its personal care revenues reached $215.4 million that period.

The company’s hospice service line brought in $57.3 million in revenue during the third quarter, a 3.5% rise from $53.1 million in the prior year’s period. The company reported a “modest increase” in its hospice average daily census, which reached 3,534 in Q3, driven in part by 2.1% in organic growth. Hospice average length of stay reached 96.3 days during this period.

A drive to co-locate the company’s personal care and clinical services businesses is a cornerstone of Addus’ acquisition strategy, CEO Dirk Allison said at the conference. Addus considers its personal care operations to be its core business around which it wraps home health and hospice when appropriate.

“We want to put it around our personal care network. So if it’s not a personal care transaction, it needs to fit into our network, which we already have,” Allison said. “If it is a personal care transaction, it needs to be in the states in which we believe we can operate successfully.”

Addus’ most significant deal this year was its $350 million acquisition of Gentiva’s personal care segment, which provides services to more than 16,000 clients daily across seven states. The purchase marked the entry of Addus’ personal care segment into the Texas and Missouri markets.

The Gentiva acquisition propelled Addus’ census and revenue growth, Allison previously stated in earnings calls. Other growth levers include more favorable market opportunities in home health and personal care, with hospice a smaller, albeit important, part of the company’s M&A outlook.

“With the pipeline right now, we have opportunities across multiple segments today that we’re evaluating,” CFO Brian Poff said at Stephens. “We’re pretty conservative on our approach to M&A. We want to make sure that strategically they’re a good fit, they’re in the right markets and also at the right price.”