Addus Seeking Small, Private Duty Deals

With its state-level issues in Illinois behind it, personal care provider Addus Homecare (Nasdaq: ADUS) is anticipating recouping millions back and charging ahead with building out its private duty business line.

The provider, which is now based in Frisco, Texas, is expecting to see $78 million in receivables from Illinois that the company has carried for a year or more. Illinois recently passed a full-year budget for the first time in two and a half years, allowing its Medicaid and Medicare bills to finally be paid off. Addus executives were relieved they would see the company’s receivables soon, and were ready to move forward with new deals, they stated on the company’s Tuesday second-quarter earnings call.

For the second quarter, Addus reported a 2.6% net service revenue increase, reaching $103.6 million compared to the same time period in 2016. Net income rose 3.8% to $2.7 million for the quarter, compared to $2.6 million for the same quarter in 2016.


On the acquisition front, executives stated the company was moving along with several small deals on its private duty side. These transactions are all under $10 million, CEO Dirk Allison said during the company’s second quarter earnings call.

“In private pay, one of the things we have found are that the deals are smaller,” he said. “If they are larger, they tend to be franchise models, which we have no interest in pursuing.”

The company completed the acquisition of New Mexico-based personal care service company Options Home Care on August 1. The six Options sites in the transaction are currently functioning as part of Addus, executives stated on the call, and the company produces more than $20 million in annual revenues.


Addus’ private duty business made up just 2% of its revenues in the second quarter of 2017, according to public filings.

Regulatory worries

Addus Homecare also isn’t worried about a new proposal from the Centers for Medicare & Medicaid Services (CMS) that could cut as much as $950 million in reimbursements to the home health care industry through fundamental changes to the prospective payment sytem.

Unlike some of its peers, including LHC Group (Nasdaq: LHCG) and Amedisys Inc. (Nasdaq: AMED), Addus will largely be unaffected by the payment system update because so little of its revenue comes from Medicare.

“Less than $400,000 of Addus annual revenue is from Medicare home health care that could be affected by this proposed change,” Allison said. “We are subject to the various state rules pertaining to Medicaid that are not affected by rules applicable to Medicare.”

As of mid-day trading Tuesday, Addus’ share price was down more than 2%, hovering near $33.55. The company’s share price has declined from more than $38 over the last month.

Written by Amy Baxter

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