After finally receiving payments from Illinois that were held up due to a two-year budget stalemate, Addus HomeCare (Nasdaq: ADUS) is continuing to tie up loose ends.
Frisco, Texas-based Addus is still setting its sights on personal care growth and is finally “at a point where we are ready to grow,” CEO Dirk Allison said during a Sept. 6 presentation at Baird’s annual Global Healthcare Conference.
Allison, who took over as CEO at the beginning of 2016, has been focused on improving the company’s margins over the last 18 months, he said. For a time, the personal care company saw margins drop from 8% to 6%, Allison revealed. After scrapping Addus’ centralized contact center and ramping up other initiatives to boost personnel in the field, the company has been able to bounce back.
“One of the things I wanted to do was move our margins up,” he said during the presentation. “I believe it could be a 10% margin industry. We don’t have enough size, but we’re getting close.”
In addition to enhancing its technology, bringing on new leadership has helped Addus improve, Allison said. Switching the payroll system has also significantly cut waste, and the company is 95% done with its conversion to the new system.
“We would run 20,000 checks per week and had 1,000 wrong,” he said. “Every week we were recutting 1,000 checks. We made the investment to move to ADP, which took 13 months. … A number of issues are way reduced.”
One of the biggest snags for Addus since Allison began to lead the company was the budget stalemate in Illinois, which lasted more than two years and held up tens of millions of dollars for Addus. Fortunately, the company was paid $70 million from the state for personal care services it had provided within weeks of a budget being passed.
The state has also increased Medicaid reimbursements to match rising minimum wage levels.
“Wage comes right out of our margins if the state does not track upward,” Allison said. “In Illinois, because it is such a strong labor state, we didn’t worry about the increases to offset minimum wage. But you can’t get those without a budget.”
The new budget increases Addus’ rate by $1.15 per what hour, Allison said, with 72 cents going directly to employees.
Looking ahead, Allison is focused on employee satisfaction. The company recently hired a new human resources manager, Laurie Manning, to improve in that regard.
In addition, Addus will continue to look for smaller scale acquisitions in the $25 million to $30 million range, Allison stated.
Written by Amy Baxter