After facing more than two years of state budget constraints, Addus HomeCare (Nasdaq: ADUS) in-home care aides in Illinois are celebrating in their recent win, as the company’s collective bargaining unit under Service Employees International Union (SEIU), has reached a tentative agreement with Addus management to boost wages.

Specifically, the tentative agreement will give workers a 72 cents per hour raise, with retroactive payments dating back to August 1.

The wage increase applies to all Illinois Addus staff serving clients under its contracts with the Illinois Department on Aging, the Illinois Office of Rehabilitation Services and Illinois Managed Care Organizations, according to Addus Chief Development Officer Darby Anderson. More than half of Addus’ net service revenue came from operations in Illinois in 2016. Addus does not expect the increase to significantly impact its earnings.

Increased Medicaid Payments

According to the SEIU, other provisions detailed in the tentative agreement include:

• An increase to $1.77 for caregivers’ health fund to protect their health insurance;
• Paid sick time for all workers covered by the Cook County Paid Sick time ordinance; and
• A protection of caregivers’ mileage from any reductions.

Because the proposed items are under tentative agreement at the time of press, SEIU has chosen not to comment further on the matter until the agreement has been ratified, according to James Muhammad, communications director for SEIU Healthcare.

Addus expects union members to ratify the agreement by early December, Anderson explained. The raise will be covered by Medicaid payment increases as part of the new Illinois budget, he added.

“[The 72 cents] was a required pass through included in the legislation, that led to the 2018 state budget, and included a reimbursement rate increase,” Anderson told HHCN. “The increase in the enhanced rate for health insurance was also set by the legislation and budget.”

In total, the Medicaid rate increase in Illinois, which went into effect on August 1, was raised to $18.29 per hour, for “the purpose of increasing, by at least 72 cents per hour, the wages paid by those vendors to their employees who provide homemaker services,” according to Illinois Department on Aging.

The Bigger Picture

The new collective bargaining agreement will not have a “material impact” on earnings, Anderson explained in a follow-up e-mail to HHCN.

“When the rate of reimbursement is increased, we agree to re-negotiate on wages, benefits and all of those economic elements of the agreement,” he said. “It’s pretty standard operating procedure. We’re happy to have the negotiations concluded and … we are happy with the agreement.”

While Addus works with its elected bargaining team to ratify the proposal, it still faces challenges in the Land of Lincoln.

In its third quarter earnings call, CEO Dirk Allison stated the company’s intent to diversify its business and reduce concentration in Illinois to under 35% of consolidated revenue.

For Anderson, the bigger picture includes fighting for additional funds from Medicaid to help agencies brace for increased wages—in the city of Chicago, the minimum wage will increase to $13 per hour in 2018, while Cook County will follow suit in 2019.

“The increase from the state included in the 2019 budget was in part to fund mandated wage increases implemented thus far,” Anderson said. “[But] without additional rate increases, these cost increases will negatively impact Addus and every other provider in Chicago and Cook County,” Anderson said.

For this reason, Addus remains committed to working with labor organizations to ensure fair wages for workers.

“We are looking forward to partnering with SEIU and our provider association to continue advocating for rate increases to raise the standard of wages and benefits for all of our employees, and specifically to fund mandated increases in minimum wage and sick time benefits in Chicago and Cook County,” he said.

Written by Carlo Calma