Addus HomeCare (Nasdaq: ADUS) is looking for synergies in 2018, starting by growing its hospice offering and extending its managed care experience by tapping into new Medicare Advantage opportunities in the future.
The Frisco, Texas-based personal care services provider is eyeing these new opportunities as the business landscape continues to shift, said Brian Poff, chief financial officer of Addus, during the RBC Capital Markets 2018 Healthcare Conference in New York City.
One new area of pursuit for the company is Medicare Advantage, which currently covers one in three Medicare beneficiaries and is expected to continue growing rapidly. Earlier this month, the Centers for Medicare & Medicaid Services (CMS) announced its proposal to include non-skilled in-home care supports in MA plans starting in 2019.
Addus plans to review the opportunity and is working with its managed care partners, Poff said. Already, 30% of Addus’ revenues flow through managed care partnerships.
“We’ve developed those relationships already,” Poff said. “As things move forward, there’s potential for Medicare Advantage being an opportunity. …We see that as a new market we could potentially tap into.”
However, it is “too early to tell the overall impact,” according to Poff.
In addition, Addus is further exploring hospice opportunities, keeping with the company’s previously announced plans to diversify from personal care services. The hospice M&A environment has been heating up over the last few years, in part because of the sector’s higher margins, relative to personal care and home health care.
“In the pipeline today we have hospice components,” Poff said. “The multiples today for pure-play hospice are expensive. [You could see us make acquisitions] if we see assets that have a combination of services that makes sense for us in the markets thats makes sense for us.”
Down the road, the company aims to boost its hospice exposure so that up to 60% of its revenue would come from personal care services and 40% would come from hospice, depending on the acquisition opportunities.
In addition to seeking out new revenue streams as part of the company’s overall strategy, Addus is continuing to diversify outside its founding state of Illinois.
In 2017, Addus made a number of acquisitions that helped cushion the company from its significant exposure in Illinois, which has had budget issues over the years that prevented Addus from being paid on time.
The company has been vocal about its desire to limit its Illinois exposure since last year. Addus hopes to have Illinois make up about a third of its revenue in the future, compared to the 50% reported at the end of 2017.
“The political environment there has ups and downs,” Poff said. “We’ve ever had a problem being paid by Illinois, it’s when do we get paid. …It won’t be an area we continue to expand our state services. All our expansion is elsewhere.”
At the same time, Addus has the scale to plow through payment challenges in the state, and sees its size as a major advantage as the heath care landscape continues to change and new opportunities abound, particularly with other major consolidation across the industry and as companies like Amazon (Nasdaq: AMZN) look to make their own mark on the industry.
“We are a low-cost in-home care provider,” Poff said. “We’re in a good position to field the benefits in health care in any direction it goes.”
Written by Amy Baxter
Companies featured in this article:
