Addus CEO: Medicare Advantage Won’t Be a 2020 Home Care Boon

A significant portion of home care providers view Medicare Advantage (MA) as a 2020 business opportunity. But MA plans likely need more time to figure out where home care fits into their coverage, meaning real upside may still be a ways off, according to Addus HomeCare Corporation (Nasdaq: ADUS) President and CEO Dirk Allison.

Allison discussed his Frisco, Texas-based company’s Medicare Advantage plans, ongoing operations and M&A outlook Tuesday at the Jefferies 2019 Healthcare Conference in New York.

“We do not believe it’s a 2020 event,” Allison said during a presentation. “We believe it’s more of a 2021 event, largely because I think that the plans have to file this month for their 2020 plans, and [the Centers for Medicare & Medicaid Services] (CMS) clarified the rule about six weeks ago. I don’t think that MA plans have the time to really put the thought in for 2020.”

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In general, MA plans submit their bids on what benefits they’re going to offer to CMS in June. Plans and policymakers then typically work out the details until just before the official enrollment period starts Oct. 1.

Allison’s stance on Medicare Advantage and home care runs contrary to Home Health Care News findings. In a recent survey of 105 providers of at-home services and supports, 90% of respondents said they anticipate contracting with an MA plan for the 2020 plan year.

Last month, during a Q1 2019 conference call with investors, Addus previously expressed optimism about its MA inroads due to CMS expanding supplemental benefits flexibility to better care for chronically ill individuals.

Currently, the company has multiple contracts with large MA plans to provide personal care services, according to Allison.

“Now that they have much more discretion as to how they add this benefit, we believe starting in [2021] — and on through the next three to five years — you can see a real impact for Medicare Advantage with personal care,” he said. “What we have seen so far, about 3% of companies offered the benefit in [2019], and we have two large contracts. We’ve gotten a number of patients, but the volume is very low because the benefit is more of a marketing benefit.”

Whereas Addus’s average Medicaid client receives about 600 hours of care per year, some MA plans are limiting care to about 100 hours, the CEO noted.

For now, Addus believes that MA plans have primarily marketed to older adults as an opportunity to receive respite care, according to Allison.

“What we are trying to do is work with the Medicare Advantage plans to say, ‘That’s not where the benefit of this plan lies,’” Allison said. “We can help keep the elderly population out of the emergency room and out of the hospital, which saves you a lot of money on your medical loss ratio. We are trying to move from the marketing side to the medical side. When that happens, the opportunity for a company like Addus, with our personal care coverings across the country, it’s a tremendous benefit.”

Addus is primarily a home care services company — with more than 33,000 employees — that provides home-based care services to tens of thousands of consumers across two dozen states, with particularly strong market presence in Illinois and New Mexico.

During the Jefferies presentation, Addus also discussed completing the purchase of the assets of VIP Health Care Services, a Richmond Hill, New York-based home care provider that serves about 1,250 consumers across all five New York City boroughs, Long Island and two additional counties.

The deal was first announced last November; it officially closed on June 1.

VIP Health Care Services has annualized revenues of about $50 million. Addus and VIP Health Care Services will have combined revenues of more than $110 million in New York.

Addus, which has largely grown through M&A, continues to eye other potential acquisition opportunities, with a focus on personal care assets. Even so, Allison emphasized the occasional necessity of walking away from deals plagued with compliance issues.  

“We are not going to sacrifice the quality of our due diligence and transition process just to get a deal done,” Allison said. “[Because] a year later, you pay for it, and the euphoria goes away. We have walked away from a couple of deals in the last six months and both of them revolved around compliance issues.”

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