Addus CEO Lauds Illinois Rate Increases

Over the years, Addus HomeCare Corporation (Nasdaq: ADUS) has faced its fair share of Illinois budget woes.

But the company has finally received some positive news, announcing Monday that the Centers for Medicare & Medicaid Services (CMS) has approved two Illinois budgeted rate increases for the next couple years. Combined, the Frisco, Texas-based Addus expects the Medicaid rate increases to have a “favorable impact” to its bottom line and operations in the Praire State.

Specifically, CMS approved two rate increases: one effective Dec. 1 of this year and one for Jan. 1, 2020. Broadly, the rate increases are meant to balance the costs of previous minimum wage increases in Illinois.

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Broadly, many Medicaid-backed in-home care agencies depend on reimbursements to operate. If states fail to increase rates as minimum wages also rise, providers are forced to absorb the difference.

With more than 33,000 employees, Addus currently provides home-based care services to tens of thousands of consumers across two dozen states, with a particularly strong market presence in Illinois and New Mexico. The majority of Addus’s revenue comes from state and local government agencies, primarily through Medicaid and Medicaid waiver programs.

Originally, the Illinois rate increase was supposed to go into effect July 1, 2019, with rates increasing by 10.9% — to $20.28 from $18.29 — and then an additional 7.7% to $21.84. The state of Illinois had required managed Medicaid plans to honor these rates as scheduled, though it needed to receive CMS approval in advance of implementing new rates in the state Medicaid program.

Addus CEO and President Dirk Allison was quick to welcome the rate increase news.

“We are pleased with the work of the Illinois state leadership and the favorable results of the budget negotiations and subsequent approval by CMS, which have provided clarity for overdue funding of the prior minimum wage increases,” Allison said in a statement. “While we hoped to have received full funding immediately for minimum wage costs, we recognize the fiscal limitations of the state and appreciate the commitment to provide full funding by the end of their fiscal year.”

The minimum wage in Illinois is $8.25 per hour; it will increase to $9.25 next year. Chicago’s minimum wage is currently $13.

Addus Chief Development Officer Darby Andreson previously explained the significance of rising minimum wages and stagnating rates during a February interview with Home Health Care News.

“Providers may say, ‘I’m just not going to do Medicaid anymore because the rates aren’t sustainable,’” Anderson said. “‘I’ll provide private pay or work more primarily in other sources of funding and not work in Medicaid,’ which is going to leave a gap in the provider pool.”

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