COVID-19 Prompts Payers to Show ‘Real Appreciation’ of Home-Based Care

Like every other provider in the home-based care industry, Addus HomeCare Corporation (Nasdaq: ADUS) has spent the past three months grappling with the coronavirus.

In the short term, that has meant decreased visit volumes and reduced revenues. But in the long-term, Frisco, Texas-based Addus is optimistic the COVID-19 emergency will usher in a number of positives for the company — and the industry as a whole.

“Both from a payer and a family standpoint, what we’ve seen over the last two or three months is a real appreciation of what we do in the home and how that can help keep patients … safe,” CEO Dirk Allison said Tuesday during a presentation at William Blair’s Annual Growth Stock Conference.

Allison is hopeful that appreciation will turn into opportunities for growth and partnerships down the line.

Addus is one of the country’s largest providers of personal care services, which account for more than 90% of the company’s net service revenue. The agency has a large focus on Medicaid-reimbursed home care services, specifically. On top of that, it has growing hospice and home health business lines.

Addus started seeing reductions in its revenues as a result of COVID-19 in mid-March, with personal care hit hardest. Home health care and hospice also started to dip slightly in April, but not to the same extent.

“We thought we might be down 8% to 10% in the second quarter from the first quarter run rate,” Allison said. “When we got into April … we saw that the [decrease was] really … more like 5% to 7%, and so we were excited that they were better than we expected.” 

Revenues have only continued to improve from there. In May, they were down only about 5% from Q1. Allison expects revenues to return to pre-COVID run rates in Q3, he said.

Additionally, the company is on track to maintain its goal of an organic growth rate of 3% to 5% in the next couple quarters — and possibly even accelerate it after that — he said.

For one, he sees opportunities to pick up clients and make new acquisitions when mom-and-pop providers go under due to COVID-19, as many stakeholders expect to happen later in the year. Plus, higher unemployment means the ability to hire more people, in turn allowing the Addus to take on a larger number of prospective clients.

Allison expects increased demand to come as a result of more people seeking home care as opposed to institutional care settings, where COVID-19 has run rampant.

“We are seeing both families and payers interested in making that move,” Allison said. “Hopefully we’ll continue to see that trend in the future, and the one other thing that I think came from this virus is an appreciation by payer sources for what homecare can do for them.”

Take Medicare Advantage, for example.

MA plans were only allowed to cover personal care services for the first time last year. However, amid the coronavirus, the Centers for Medicare & Medicaid Services (CMS) has granted plans further flexibility — a move some predict could create more opportunities for home care providers going forward.

“Long term, [personal care services] can save these managed care organizations [and MA plans] money if we can show we can keep people out of higher cost facilities,” Allison said. “Hopefully that’ll be positive that’s come out of this virus.”