Addus COO: Recruiting Has Been ‘a Little Bit of a Struggle’ During COVID-19

Addus HomeCare Corporation (Nasdaq: ADUS) is rebounding from coronavirus-related disruption in its personal care and home health segments, company leadership noted Tuesday during a second-quarter earnings call.

But the Frisco, Texas-based company also acknowledged there are still significant challenges on the horizon.

“Addus had a very solid financial performance for the second quarter of 2020, with volume levels not as heavily impacted by the ongoing COVID-19 environment as we originally thought,” Addus CFO Brian Poff said on the call.

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As an in-home care provider, Addus provides a mix of personal care, hospice and home health care services. It currently provides those services to about 42,000 individuals across 25 states and 185 locations.

Addus recently expanded that footprint. Last month, it announced it had closed on a deal to acquire A Plus Health Care Inc., a Kalispell, Montana-based home care provider.

Personal care services accounted for nearly 85% or Addus’s overall Q2 revenue, a total of about $156.3 million. Hospice accounted for about 13% of Q2 revenue, with home health accounting for the remainder.

Overall, net service revenues for Addus were up nearly 24% year-over-year in Q2, jumping to $184.6 million from $148.9 million in 2019.

The road to recovery

Patients shied away from care at the beginning of the public health emergency, Addus leadership noted.

That caused Addus to hit a low point in visit volume for all three of its segments in April, with personal care services contracting from about an average billable total of 39,000 in Q2 2019 to a little over 36,000 in Q2 2020.

But the damage was somewhat contained and volume is trending upward, Addus CEO Dirk Allison said on the call.

“As we see the return of these patients, when they become more comfortable with services provided in their homes, our personal care census should continue to recover,” Allison said.

Home health was actually the hardest hit, but also the quickest to rebound, according to the company. Since then, it has seen Medicare referrals for home health increase to the point of pre-COVID-19 levels.

Addus received $6.9 million related to its Medicare business from the Provider Relief Fund, but decided to return it.

For one, both Addus management and the board felt that the company had a strong capital structure — with little debt — that could sustain itself without the money provided. It also felt like it was the right thing to do.

“[We want to] let others who need these funds have access to the money,” Allison said.

Additionally, it felt uncomfortable not knowing what future federal reporting and audit requirements could come about after accepting money from the fund.

While it hasn’t impacted revenue, Addus is also actively taking COVID-19 patients in each of its segments.

“While the past five months have been challenging, I remain optimistic about the future of the home care industry and Addus, in particular,” Allison said. “We have a dedicated team of leaders and team members that have demonstrated their ability to continue to meet our mission — even if this virus has disrupted the way we have historically operated.”

Forthcoming challenges

Despite a strong quarter, the Addus leadership team was frank about the challenges that the company is currently facing and the ones it will continue to face.

It’s going to have to deal with a slew of state-by-state specific problems, such as minimum wage hikes in Chicago to $14 — and eventually $15. It will also have to consider and adjust to fluctuating state budgets after COVID-19, particularly as it pertains to its Medicaid side of the business.

“[Still], I think one thing to remember is our services are keeping folks in their home and isolated and are one of the best ways to try to protect them from this virus,” Allison said. “It also is an alternative to those folks potentially being in a nursing home setting, which we all know has been a problem during this particular virus. … So we feel that we have a great story to tell.”

Allison added that he believes that the states understand the severity of the situation and the benefits of the home-based care setting versus facility-based care.

Addus is also expecting its personal protective equipment (PPE) expenses, which have been a significant add-on, to be a part of the company’s budget for the foreseeable future.

“We believe this additional expense will be necessary for the next several quarters or until an effective vaccine or treatment is developed and widely available,” Allison said.

The company is also dealing with recruiting issues for the time being, but is hoping that lower unemployment benefits from the federal government and workers transferring to home-based care from other fields will help solve the problem.

“Recruiting has been a little bit of a struggle, I think, primarily due to the additional unemployment benefits that [have been out] there,” Addus COO Brad Bickham said on the call. “We’re getting a lot of inbounds, but frankly we’re also seeing a lot of folks that won’t show up for training or for interviews. So recruiting is honestly a little down, [but] I expect it to improve with the reduction of the $600 [per week in unemployment benefits].”

The company also plans to lure some unemployed workers back to work with some incentives in a few markets, but didn’t specify what those would be.

Historically, hiring has been better for Addus during economic downturns.

“That’s been a better time for us to be able to hire and bring folks on, and we believe that will occur over the next year or two as the unemployment benefits … come to an end,” Bickham said. “We do believe that the recruitment efforts will return to a more historical level and hopefully [get] somewhat better.”

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