EVV Difficulties Creating M&A Opportunities for Addus HomeCare Corporation

Over the last few months, Addus HomeCare Corporation (Nasdaq: ADUS) has had to deal with a challenging legislative environment and significant COVID-19 surges that have affected clients and caregivers alike.

Still, the Frisco, Texas-based in-home care provider is maintaining its course, particularly when it comes to M&A activity in 2021.

“We continue to evaluate and pursue additional acquisition opportunities and have a robust pipeline of potential transactions that meet our target criteria,” Addus CFO and Executive VP Brian Poff said on the company’s Q4 earnings call Friday. “Going forward, we believe the market landscape in 2021 will be advantageous for us to enhance our current operations while looking to complement clinical services and expansion into select attractive markets.”


Addus provides home health, hospice and personal care services to about 44,000 consumers across 25 states.

Personal care services have long made up for the vast majority of Addus’ revenue — and still do. But the company is making a strategic effort to build out its hospice and home health capabilities in existing markets to become more dominant in those areas.

That strategy was reflected in its acquisitions from late 2020. In December, Addus closed on a deal to acquire Queen City Hospice and its affiliate, Miracle City Hospice, for $192 million. It also acquired Sunlife Home Care, a personal care provider based in Tucson, Arizona.


“The integration of these operations into Addus has been proceeding consistent with our expectations and on schedule,” Addus CEO Dirk Allison said. “Both of these acquisitions will help us expand our services into existing markets, with Queen City Hospice adding hospice services to our Ohio personal care presence.”

The other state, in addition to Ohio, where Addus has already built out its vision to provide the three levels of care — personal, home health and hospice care — is North Dakota.

The company’s Q4 net service revenue totaled nearly $196 million in 2020, a more than 2% increase compared to $192 million during the same quarter in the previous year. Overall, Addus’ net service revenues totaled $765 million in all of 2020, an increase of over 15% compared to $649 million in 2019.

“Even after our most recent acquisitions, we continue to benefit from low net leverage and remain well positioned to continue to execute on our acquisition strategy,” Poff said.

In Q4, personal care services represented about 84% of Addus’ net service revenue, while hospice and home health represented 14% and 2%, respectively.

The company eventually wants to get its clinical side up to about 25% of its business, which means an array of acquisitions are likely on the way.

Addus has recently observed multiple opportunities that it’d like to explore on the personal care side still, however, especially with some of the smaller providers that have had difficulty operating in a tough COVID-19 environment.

The company also sees the electronic visit verification (EVV) implementation as a potential headwind for providers in states where it is finally being introduced.

“We are also seeing more states moving into EVV,” Poff said. “A lot of the states are starting that transition process, which I think is making business for some of those smaller providers a little more difficult — and a little more likely to be attractive for us.”

Strategically, Addus’ goal remains the same: to build out home health, hospice and personal care services in each of the states it is located in.

“Our real focus is strengthening the markets in which we currently operate,” Allison said. “Our goal moving forward is to take those states which we operate in and drive those three levels of care in those markets … with our acquisition strategy.”

Industry insiders have generally given Addus high marks for its strategy of building out a “three-legged stool” of care.

“I think they’ve done a great job,” Mark Kulik, the managing director of M&A advisory firm The Braff Group, previously told Home Health Care News. “And I believe other national companies are going after the same thing — being able to provide that total patient care on the continuum.”

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