The COVID-19 public health emergency has solidified the home as a viable and effective care setting. That, in turn, has led to meaningful opportunities for home-based care providers, especially those with diversified service lines.
Addus HomeCare Corporation (Nasdaq: ADUS) is a prime example. The company’s leadership team discussed the pandemic and its lasting impacts during William Blair’s annual growth stock conference on Wednesday.
“Pre-COVID, there was an ever-increasing move to the home environment,” Dirk Allison, CEO and chairman of Addus, said during the event. “COVID has certainly accelerated that momentum.”
Addus is specifically seeing plenty of new opportunities on the home health side of its business, which continues to draw more referrals, Allison explained.
“I think there are a lot of opportunities,” he said. “I don’t think that’s going to slow down.”
Headquartered in Frisco, Texas, Addus is a provider of home health, hospice and personal care services, the latter of which make up the majority of its overall business. The company currently provides in-home care services to roughly 44,000 people across 208 locations in nearly two dozen states.
When thinking of opportunities, Addus is monitoring the red-hot M&A market, which has heated up since the start of 2021. Over the next 12 to 24 months, the company will be focused on deals in the personal care and home health space, according to Allison.
In particular, Addus’s strategy revolves around sourcing home health acquisitions in markets where the company already has a strong personal care presence. It’s a key play in the modern aging-in-place company’s playbook — and a strategy actively pursued by Addus peers Amedisys Inc. (Nasdaq: AMED), LHC Group Inc. (Nasdaq: LHCG), AccentCare Inc. and others.
“You won’t really see us go out and make a big clinical acquisition in a market where we do not have personal care services,” Allison said. “It doesn’t fit our strategy.”
Broadly, Addus believes that by adding clinical services, it’s able to better care for patients, making it a better partner for accountable care organizations (ACOs) and managed Medicaid organizations.”
“And potentially the Medicare Advantage players in those markets, as we move forward from just a strictly fee-based service into something that maybe is more value-based,” Allison added.
Addus has been relatively quiet on the M&A front since its $192 million acquisition of Queen City Hospice and affiliate Miracle City Hospice in December. The company also closed on SunLife Home Care, a personal care provider, at the end of last year.
Brad Bickham, president and COO of Addus, said that the company is at about 20% clinical home health revenue today. It’s likely that this will bump up in the next couple of years.
In terms of geographic footprint, Addus has pinpointed a number of markets where the company hopes to expand in the future. The company wants to expand in Ohio, as well as in Pennsylvania, Virginia and Tennessee.
Illinois — a major personal care market for Addus — also remains an area of focus for the company. Allison noted that roughly 36% of Addus’ revenue comes from this market. Going forward, the company aims to establish clinical services in the state.
In the past, Illinois has been a tough market for Addus to navigate due to challenges around budget and rate increases.
During the presentation, Addus’ leadership also touched on the positive momentum the company is seeing on the staffing side.
Overall, the company has seen a decrease in applicant volume, but one bright spot has been an improvement in applicant conversion, according to Bickham.
“Our hiring numbers have been fairly consistent through May of this year,” he said. “I think the stimulus tax and the enhanced unemployment benefits starting to phase out this summer — and toward the end of the summer — should certainly help on the hiring front. We’re fortunate on the personal care side that we do have a strong demand for our services. Our biggest challenge has always been fulfillment.”
Bickham noted that Addus expects to see an influx of people returning to the workforce.
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