Addus HomeCare Corporation (Nasdaq: ADUS) is the latest publicly traded home-based care company to disclose just how hard it was hit by workforce-related issues during the Omicron surge.
LHC Group Inc. (Nasdaq: LHCG) executives revealed Thursday that cost constraints due to labor issues cost the company approximately 2,500 admissions and a loss of $13.8 million in revenue in the fourth quarter. Encompass Health Corporation (NYSE: EHC) executives earlier this month said its home health segment lost a “minimum” of 1,700 admissions over the same time period.
“During our fourth quarter, we started to see the effects of the Omicron surge, which began in December and began to decline at the end of January,” Dirk Allison, the president and CEO of Addus, said on the company’s fourth quarter earnings call Friday. “While today we are not yet back to our expected level of hiring for personal care, we have started to see an increase in our hires per business day in February.”
The Frisco, Texas-based Addus provides home care services – including personal care, home health and hospice – to approximately 45,000 consumers through 211 locations across 22 states.
While hires per day are running above the company’s Q3 2021 rate, Addus is facing considerable pressure in the labor market still. Hires were down 5.7% sequentially in the fourth quarter.
In many of the markets Addus serves, minimum wage increases have also gone into effect. In home health and hospice specifically, labor pressure has led to a 4% to 5% increase in wages.
Net service revenue for Addus in the fourth quarter totaled $224.6 million, a nearly 15% increase compared to the approximately $196 million it brought in over the same time period in 2020.
Overall, the company brought in $864.5 million in revenue in 2021. That marks a 13% increase compared to 2020’s total, which was about $764.8 million.
The amount of quarantined employees started to hike significantly in December, and in January, 4% of Addus’ caregivers were in quarantine. That rate was three times higher than what it was during the Delta variant surge.
Due to that, Addus saw a 6% reduction in hours served in January.
“The good news is we have started to see a rapid decline in these quarantines with our February numbers back down to the level we saw with the Delta variant,” Allison said.
The expectation is that revenue will be down again in the first quarter by about 2% to 3% sequentially, Addus CFO Brian Poff said on the call.
Addus did acquire JourneyCare – a hospice and palliative care provider based in Illinois – for $85 million in January. And while theoretically that should help revenue, it won’t for a while, especially not in the first quarter.
That integration process will take six to nine months, Poff said, and could be a slightly more difficult process because JourneyCare was a nonprofit company.
Home health care growth
Traditionally, personal care has been Addus’ biggest focus by far. That’s still the case today, but the company has been concentrated on building out the “three legs of the stool” in the markets it serves – personal care, home health and hospice.
An example of that strategy being played out was its acquisition of the Chicago-based Summit Home Health.
“We are pleased that during the fourth quarter we closed on our acquisition of Summit Home Health, a Medicare certified home health provider in Illinois, which allows us to provide skilled home health services in the state with our largest personal care operation,” Allison said.
That strategy is also made evident by the JourneyCare acquisition. But the company has made it clear that it plans on investing considerably into its home health segment in the near-term future.
For context, in 2021, personal care accounted for 79% of Addus’ revenue. Meanwhile, home health and hospice accounted for about 3% and 18%, respectively.
The company’s revenue in the home health segment did grow by over 7% in the fourth quarter, however.
“We continue to see strong volume growth in this segment,” Allison said. “Since the beginning of 2021, our home health admissions have increased steadily, with overall favorable trends continuing for most of the fourth quarter. As we have been seeing over the past year we are excited about our home health operation and we’ll continue to focus our efforts are expanding these services.”
Comparatively, hospice revenue grew by 1.3%, though it was the first year-over-year increase in that segment since mid-2020.
“When you look at having three levels of care with home health, hospice and personal care, there’s certainly a significant opportunity,” Poff said. “You have patients that are actually receiving multiple levels, so they could be receiving home health and personal care or hospice and personal care. And we also generate a pretty steady stream of referrals from home health to hospice.”
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