Addus CEO Slams CMS Medicaid Proposal: You’re Going To See A Vast Majority Of The Small Mom And Pops Go Out Of Business

Of all the challenges home-based care providers are facing, it’s the U.S. Centers for Medicare & Medicaid Services’ (CMS) proposed rule regarding Medicaid access that is top of mind for Addus HomeCare Corporation (Nasdaq: ADUS) leaders.

Addus Chairman and CEO Dirk Allison called CMS’s proposal the company’s “biggest challenge” over the past several weeks.

“They’re trying to expand coverage with personal care across the United States,” Allison said Wednesday at the Jefferies Healthcare Conference. “They’re also trying to make sure that our caregivers have a living wage, which we believe are two very valid goals.”


Similar to many of his peers in the home care space, Allison zeroed-in on a provision that would make it standard for at least 80% of Medicaid payments for personal care, homemaker and home health aide services to go toward caregiver compensation.

While Addus supports the proposal’s broader aim, the company doesn’t agree with its execution.

“We’ve been very vocal in our support of those goals, since the rule was announced,” Alison said. “I think the question comes around the way they’re attempting to accomplish this goal.”


The Frisco, Texas-based Addus currently provides home-based care services to approximately 47,500 consumers through 203 locations across 22 states.

One factor that makes the CMS proposal an issue is that providers are all operating in different home care environments. There aren’t consistent standardization requirements across the board.

“Every state has different rules, regulations, qualifications and, quite frankly, very different hourly rates,” Allison said.

The CEO pointed out that in a state such as Illinois, for example, the hourly rate is almost $28, but there are other states where the rate is closer to $15. Setting a compensation mandate with that degree of variation would be difficult, he explained.

Addus already passes 77% of reimbursements to caregivers in Illinois, and Washington and New York are already above 80%, according to the CEO.

During the investor presentation, Allison also called for more clarification around the proposal’s provisions.

“How do you define revenue,” he said. “In certain aspects, you don’t always collect 100% of what the state allows you to bill.”

Overall, Addus is critical of the idea that one rule could apply to many different types of providers working in vastly different operating landscapes.

“We don’t believe one-size-fits all is the way to go,” Allison said. “We believe that we need to continue to work to give [CMS] data, so that they can come up with a way to accomplish what they want, but at the same time, not hurt the industry.”

If the proposal is finalized as is, it will impact the types of companies making up the home care industry, Allison noted. In terms of timing, however, it could take upwards of four years for implementation.

“If it goes through at 80%, you’re going to see a vast majority of the small mom and pops go out of business,” he said. “In states like Illinois, they’ll probably do OK, and maybe New York and Washington because you’re already there. In these other states, mainly the Southwestern states where you’re paying $7.25 an hour minimum wage, that’s where you’re going to have difficulty.”

Addus has been working with home-based care advocacy organizations, including the Partnership for Medicaid Home-Based Care, to adjust the CMS proposal. Currently, PMHC, the National Association for Home Care & Hospice (NAHC) and the Home Care Association of America (HCAOA) are seeking an extension to the proposal’s comment period.

Beyond the CMS proposal, Allison also touched on Addus’ growth outlook for the year on Wednesday.

“In the personal care arena, there’s still a lot of room to grow,” he said. “I think one of the things that the Biden administration is trying to do, and it should be complimented [for this], is expand access to care. There’s a lot of waiting lists for people that would like to have this service that are not having that today.”

On the clinical side, Addus has seen some improvement in its ability to hire clinicians over the last six months, but this is still a growth roadblock for the company.

“We’re hoping it continues to get better, but that has been a challenge and we believe it will remain one for a bit,” Allison said.

Personal care is likewise still hindered somewhat by workforce challenges.

“In comparison to last year, their situation has improved considerably with the PC service fill rate rebounding to the high-80s after dipping to the low-70s in the midst of the pandemic,” an analyst note from Jefferies reads. “Mgmt reiterated their goal to hire an incremental 3-5% caregivers to their workforce and believe that the recruitment landscape is more favorable as gov’t supplemental funding programs … have ended.”

Companies featured in this article: