Addus Encouraged by Vaccine Progress, New HCBS Policies

Typically, when executives talk about their companies “having to weather the storm,” they’re speaking figuratively. That wasn’t the case for Addus HomeCare Corporation (Nasdaq: ADUS) on Tuesday.

Addus CEO and Chairman Dirk Allison talked about the negative impact that the February winter storms had on the home-based care provider’s business during the company’s Q1 2021 earnings call.

“We were affected by the February winter storm that spread across several states where we provide personal care services,” Allison said. “We estimate [this] had a negative impact on our first-quarter personal care revenues of approximately $1 million as a result.”

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.

Of course, the public health emergency is another storm Addus and its industry peers are navigating. A COVID-19 surge during the company’s fourth quarter resulted in an increased number of quarantined employees unable to serve their clients.

Addus went from 187 quarantined employees per week in the third quarter of 2020 to 448 quarantined employees per week during the fourth quarter, according to Allison.

“[This] affected our hours of care through January,” he said. “For April, this number is now down to 149 employees per week, which should help our growth rate return to a more normal level in our second quarter of 2021. We also saw a similar dynamic as it relates to our client call-offs in personal care.”

Although the public health emergency continues to create challenges for Addus, the company began to see positive momentum in a number of its markets in mid-February.

“While I expect the environment to continue to have some difficulties over the next several months, we are encouraged by the progress being made with the COVID vaccine rollout and the steady reduction in COVID cases since the peak in late December,” Allison said. “We look forward to the time in the near future when this pandemic is no longer a disruption to both the country and our operations.”

Budget woes

Over the years, Addus has faced its fair share of Illinois budget woes. The company has a particularly strong market presence in Illinois and depends on reimbursement rates to operate.

Addus’ leadership team made note of the Illinois state rate increase put in place to cover the Chicago minimum-wage increase, which occurred on July 1, 2020. The rate increase became effective on April 1, 2021.

The company is also hopeful about the potential positive changes the Biden administration has ushered in.

“The COVID relief legislation that was signed into law by the president will provide general financial relief to states suffering revenue losses from the pandemic, which will help to strengthen the budgets of these states and their Medicaid reimbursement,” Allison said. “We expect to see the funds from the $350 billion state benefit in this bill to be dispersed starting in May.”

Many providers still have questions about the 10% raise of the federal matching rate for Medicaid home- and community-based services spending, but Allison believes that the law is promising.

“We believe the federal government will clarify the rules around this match soon, which should allow states to start to use these additional monies to support home- and community-based services,” he said.

During the call, Addus also touched on its plans to remain active on the mergers and acquisitions front. The company will be focused on home health, in particular, moving forward.

“Our primary focus on acquisitions remains on opportunities [that] add clinical services to our existing personal care markets, with the goal of having additional markets with all three levels of care that we provide,” Allison said.

While purchase multiples for clinical services remain high, Allison noted that Addus’ strong liquidity position will enable the company to close additional acquisitions during the next few months.

Financial results

Addus reported net service revenues of $205.3 million for the first quarter of 2021, a 7.9% increase compared with $190.2 million for the same period in 2020. The company’s personal care segment brought in roughly $164 million in Q1 2021, compared with $160 million for Q1 2020.

“Our same-store revenue has been affected by the COVID-19 virus,” Allison said. “However, we are starting to see a positive trend in all three segments in which we operate for the first quarter of 2021. Our personal care same-store revenue growth was 2.4% when compared to the first quarter of 2020.”

Addus’ home health segment reported $4.34 million for Q1 2021, compared with $4.33 million for Q1 2020.

“We are excited to see our home health same-store revenue back to the level which we experienced in the first quarter of 2020 prior to the impact of the pandemic,” Allison said.

The company’s hospice segment reported $36 million for Q1 2021, compared with $25 million for the same period last year.

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