Addus HomeCare Corporation (Nasdaq: ADUS) has entered a new, “very attractive” state with its acquisition of Indiana-based HomeCourt Home Care.
The company has also entered into a definitive purchase agreement to acquire another personal care provider in Indiana, similar in size to HomeCourt, with the deal expected to close in the coming months, according to the company’s Q1 earnings call on Tuesday. Addus leadership has been interested in expanding into Indiana for three years due to the state’s rate increases and efforts to eliminate client waitlists, CEO R. Dirk Allison said.
“These two acquisitions continue our strategy of entering new markets with scale and where we have the ability to expand our services,” Allison said on the call.
Frisco, Texas-based Addus primarily offers personal care services, as well as hospice and home health services. The company currently serves approximately 62,750 patients and consumers through 263 locations across 24 states.
The HomeCourt Home Care deal closed on May 1. The personal care provider currently serves approximately 240 clients and generates approximately $9.8 million in annual revenue. The company expects combined Indiana revenue to ring in just under $20 million, between the HomeCourt acquisition and the unnamed second acquisition.
Company leadership is considering larger transactions in the future and is currently considering two or three deals similar in size to the company’s $350 million acquisition of Gentiva’s personal care assets.
“We continue to believe that size and scale are important to health care services and have been the focus of our strategy for the past ten years,” Allison said. “We continue to evaluate opportunities which would increase both density and geographic coverage, as well as seek to further strengthen our relationships with states and managed care organizations. Recently, we have begun to see an increasing number of personal care opportunities.”
The state of Illinois increased Addus’ rates for personal care services, effective on Jan. 1. Allison said he expects the rate hike to add approximately $17.5 million to the company’s annualized revenues.
On the regulatory front, Allison said the company continues to predict that the 80/20 rule, which requires that 80% of Medicaid dollars on some home-based care services be spent on worker compensation, will be eliminated in 2026. Implementation of this move would be years away and does not currently impact Addus’ performance, Allison said, but would be an encouraging development for the company and the personal care industry overall.
Leadership expressed measured optimism regarding the Medicare home health rule due to the final rule for 2026 being much softer than originally proposed.
“We saw some positivity in the final rule last year,” Brian Poff, executive vice president and chief financial officer, said on the call. “We are interested to see what the rule will look like this year. It feels like there is more appreciation coming out of CMS for what the industry has gone through the last few years. They seem to be focusing on some of the areas where there might have been issues that impacted how they looked at reimbursement in the last few years. The industry has been lobbying for some time for them to see that.”
Allison said the company is open to future home health acquisitions, but will be diligent when evaluating these opportunities.
Leadership also responded positively to the Centers for Medicare & Medicaid Services’ (CMS) focus on fraud, waste and abuse in Medicaid and Medicare. Allison said the company is glad to see the second Trump administration focus on fraud and abuse, and that Addus invests significant funds to maintain compliance in the states where it operates.
“The fact that we are large and spend millions of dollars on compliance bodes very well for what the administration is trying to do, that is, take out the players, mostly smaller players, that are not doing the right thing and are just billing and not following through,” Allison said. “More importantly, the most important thing is that the care is being given to the patient. There is a reason that the patient has a plan of care that the state approved. They need that care. We would rather regulators call out home care broadly and address fraud and abuse in home health and hospice as well.”
In Q1 overall, Addus’ net service revenues rang in at $363.6 million, a 7.7% increase year-over-year. The company increased its adjusted EBITDA by 9.7% year-over-year, to $44.5 million.