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Addus HomeCare Corp. (NASDAQ: ADUS) saw hospice growth in 2023, despite lingering pandemic-related challenges around daily census.
The company anticipates growth in its personal care business in 2024, which will have a reverberating impact in its hospice and home health service lines.
Addus’ personal care services are a significant part of its overall strategic growth plans, which could als affect their other business lines, including hospice, according to Addus Chairman and CEO Dirk Allison.
Expanding its personal care footprint in existing and new markets is part of the company’s ability to negotiate reimbursement rates in an evolving value-based reimbursement climate, Allison stated in a Q4 2023 earnings call. The company is optimistic that personal care acquisition opportunities on the horizon in 2024 could help demonstrate its value proposition around home health and hospice services as well, he indicated.
“We remain excited about our home health operation, as it complements both our personal care services, particularly where we participate in value-based contracting models, and our hospice service by allowing us to provide the full continuum of home-based care,” Allison said in the earnings call. “We continue to believe our success is due to our ability to provide both non-clinical personal care services to identify changes in condition and clinical resources as needed for specific, skilled patient care interventions. Acquisitions remain an important part of our growth strategy, especially situations [where] we have the ability to leverage our strong personal care presence and add clinical services. We’re optimistic that we will see additional attractive acquisition opportunities in 2024.”
Addus’ roughly 33,000 employees provide hospice, home health and private duty nursing services across more than 200 locations in 22 states.
The company had a “strong finish to a record high” year of revenue growth in 2023, according to Addus CFO Brian Poff.
Overall, the company brought in $1.06 billion in 2023, swelling from $951.1 billion the previous year.
During the fourth quarter Addus saw revenues reach $276.4 million, an 11.9% year-over-year increase. This was in part driven by acquisitions that boosted the company’s presence in Illinois regions.
The company is no stranger to acquisitions. Addus purchased Illinois-based hospice provider JourneyCare Inc. for $85 million in October 2022 and picked up Chicago-based Apple Home Health Ltd. for an undisclosed sum the following month.
The company’s personal care services made up the bulk of its revenue at $204.49 million in the fourth quarter, an 11.9% jump compared to the same period in 2022. Meanwhile, home health service revenues reached $17.1 million.
Its hospice segment represented 19.8% of Addus’ net service revenue in the fourth quarter. At $54.7 million, hospice services saw a 3.5% sequential increase in Q4 of 2023 compared to the previous year.
Though same-store hospice average daily census (ADC) volumes rose sequentially by 2.7%, ADC rates fell year-over-year by 1%. Median length of stay hovered around 28 days in Q4, lower than anticipated, according to Addus executives.
State of hospice segment
Higher volumes of hospice discharges impacted its ADC and length of stay, according to Bradley Bickham, executive vice president and chief operating officer at Addus.
“If you look at our year-over-year [hospice] results, we are essentially flattish on the volume side,” Bickham said. “That was due to some pretty heavy discharges in Q4. We expect with the strong admission volumes that we’ve seen in the past few quarters, that will start translating into some ADC growth. We are looking into 5% to 7% revenue growth for the hospice segment.”
The company anticipates hospice census volumes and median stay rates to normalize back toward pre-pandemic levels, according to Allison.
“We are encouraged by the steady sequential improvement in admissions volume in our hospice segment and anticipate favorable trends continuing into 2024,” Allison said. “There were a lot of structural changes that happened to hospice during the pandemic. You had accelerated death rates among the elderly populations that would normally be in hospice down the road. We have expected this to return to a more normalized level the last couple years, and we’re still at times struggling with some of the things that have occurred as far as trying to get back to that normal rate.”
Part of the challenges around hospice growth have been tied to staffing shortages exacerbated by the pandemic that carried clinical capacity strains in hospice, Allison added. Hiring sufficient caregiving staff has been an ongoing and lingering headwind in terms of recruitment, he stated.
The company remains optimistic that hospice growth rates will normalize alongside its increased recruitment and retention investments, Allison said. Addus has fueled investments into recruitment and retention to improve clinical capacity, he stated. The company has also invested in scheduling optimization technology to increase operational efficiency, according to Allison.
“As we continue down the road, you’ll see the [hospice] admissions rate level out and come back more toward what we were expecting,” Allison said. “We’re doing things along investments into scheduling and investments into recruitment and retention … You’ll see the [hospice] ADC growth start to be more consistent than what we’ve seen maybe the last couple of years. We’re starting to see, on the hospice side of our business, it’ll really level out a bit. We believe that hospice will get back to where it was prior to pandemic levels.”
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