Addus Sees Reciprocal Gains Across 3 Home-Based Care Services

Addus HomeCare (NASDAQ: ADUS) has gone all-in on building out its care continuum.

Launched as a personal care provider, the company in 2016 began offering hospice and home health to enhance its value proposition for payers by further reducing hospitalizations and emergency department visits.

“If you realize that our average patients are in their 70s, a lot of these patients are — not trying to in any way be disrespectful — but kind of frequent flyers,” Addus CEO Dirk Allison said at the Bank of America Healthcare Conference. “They end up in the hospital a great deal of time. They go to the emergency room a lot. If we’re able to manage those particular patients at home, we can help reduce the overall cost of care.” 

Addus provides personal care to upwards of 41,000 clients across its 24-state footprint and serves more than 3,600 hospice and home health patients

With so much of its business weighted towards personal care, the company receives most of its reimbursement from Medicaid managed care organizations (MCOs) run by private payers. As of 2019, MCOs covered 69% of all Medicaid beneficiaries, according to the Kaiser Family Foundation.

While clinical services can generate the cost reductions that make Addus more attractive to payers, the benefits don’t end there. Adding on clinical services created new revenue streams, and each business line can foster growth for the other two.

Many patients receiving clinical services will continue to need personal care, for instance. In turn, the personal care segment can feed referrals to home health and ultimately hospice when appropriate.

This theory is proving sound in Illinois and New Mexico, two states in which Addus provides all three of its services. Three MCOs manage the Medicaid population in that state, and Addus more than a year ago launched a pilot with two of them.

Thus far, this pilot has demonstrated the potential for cost savings.

“What we’ve been able to show [in New Mexico] is that starting with personal care and using our clinical resources, we’ve been able to help reduce the medical loss ratio of those very high cost patients,” Allison said.

This approach has also guided the company’s acquisitions.

Addus last year acquired Armada Hospice of New Mexico and Armada Hospice of Santa Fe for $29 million, further building out the continuum it offers in that state. The transaction also included the affiliated Armada Skilled Home Health of New Mexico.

The company’s hospice business in Illinois — another state in which Addus provides all three services —will be picking up steam from its $85 million JourneyCare acquisition earlier this year. The former nonprofit was one of the largest hospice providers in the Prairie State, serving 750 patients daily in 13 counties.

Since 2019, Texas-based Addus has purchased seven personal care companies and four home health and hospice companies, executing a co-location strategy to bring all three pillars of its business into the same markets.

With this goal in mind, the company is likely to pursue more hospice and home health deals while also bolstering its core personal care business.

“We see good opportunities this year to not only continue to add in clinical services where we have strong personal care, but I think continue to also enhance and add personal care assets,” Allison said. “The overall market was a little slow around the turn of the year, but we expected that to start picking up in the Spring. The conversations that we’re having with folks seem to be coming into fruition.”