Addus HomeCare Corporation (Nasdaq: ADUS) is bullish on its M&A pipeline across all segments, its value-based sponsorship strategy and favorable rates in some of its markets.

However, perhaps more important than anything else is its leaders’ belief that the company has turned the corner on hiring.

In the third quarter of this year, hires per working day at Addus were up 3% compared to the second quarter, and up 14% year over year. This is in stark contrast to what the company was seeing earlier in 2022.

“We’re seeing improved hiring trends in October, with hiring per business day ahead of third-quarter 2022 performance,” Addus CEO Dirk Allison said on the company’s third-quarter earnings call Tuesday. “We’ve been seeing improvement over the past few months with increased capacity to hire new physicians, as well as a modest decline in our clinical sales numbers.”

Headquartered in Frisco, Texas, Addus is a provider of personal home services, as well as home health care and aged care services. It currently serves approximately 46,500 consumers through 207 locations across 22 states.

Addus’ total net services revenue in the third quarter was $240.5 million, an increase of 11% compared to approximately $216.7 million over the same time period in 2021.

Addus continues to invest in technology that the company believes will help the company in its sourcing, staffing, and onboarding process.

Allison also acknowledged that hiring has been tougher on home health and coping, but that these trends were going in the right direction for every business sector.

“During the third quarter, the funding we received from the USAID allowed us to begin increasing caregiver wages, paying login and retention bonuses, or offering one-time bonuses to existing caregivers, depending on the state program,” Allison said. “This has been helpful in our hiring efforts over the past quarter, and should help our hiring and retention efforts as we still have a good chunk of these dollars that still have to be used.”

Addus has recently been trying to cement its home health footprint as it attempts to build home health, grooming and personal care capabilities in the markets it serves.

So, the home health final payment rule — announced Monday — applies to them, too.

“We were excited that CMS announced yesterday a slight 0.7% increase for 2023,” Allison said. “Although this increase is less than we would like to see, we appreciate the change made by the CMS, away from the suggested 4.2% decrease.”

Merger and acquisition plans

Throughout the call, Addus leaders have remained lukewarm about the 2023 home health payment rule. While the biggest cuts have been avoided for now, stakeholders remain unhappy with the looming cuts in behavioral adjustment in 2023 and beyond.

However, from Addus’ perspective, the clarity allows them to push ahead with more home health deals. Recently, it announced that it acquired Chicago-based Apple Home Healthcare in early October.

“We expect to be able to take advantage of more access to home health care that should happen now that the final rule has been published, as we are still well capitalized,” Allison said.

While it has delivered smaller deals across its segments so far, the company may be on the brink of some bigger deals.

“We are now starting to see a number of larger assets being introduced to the market and we expect to see more of these volume opportunities in the coming months,” Allison said.

Over the next 12 to 24 months, the focus will be primarily on larger home health and personal care deals. For aged care services, the company will continue to look for smaller deals as it sees fit in markets that already have aged care operations.

“Addus remains well positioned to capitalize on future growth opportunities in home care, while largely insulated from the most significant downside risks facing the sector in 2022-2023,” said an analyst note from Stevens. More specifically, Home Personal Care Addus (approximately 75% of third-quarter revenue) should benefit from improved caregiver hiring trends and a strong Medicaid funding background in the second half of 2022 and 2023.”

Value-Based Care and Medicare Advantage

Part of what Addus stands for when it comes to home health care is its ability to complement personalized care in markets that have value-based contracts.

The company currently has four value-based contracts in three states.

“We recently received positive feedback from our value-based care partners, as the personal care and home health care teams improved patient outcomes,” Allison said. “In addition to our current four contracts, we are working on two new opportunities, due to start in early 2023.”

Although these contracts are still “relatively insignificant” today, Addus leaders are confident that they will make an even greater impact in the next few years.

The same goes for Medicare Advantage (MA) opportunities.

“Besides being able to provide quality care under these contracts, [the goal was to] “We have the ability to take the information that we’ve learned over the course of a year or more, and be able to transfer that to other areas of the country where we have personal care and home health,” Allison said. “And as we move around the country in some of our strong markets, this is where you’ll see our ability to interact with Medicare Advantage payers.”

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