Even though it has been hit hard by labor pressures, Addus HomeCare Corporation (Nasdaq: ADUS), believes it may have found ways to at least combat recruitment struggles. In turn, the company is optimistic about its organic, volume-based growth in 2022.
The top three executives from the Frisco, Texas-based home health, hospice and personal care services provider previewed the year ahead in a conference call as part of the Oppenheimer 32nd Annual Healthcare Conference Tuesday morning.
Chairman and CEO Dirk Allison said during the call that there is a lot to look forward to for Addus, including a new team devoted to exploring a new value-based care program for the company.
“We are in the very early stages ourselves,” Allison said. “We do believe it will be something that we want to be a part of because we get a lot more data on the personal care side than we thought previously. Now we have to have the systems to allow us to mine that data and use that from a value-based care approach.”
Addus was originally founded in 1979 as a company that helped Chicago residents with household chores and other tasks. It has continued to expand its service offerings since then, with a major focus on clinical in-home care over the past couple of years.
The provider currently delivers in-home care to about 45,000 people through 211 locations across 22 states, with personal care still the bulk of its business.
Volume gains to drive company growth
Addus executives are looking forward to a year that hopefully has more stability in terms of organic, volume-driven growth.
Brian Poff, executive vice president and CFO of Addus, said he expects 2022 to include more volume-based growth as opposed to rate-based growth.
“I think if you look [at] the last couple of years, particularly with rate increases we’ve gotten from some of our larger markets like Illinois and New Mexico, it has been more rate than volume,” Poff said. “Our expectation for ’22 is that it is going to start to shift more toward volume and less rate. We will get the benefit of the most recent rate increase we got in Illinois back in November, so that’ll flow into 22. We still feel that 3% to 5% in personal care growth, as an organic growth rate, is a good metric for us going forward.”
Poff also expects Addus to be “very active” in M&A over the next 12 months.
“We expect to be active not only in continuing to bolster our personal care operations in markets that we could use additional geographic coverage, but also in adding clinical services and markets that we think have a good, strong personal care presence today,” Poff said.
One specific market the company has its eye on for home health care acquisitions is Ohio.
Brad Bickham, president and COO of Addus, said the success the provider has had in New Mexico should be its blueprint in its other markets. Contextually, New Mexico is one of the markets where Addus offers its full continuum of care, with established value-based care arrangements.
“Between home health and hospice, we have a steady stream of referrals [in New Mexico],” Bickham said. “We use data analytics to look at our clinical data on the home health side to identify patients that might be ready to transition into hospice care, so we can start having those discussions with the families. That process has gone very smoothly in New Mexico, and we’re looking to expand that capability.”
More clinical hiring challenges
Last month, the company announced net service revenue in the fourth quarter totaled $224.6 million, a nearly 15% increase compared to the approximately $196 million it brought in over the same time period in 2020.
Overall, the company brought in $864.5 million in revenue in 2021. That is a 13% increase compared to 2020’s total of about $764.8 million.
However, company hires were down 5.7% sequentially in the fourth quarter. Bickham said that February and March hiring numbers, in contrast, are looking strong.
“The clinical side has been the more challenging hiring environment,” Bickham said. “I think we’ve seen some recent improvement over the last couple of weeks. It seems like we’re starting to fill more open positions, but that’s certainly the area that we’ve struggled the most with.”
To handle some of the staffing shortages and hiring difficulties, Bickham said Addus has changed a few things in how it retains skilled staff. For instance, Addus moved forward the time where staff receive their merit salary increases from March to January.
“[That move was made] to help alleviate some of the pressure we’re seeing on the turnover side,” Bickham said. “We’ve also really bolstered our recruiting efforts as far as adding internal resources, for both home health and hospice, to really try to pick up the candidate flow. That still is an area that has some struggles but I think it is getting a little better.”
Bickham also said the company will work on improving response time to candidates, knowing that many people apply to multiple jobs at once. Having a faster response time should improve recruitment, he said.
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