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Addus' hospice business is thriving despite labor pressure and inflation

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Strengthened by recent acquisitions, Addus Homecare’s (NASDAQ: ADUS) hospice segment remains uniquely positioned against labor headwinds and inflation.

For example, the $85 million acquisition of Illinois-based hospice provider JourneyCare Inc. earlier this year added $25 million to second quarter revenue. Addus also posted first full quarter earnings from his $29 million purchase of Armada Hospice in New Mexico and Armada Hospice in Santa Fe in 2021. The deal also included affiliate Armada Skilled Home Health of New Mexico.

According to CEO Dirk Allison, Addus plans to be busy in the acquisition market later this year and into early 2023, primarily targeting personal care and home health deals.

Allison said on the second quarter earnings call: “We are continuing our conversations with brokers and other third parties, and based on the feedback we have received, we anticipate an increase in potentially large-scale deals in late 2022 and early 2023.”

Since 2019, Addus has acquired seven personal care companies and four home health and hospice institutions. They plan to deploy about $100 million a year for the acquisition.

But acquisitions aren’t the only driver of provider growth in the first half of 2022.

In Addus, the average length of stay in hospice increased from 17 days in Q1 to 23 days in Q2. His average daily census for hospice businesses was also boosted by a deal with Journeycare, where he reached 3,333 in the second quarter, compared with his 2,460 in the same period last year. About 2.5% of that growth is in like-for-like stores and not attributable to acquisitions.

Second quarter corporate revenues increased 8.7% to $236.9 million, with hospice accounting for 20%, CFO Brian Poff said on the earnings call. The hospice segment increased from $36.9 million in Q2 2021 to $52.074 million.

The census and length of stay increases suggest that Addus has somewhat normalized after the COVID-related disruptions that negatively impacted metrics for many hospice providers across the country.

These wins have helped the company cushion the effects of skyrocketing inflation.

“We are pleased that the historically normalized trend in hospice care experienced strong cash flows during the quarter and remains well positioned in the current inflation environment,” Allison said. I’m here.

Nonetheless, the headwinds of labor continue, and now the light at the end of that tunnel resembles a candle flame more than a shooting star.

The recent surge in COVID-19 variants has pushed more patients and staff back into quarantine, and hiring skilled home care and hospice clinicians remains a challenge, the company reports.To date in 2022 By the way, Addus’ personal care business has been lucky compared to clinical health care services.

Allison indicated some improvement in home health care and hospice employment and a “slight reduction” in turnover. Hiring and retention are “moving in a positive direction,” he said in his earnings call.

Despite rising costs and labor issues across the industry, the prospects for Addus are good, according to industry analysts.

“We remain positive on ADUS and second-quarter results show that management continues to improve despite a difficult working environment,” said Brian Tankilute, equity analyst at Jefferies Financial Group. I think it shows that we have the ability to do it and deliver results.” Note. “Although the workforce will continue to act as a constraint on overall growth, signs of improving employee recruitment and retention are expected to accelerate ADUS growth over the next few quarters, especially as demand for services remains strong. We are optimistic that we will.”

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