Addus HomeCare CFO Flags Medicaid Rate Outlook, Gentiva Deal Progress, and M&A Pipeline at Conference

Key Points

• Medicaid rate outlook: Texas enacted nearly a 10% rate increase effective September 2025, Illinois has historically provided annual raises but its next increase is uncertain and may come later in the budget process, and New Mexico appears headed for a ~4–5% increase effective July 1; consolidated pass-through to wages is typically in the mid-to-upper 20% range.
• Gentiva acquisition and M&A pipeline: Addus closed the $280M annualized Gentiva personal-care deal in December 2024 — its largest to date and its entry into Texas where it is now the largest provider (~5% share) — and management says the asset is tracking in line while the company remains positioned for tuck-in deals and potential larger personal-care acquisitions later in the year with a clean balance sheet.
• Operational gains and margin expansion: A multi-year strategy has raised operating margins from roughly 5–6% to about 12–13%, and an internally built caregiver app boosted Illinois fill rates from the low 80s to the upper 80s (now rolling out to Texas and New Mexico) as Addus expects census growth to resume in the second half of the year once redetermination headwinds ease.

Addus HomeCare NASDAQ: ADUS CFO Brian Poff discussed the company’s strategy, Medicaid rate environment, compliance posture, and recent operating trends in a wide-ranging conversation that also touched on M&A priorities and growth initiatives in personal care and hospice.

From a pure-play personal care provider to broader scale and higher margins

Poff said the company’s current operating profile reflects a multi-year plan that began when CEO Dirk Allison joined roughly a decade ago. At that time, Addus was primarily a personal care business with operating margins around 5% to 6%, and management believed scale could make the Medicaid-focused model more profitable than many investors assumed.

According to Poff, the company focused early on building the desired cost structure and then moved “pretty quickly into M&A and growth.” Over time, Addus added scale and expanded into clinical services in certain markets where it already had a strong personal care presence. Poff said Addus has grown to more than $1.5 billion in revenue and is now running approximately 12% to 13% in “bottom line margin,” which he characterized as aligned with the company’s long-term vision.

Medicaid rate updates: Texas, Illinois, and New Mexico in focus

Poff emphasized that Medicaid rate increases are not automatic and depend on state budget cycles and legislative decisions. He highlighted Addus’ three largest markets—Illinois, Texas, and New Mexico—as each operating on different fiscal-year cadences.

• Texas: Poff said Addus received nearly a 10% rate increase that took effect in September 2025. Because Texas meets every two years, he said the company does not expect additional action there this year.
• Illinois: Poff said Illinois has been “pretty consistent” in providing annual rate increases in recent years, with an increase that took effect Jan. 1. However, he noted that Gov. J.B. Pritzker’s initial budget does not include a rate increase for the next year, though Poff said that was similar to the prior year’s initial budget and Addus ultimately received an increase later in the process. He said more clarity may come in the next couple of months.
• New Mexico: Poff said New Mexico held rates steady last year but appears to be moving toward a 4% to 5% rate increase this year, which would take effect in the back half of the year due to its July 1 fiscal-year cycle.

Beyond those states, Poff said Addus is working with legislators in a “handful” of smaller states, and he indicated the company expects some level of rate support this year that is closer to “status quo,” which he described as a positive.

On the question of how much of a rate increase flows through to wages versus margin, Poff said it varies by state. He described Texas and Illinois as formulaic, with a defined percentage passed through, while other states offer more flexibility. He said consolidated “pull-through” is typically in the mid-to-upper 20% range, with Texas and Illinois somewhat lower due to their formulas.

Compliance and fraud headlines: “We would welcome a little more scrutiny”

Against a backdrop of industry headlines around home care fraud, Poff outlined Addus’ compliance approach. He said the company has invested heavily over the past decade in an internal compliance group and described a process that includes pre-service caregiver training, supervisory home visits, and client and family surveys aimed at identifying issues.

Poff said Addus has not seen a change in the cadence of state audits and described the scrutiny as part of day-to-day operations. He added that the company would “welcome a little more scrutiny” in the industry because management believes Addus is a high-quality provider, while smaller providers may be more likely to cut corners. He also suggested that increased enforcement could create market share opportunities, though he said it was not something the company is concerned about.

Gentiva acquisition: large Texas entry, tracking in line

Poff said Addus closed its Gentiva personal care acquisition in December 2024, calling it the largest deal the company has done to date. He said the acquired business represented about $280 million in annualized revenue, all personal care, spanning multiple states with Texas as the largest component. Poff said the transaction marked Addus’ entry into personal care in Texas and made the company the largest provider in the state, while still representing only about 5% market share.

He said Gentiva has performed “very well” and in line with expectations. Poff noted that the acquisition period coincided with Medicaid redeterminations that created some early top-line pressure, particularly in Texas, but he said the business is now performing well and is running largely in line with the rest of Addus. He also cited late January storms in Texas as a potential contributor to some missed visits, though he said the impact was likely not material.

Caregiver app improved fill rates; census headwinds tied to redeterminations

Poff discussed a caregiver app Addus developed internally and rolled out in Illinois. He said Addus receives a set number of pre-authorized hours from state agencies and seeks to schedule and fill as many of those hours as possible. Consolidated fill rates, he said, typically run in the low 80% range.

The company built the app after hearing that one reason caregivers leave is insufficient hours. Poff said the app allows caregivers to view schedules, clock in and out, preview paychecks, and pick up additional “flex hours.” In Illinois, he said caregiver adoption exceeded 90% and fill rates improved from the low 80% range into the upper 80% range, where they have remained. Addus is now rolling the app out to New Mexico and Texas, which Poff said also run around an 80% fill rate, and he said the company hopes to see similar improvements. He described New Mexico and Texas personal care revenue as “a few hundred million combined.”

On personal care census trends, Poff said Addus expects census growth to begin in the second half of the year. He attributed recent stagnation primarily to Medicaid redeterminations that strained state resources and slowed the pace of new admissions, as well as administrative issues such as clients being temporarily removed for incomplete paperwork despite being otherwise eligible. He said year-over-year census declines have narrowed—from roughly 2.5% down in Q1 to under 1% down more recently—and management is focused on sequential increases that could turn year-over-year positive in “another quarter or two.” He also pointed to hiring trends, noting that higher unemployment can be helpful for caregiver recruitment and that inflation pressures can motivate more people to seek additional work.

Poff also reviewed Addus’ hospice strategy, noting the company entered the segment with a New Mexico acquisition in 2018 and has expanded to nine hospice states. He said the company made changes in hospice leadership and sales training over the last couple of years and has recently delivered consistent average daily census (ADC) growth. He cautioned that recent double-digit hospice growth is not a long-term expectation and suggested it may moderate over time.

On capital allocation, Poff said Addus remains interested in M&A, particularly smaller “tuck-in” personal care deals at low multiples and potential larger personal care assets that he said could come to market in mid-to-late year. He emphasized that the company’s balance sheet is “very clean” and intentionally positioned to be flexible when opportunities arise.

About Addus HomeCare NASDAQ: ADUS

Addus HomeCare NASDAQ: ADUS is a leading provider of home and community-based care services for elderly, disabled, and medically complex individuals across the United States. Through a network of company-owned and franchise locations, the company delivers a broad spectrum of non-medical personal care and licensed home health services designed to support clients' independence and quality of life.

The company's core offerings include personal care assistance—covering daily living activities, medication reminders, and light housekeeping—and skilled home health services delivered under the supervision of registered nurses and licensed therapists.

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