Addus HomeCare (ADUS) Jefferies 2024 Global Healthcare Conference summary

Industry and regulatory environment

• Medicaid access rule finalized, bringing stability and clarity to the personal care sector.

• Six-year implementation for the 80/20 rule allows for gradual adaptation and potential future changes.

• States retain flexibility in defining compliance measures, which is viewed positively.

• Illinois operates at a 77% requirement, with expectations of a rate increase to meet 80% if mandated.

• Industry consolidation observed in Illinois, with larger providers gaining market share.

Strategic business decisions and financial impact

• Exited New York market due to regulatory instability, wage pressures, and lack of profitability.

• New York generated significant revenue but negligible bottom-line contribution.

• Sale allows redeployment of capital to more stable and profitable states.

• Post-sale, leverage is near zero, providing ample capacity for M&A.

• Cash generation remains strong, with focus on using dry powder for acquisitions.

State-specific developments

• Illinois budget includes a caregiver wage increase to $18/hour effective January 2025.

• Expected 5.5% rate increase in Illinois, translating to approximately $23 million in new revenue.

• Rate increase is workforce-directed, not tied to minimum wage mandates.