Addus HomeCare is putting personal care services (PCS) acquisition activity on hold until there is more clarity around the Centers for Medicare and Medicaid Services’ newly proposed home- and community-based services rule, the company’s chairman and CEO said in a first quarter earnings call on Tuesday.
“With the announcement of the proposed rule from CMS, we are pausing our efforts as relates to acquisitions for personal care services,” Dirk Allison said, according to a transcript. “While we continue to believe strongly in our strategy of pairing home healthcare with personal care, we believe it is prudent to focus on modifying this proposed rule prior to our continuing development efforts in the personal care market. Once we have clarity on any final rule, we will proceed to pursue acquisition opportunities in the PCS space.”
CMS released the Ensuring Access to Medicaid Services proposed rule last week. Among the more controversial provisions is one that would require that 80% of Medicaid payments for personal care, homemaker and home health aide services be spent on direct care worker compensation.
Addus, along with providers groups, has been vocal in its opposition to such a requirement. Allison reiterated the firm’s problem with the requirement on Tuesday.
“While we agree with the goal of broadening coverage, we question the specific approach proposed and the target threshold as there are inherent challenges in setting a one-size-fits-all minimum percentage,” he said during the call. “This is due to the wide variance in state waiver programs which directly impacts the administrative burden required to provide home- and community-based services in individual states.”
Because of the requirement’s “significant administrative burden,” it also could force small, local providers and those providers in states with large rural populations to stop providing care, he noted.
“These challenges, if not properly considered and addressed, may have the opposite effect intended by the proposed rule by inadvertently reducing access to services, particularly those provided by these small providers and in those rural areas where the administrative costs of providing home and community-based services are significantly greater,” he said.
In contrast to personal care transactions, potential large home health acquisitions will increase in the coming months “as pending CMS pricing updates and proposals are better understood and as sellers’ pricing expectations rationalize,” Allison said.
Addus earned $12.7 million in the quarter ended March 31, nearly a 50% increase over the year-earlier quarter. Sales grew by 11% to $251.6 million.
