Pen showing on diagram of sales report

Addus HomeCare Chairman and CEO Dirk Allison said the Centers for Medicare & Medicaid proposed home health rule “is probably the biggest impediment now to signing deals for the home health market.” Allison made the comment to analysts Tuesday morning while discussing second quarter earnings.

The executive told analysts his company put two potential acquisitions on hold as it waits to see if the proposed 7.69% Medicare payment cut to home health agencies becomes final later in the fall. Despite the uncertainty, Allison assured analysts the home health and hospice firm remains bullish on making deals.

“While skilled home health activity may be slow in the short term, we are still very optimistic of M&A outlook and continue to build a pipeline, focusing primarily on personal care and home health,” Allison said. “We continue to believe that acquisitions will be an important part in achieving our 10% minimum annual revenue growth target which we have exceeded for the past few years.” 

CMS announced the proposed rule for the 2023 calendar year in mid-June. Since then, legislation has been introduced in both the House and Senate which would delay the reduction until 2026. Still, the proposed rule is making providers nervous and Addus isn’t the firm to respond by tapping the brakes on mergers and acquisition activity. Last week, Amedisys announced it was pressing the pause button on deals as well. 

Allison expects M&A activity to pick up in the final quarter of the year once there is certainty regarding the final rule. For now, he said buyers and sellers don’t see eye to eye on how the rule could impact asset prices.

“I think the sellers believe that the rule is not going to be a big deal and we should be willing to pay the values regardless,” Allison explained. “I think buyers are looking and saying great, if that’s the way it works out in October or November when the published rule comes out.”

Addus Home Care reported second quarter earnings Monday that were less than Wall Street anticipated. The company reported per share earnings of $0.91 on revenues of $236.9 million. That was a penny less than analysts forecast.