10q10k10q10k.net

What changed in Addus HomeCare Corp's 10-K — 2022 vs 2023

vs

Paragraph-level year-over-year comparison of Addus HomeCare Corp's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+453 added−441 removedSource: 10-K (2024-02-27) vs 10-K (2023-02-28)

Top changes in Addus HomeCare Corp's 2023 10-K

453 paragraphs added · 441 removed · 356 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

78 edited+35 added−22 removed86 unchanged
Biggest changeOur Market and Opportunity We provide home care services that primarily include personal care services to assist with activities of daily living, as well as hospice and home health services. These services allow the elderly and other infirm adults who require long-term care and assistance with activities of daily living to maintain their independence at home with their families.
Biggest changeThese services allow the elderly and other infirm adults who require long-term care and assistance with activities of daily living to maintain their independence at home with their families. Personal care services are a significant component of home and community-based services (“HCBS”), which have grown in significance and demand in recent years.
Likewise, to participate in Medicaid programs, our personal care services, home health agencies and hospices are subject to various requirements imposed by federal and state authorities.
Likewise, to participate in Medicaid programs, our personal care services, hospices and home health agencies are subject to various requirements imposed by federal and state authorities.
Moreover, individuals generally prefer to receive care in their homes, and we believe the COVID-19 pandemic has heightened this preference due to health concerns that may be associated with institutional settings for long-term care, along with concerns about the re-imposition of visitor restrictions that were imposed in many long-term care facilities in response to the pandemic.
Moreover, individuals generally prefer to receive care in their homes, and we believe the COVID-19 pandemic heightened this preference due to health concerns that may be associated with institutional settings for long-term care, along with concerns about the re-imposition of visitor restrictions that were imposed in many long-term care facilities in response to the pandemic.
Calendar year 2023 is the first performance year under the expanded HHVBP Model, which will affect payments in calendar year 2025. Medicare requires home health agencies to submit a one-time Notice of Admission (“NOA”) for each patient that establishes that the beneficiary is under a Medicare home health period of care.
Calendar year 2023 was the first performance year under the expanded HHVBP Model, which will affect payments in calendar year 2025. Medicare requires home health agencies to submit a one-time Notice of Admission (“NOA”) for each patient that establishes that the beneficiary is under a Medicare home health period of care.
Providers must dedicate substantial resources to ensure continuing compliance with all applicable regulations and significant expenditures may be necessary to offer new services or to expand into new markets.
Providers must dedicate substantial resources to ensure continuing compliance with all applicable laws and regulations, and significant expenditures may be necessary to offer new services or to expand into new markets.
The FCA may be enforced directly by the federal government or by a whistleblower on the government’s behalf. • The federal Civil Monetary Penalties Law, which prohibits, among other conduct, offering remuneration to influence a Medicare or Medicaid beneficiary’s selection of a healthcare provider, contracting with an individual or entity known to be excluded from a federal healthcare program, billing for services not rendered or for medically unnecessary services, misrepresenting actual services rendered in order to obtain higher reimbursement, and the failure to return overpayments in a timely manner. • State anti-kickback and self-referral provisions, false claims laws, insurance fraud laws, and fee-splitting laws.
The FCA may be enforced directly by the federal government or by a whistleblower on the government’s behalf. 14 Table of Contents • The federal Civil Monetary Penalties Law, which prohibits, among other conduct, offering remuneration to influence a Medicare or Medicaid beneficiary’s selection of a healthcare provider, contracting with an individual or entity known to be excluded from a federal healthcare program, billing for services not rendered or for medically unnecessary services, misrepresenting actual services rendered in order to obtain higher reimbursement, and the failure to return overpayments in a timely manner. • State anti-kickback and self-referral provisions, false claims laws, insurance fraud laws, and fee-splitting laws.
Courts have interpreted this statute broadly and held that there is a violation of the Anti-Kickback Statute if just one purpose of the remuneration is to generate referrals. 12 Table of Contents • The federal physician self-referral law, commonly known as the Stark Law, which prohibits physicians from referring Medicare and Medicaid patients to healthcare entities in which they or any of their immediate family members have ownership interests or other financial arrangements, if these entities provide certain “designated health services” (including home health services) reimbursable by Medicare or Medicaid, unless an exception applies.
Courts have interpreted this statute broadly and held that there is a violation of the Anti-Kickback Statute if just one purpose of the remuneration is to generate referrals. • The federal physician self-referral law, commonly known as the Stark Law, which prohibits physicians from referring Medicare and Medicaid patients to healthcare entities in which they or any of their immediate family members have ownership interests or other financial arrangements, if these entities provide certain “designated health services” (including home health services) reimbursable by Medicare or Medicaid, unless an exception applies.
We plan to continue our revenue growth and margin improvement and enhance our competitive positioning by executing on the following growth strategies: Consistently Provide High-Quality Care We schedule and require our caregivers to perform their services as defined within the individual plan of care. We monitor the performance of our caregivers through regular supervisory visits in the homes of consumers.
We plan to continue our revenue growth and enhance our competitive positioning by executing on the following growth strategies: Consistently Provide High-Quality Care We schedule and require our caregivers to perform their services as defined within the individual plan of care. We monitor the performance of our caregivers through regular supervisory visits in the homes of consumers.
The most prominent of these efforts, the Patient Protection and Affordable Care Act, as amended by the HealthCare and Education Reconciliation Act of 2010 (collectively, the “ACA”), affects how healthcare services are covered, delivered and reimbursed. The ACA increased health insurance coverage through a combination of public program expansion and private sector health insurance reforms.
The most prominent of these efforts, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (collectively, the “ACA”), affects how healthcare services are covered, delivered and reimbursed. The ACA increased health insurance coverage through a combination of public program expansion, private sector health insurance requirements and other reforms.
These laws include, but are not limited to, the federal Anti-Kickback Statute, the federal Stark law, the federal False Claims Act (“FCA”), the federal Civil Monetary Penalties Law, other federal and state fraud and abuse, insurance fraud, and fee-splitting laws, which may extend to services reimbursable by any payer, including private insurers.
These laws include, but are not limited to, the federal Anti-Kickback Statute, the federal Stark Law, the federal False Claims Act (“FCA”), the federal Civil Monetary Penalties Law, other federal and state fraud and abuse, insurance fraud, and fee-splitting laws, which may extend to services reimbursable by any payor, including private insurers.
At the current time, our compliance with environmental legal requirements, including legal requirements relating to climate change, do not have a material effect on our capital expenditures, financial results or operations, and we did not incur material capital expenditures for environmental matters during the year ended December 31, 2022.
At the current time, our compliance with environmental legal requirements, including legal requirements relating to climate change, do not have a material effect on our capital expenditures, financial results or operations, and we did not incur material capital expenditures for environmental matters during the year ended December 31, 2023.
Home health agencies that do not submit required quality data are subject to a 2 percentage point reduction to the market basket update. In addition, CMS began implementing a nationwide expansion of the Home Health Value-Based Purchasing (“HHVBP”) Model in January 2022.
Home health agencies that do not submit required quality data are subject to a 2 percentage point reduction to the market basket update. CMS began implementing a nationwide expansion of the Home Health Value-Based Purchasing (“HHVBP”) Model in 2022.
Some states have implemented or are considering measures such as individual health insurance mandates and public health insurance options. Other industry participants, such as private payers and large employer groups and their affiliates, may also introduce financial or delivery system reforms.
Some states have implemented or are considering measures such as individual health insurance mandates and public health insurance options. Other industry participants, such as private payors and large employer groups and their affiliates, may also introduce financial or delivery system reforms.
The references to our website address in this Form 10-K do not constitute incorporation by reference of the information contained on the website and should not be considered part of this document. 14 Table of Contents
The references to our website address in this Form 10-K do not constitute incorporation by reference of the information contained on the website and should not be considered part of this document. 16 Table of Contents
The Department on Aging’s Community Care Program (“CCP”) provides adult day services, emergency home response and in-home services, which consist of personal care services, to individuals who are age 60 and over and meet other eligibility requirements. Some of these services are provided through Medicaid waivers granted by CMS.
The Department on Aging’s Community Care Program (“CCP”) provides adult day services, emergency home response, automated medication dispenser services, and in-home services, which consist of personal care services, to individuals who are age 60 and over and meet other eligibility requirements. Some of these services are provided through Medicaid waivers granted by CMS.
Veterans Health Administration The Veterans Health Administration operates the nation’s largest integrated healthcare system, with more than 1,200 healthcare facilities, and provides healthcare benefits, including personal care, hospice and home health services, to eligible military veterans.
Veterans Health Administration The Veterans Health Administration operates the nation’s largest integrated healthcare system, with more than 1,300 healthcare facilities, and provides healthcare benefits, including personal care, hospice and home health services, to eligible military veterans.
Under the HHVBP Model, home health agencies will receive increases or reductions to their Medicare fee-for-service payments of up to 5% based on performance against specific quality measures relative to the performance of other home health providers. Data collected in each performance year will impact Medicare payments two years later.
Under the HHVBP Model, home health agencies receive increases or reductions to their Medicare fee-for-service payments of up to 5% based on performance against specific quality measures relative to the performance of other home health providers. Data collected in each performance year impacts Medicare payments two years later.
We utilize the ADP Vantage Suite as our base human resources and payroll processing system and use their services and products to manage our leave of absence processes, benefits, 401(k) and flexible spending account administration, garnishment 10 Table of Contents services, payroll tax filings, ACA compliance and filings, and time and attendance.
We utilize the ADP Vantage Suite as our base human resources and payroll processing system and use their services and products to manage our leave of absence processes, benefits, 401(k) and flexible spending account administration, garnishment services, payroll tax filings, ACA compliance and filings, and time and attendance.
Some states use or have applied to use Medicaid waivers granted by CMS to implement the ACA’s Medicaid expansion provisions, impose different eligibility or enrollment restrictions, or otherwise implement programs that vary from federal standards. Some of these program changes may reduce the number of Medicaid enrollees in certain states.
Some states use or have applied to use Medicaid waivers granted by CMS to implement the ACA’s Medicaid expansion provisions, impose different eligibility or enrollment restrictions, or otherwise implement programs that vary from federal standards. Some of these program changes may reduce the number of current and/or future Medicaid enrollees in certain states.
Health reform initiatives and proposals from the government or the private sector may impact prices, our relationships with patients, payers or ancillary providers, and our competitive position, among other effects.
Health reform initiatives and proposals from the government or the private sector may impact prices, our relationships with patients, payors or ancillary providers, and our competitive position, among other effects.
As of December 31, 2022, we provide all three levels of care, personal care, home health and hospice services, in Ohio, Illinois and New Mexico and strategically continue to pursue other markets. A summary of our financial results is provided in the table below.
As of December 31, 2023, we provide all three levels of care, personal care, home health and hospice services, in Ohio, Tennessee, Illinois and New Mexico and strategically continue to pursue other markets. A summary of our financial results is provided in the table below.
Market to Managed Care Organizations As a large-scale provider of home-based care, we are partnering with managed care organizations, taking advantage of an industry shift from traditional fee-for-service Medicare and Medicaid and toward managed care models, which aim to better coordinate care.
Market to Managed Care Organizations As a large-scale provider of home-based care, we are partnering with managed care organizations, taking advantage of an industry shift from traditional fee-for-service Medicare and Medicaid and toward managed care models which aim to better coordinate care, among other goals.
The scope and interpretation of these state laws vary, and in some cases apply to items or services reimbursed by any payer, including patients and commercial insurers.
The scope and interpretation of these state laws vary, and in some cases apply to items or services reimbursed by any payor, including patients and commercial insurers.
We expect ongoing consolidation within our industry, driven by the desire of healthcare systems and managed care organizations to narrow their networks of service providers, and also as a result of the industry’s increasingly complex regulatory, operating and technology requirements.
We expect ongoing consolidation within our industry, driven by the desire of healthcare systems and managed care organizations to narrow their networks of service providers, and also by the industry’s increasingly complex regulatory, operating and technology requirements.
In addition, some of our competitors may have greater financial, technical, political and marketing resources, as well as name recognition with consumers and payors. Sales and Marketing We focus on initiating and maintaining working relationships with state and local governmental agencies responsible for the provision of the services we offer.
In addition, some of our competitors and/or competitive care models may have greater financial, technical, political and marketing resources, as well as name recognition with consumers and payors. Sales and Marketing We focus on initiating and maintaining working relationships with state and local governmental agencies responsible for the provision of the services we offer.
Changes in the laws and regulations, or new interpretations of existing laws and regulations, may have a material impact on the definition of permissible activities, the relative cost of doing business, and the methods and amounts of payment for care by both governmental and other payors.
Changes in the laws and regulations, or new interpretations of existing laws and regulations, may have a material impact on the scope of services offered (including the definition of permissible activities), the relative cost of doing business, and the methods and amounts of payment for care by both governmental and other payors.
We believe we are well positioned to capitalize on a consolidating industry given our reputation in the market, strong payor relationships and integration of technology into our business model. The personal care services industry is subject to increasing regulation.
We believe we are well positioned to capitalize on these trends, given our reputation in the market, strong payor relationships and integration of technology into our business model. The personal care services industry is subject to increasing regulation.
In addition, the Improving Medicare Post-Acute Care Transformation Act of 2014 (the “IMPACT Act”) requires HHS, in conjunction with the Medicare Payment Advisory Commission, to work toward a unified post-acute care payment model for post-acute care services. Currently, home health agencies, skilled nursing facilities, inpatient rehabilitation facilities, and long-term care hospitals are reimbursed under four distinct Medicare payment systems.
In addition, the Improving Medicare Post-Acute Care Transformation Act of 2014 (the “IMPACT Act”) required HHS, in conjunction with the Medicare Payment Advisory Commission, to consider and propose a unified post-acute care payment model for post-acute care services. Currently, home health agencies, skilled nursing facilities, inpatient rehabilitation facilities, and long-term care hospitals are reimbursed under four distinct Medicare payment systems.
Other federal and state laws and regulations that apply to the collection, use, retention, protection, security, disclosure, transfer and other processing of personal data, such as the California Consumer Protection Act, which was recently significantly modified by the California Privacy Rights Act, may impose additional or inconsistent obligations and/or result in additional penalties.
HIPAA violations may result in criminal penalties and significant civil penalties. 15 Table of Contents Other federal and state laws and regulations that apply to the collection, use, retention, protection, security, disclosure, transfer and other processing of personal data, such as the California Consumer Protection Act, which was recently significantly modified by the California Privacy Rights Act, may also impose additional or inconsistent obligations and/or result in additional penalties.
We currently have our personal care and hospice segments integrated into Qlik. Qlik provides high-level historical and current analytical views to measure performance against budget and deliver insight into the various factors driving our execution against our financial, operational, and compliance goals.
We license the Qlik Business Intelligence (“Qlik”) platform to provide historical, current, and forward-looking operational performance analysis. We currently have our personal care and hospice segments integrated into Qlik. Qlik provides high-level historical and current analytical views to measure performance against budget and deliver insight into the various factors driving our execution against our financial, operational, and compliance goals.
Generally, family members of potential consumers are made aware of available in-home or alternative living arrangements through state or local case management systems.
Generally, family members of potential consumers are made aware of available in-home or alternative living arrangements through state or local case management systems. These systems are operated by governmental or private agencies.
In addition, certain governmental payors contract with other providers for services we offer. We have experienced, and expect to continue to experience, competition from new entrants into our markets. Increased competition may result in pricing pressures, loss of or failure to gain market share or loss of consumers or payors, any of which could harm our business.
We have experienced, and expect to continue to experience, competition from new entrants into our markets. Increased competition may result in pricing pressures, loss of or failure to gain market share or loss of consumers or payors, any of which could harm our business.
Our consumers are predominantly “dual eligible,” meaning they are eligible to receive both Medicare and Medicaid benefits. As of December 31, 2022, we provided services in 22 states through approximately 202 offices. For the years ended December 31, 2022 and 2021, we served approximately 66,000 and 67,000 discrete consumers, respectively.
Our consumers are predominantly “dual eligible,” meaning they are eligible to receive both Medicare and Medicaid benefits. As of December 31, 2023, we provided services in 22 states through approximately 219 offices. For the year ended December 31, 2023, we served approximately 91,000 discrete consumers.
For example, Georgia intends to impose work and community engagement requirements under a Medicaid demonstration program that is expected to launch in mid-2023, while the current presidential administration and several courts have rejected similar initiatives in other states, making it difficult to predict the nature and success of potential changes.
For example, Georgia imposes work and community engagement requirements under a Medicaid demonstration program for new enrollees that launched in mid-2023 with the permission of a federal court, while the current presidential administration and several courts have rejected similar initiatives in other states, making it difficult to predict the nature and success of potential changes.
We believe this approach to care delivery and the integration of our services into the broader healthcare continuum are particularly attractive to managed care organizations and others who are ultimately responsible for the healthcare needs of our consumers and over time will increase our business with them.
We believe this approach to care delivery and the integration of our services into the broader healthcare continuum are particularly attractive to managed care organizations and others who are ultimately responsible for the healthcare needs of our consumers and over time will increase our business with them. 4 Table of Contents Our Growth Strategy The growth of our revenues is closely correlated with the number of consumers to whom we provide our services.
However, we cannot be certain that any potential losses or asserted claims will not exceed such insurance coverage and self-insurance reserves.
We believe our insurance coverage and self-insurance reserves are adequate for our current operations. However, we cannot be certain that any potential losses or asserted claims will not exceed such insurance coverage and self-insurance reserves.
These systems are operated by governmental or private agencies. 6 Table of Contents We provide ongoing education and outreach in our target communities in order to inform the community about state and locally-subsidized care options and to communicate our role in providing quality personal care services. We also utilize consumer-directed sales, marketing and advertising programs designed to attract consumers.
We provide ongoing education and outreach in our target communities in order to inform the community about state and locally-subsidized care options and to communicate our role in providing quality personal care services. We also utilize consumer-directed sales, marketing and advertising programs designed to attract consumers.
Permits, Licensure and Certificate of Need Our hospice, home health and personal care services are authorized and/or licensed under various state and county requirements, which cover a variety of topics including standards regarding the provision of medical or care services, clinical records, personnel, infection control and care plans.
Permits, Licensure and Certificate of Need Our hospice, home health and personal care services are authorized and/or licensed in accordance with various state and county requirements, which also address a variety of operational issues including standards for the provision of medical or care services, clinical records, personnel, infection control and care plans.
We believe licensing requirements and regulations, including those related to EVV, the increasing focus on improving health outcomes, the rising cost and complexity of operations and technology and pressure on reimbursement rates due to constrained government resources may discourage new providers and may encourage industry consolidation.
We believe licensing and other operational requirements and regulations, the increasing focus on improving health outcomes, the rising cost and complexity of operations and technology and pressure on reimbursement rates may discourage new providers and may encourage industry consolidation.
As required by the IMPACT Act, CMS and the HHS Office of the 11 Table of Contents Assistant Secretary for Planning and Evaluation issued a report in July 2022, presenting an initial prototype.
As required by the IMPACT Act, CMS and the HHS Office of the Assistant Secretary for Planning and Evaluation issued a report in July 2022 that presented an initial prototype, and MedPAC issued a report in June 2023 evaluating a prototype design.
Generally, patients receiving hospice services have a life expectancy of six months or less. 5 Table of Contents Home Health Our home health segment provides services that are primarily medical in nature to individuals who may require assistance during an illness or after hospitalization and include skilled nursing and physical, occupational and speech therapy.
Home Health Our home health segment provides services that are primarily medical in nature to individuals who may require assistance during an illness or after hospitalization and include skilled nursing and physical, occupational and speech therapy.
The lack of licensure or certification requirements in some states makes it difficult to estimate the number of home-based services agencies.
The historic lack of licensure or certification requirements in some states makes it difficult to estimate the number of home-based services agencies, although these requirements and other barriers to entry are now increasing.
We believe our experience identifying and executing on opportunities generated by our acquisition pipeline, as well as our history of integrating acquisitions, will lead to additional growth. Our Services We operate three business segments: personal care, hospice and home health. Without our services, many of our consumers would be at increased risk of placement in a long-term care institution.
We believe our experience identifying and executing on opportunities generated by our acquisition pipeline, as well as our history of integrating acquisitions, will lead to additional growth. 5 Table of Contents Our Services We operate three business segments: personal care, hospice and home health.
Many consumers need such services on a long-term basis to address chronic or acute conditions. Our personal care segment also includes staffing services, with clients including assisted living facilities, nursing homes and hospice facilities.
The services we provide include assistance with bathing, grooming, oral care, feeding and dressing, medication reminders, meal planning and preparation, housekeeping and transportation services. Many consumers need such services on a long-term basis to address chronic or acute conditions. Our personal care segment also includes staffing services, with clients including assisted living facilities, nursing homes and hospice facilities.
Private Pay Our private pay services are provided on an hourly or type of services basis. Our rates are established to achieve a pre-determined gross margin, and are competitive with those of other local providers. We bill our private pay consumers for services rendered weekly, bi-monthly or monthly. Other private payors include workers’ compensation programs/insurance, preferred provider organizations and employers.
Our rates are established to achieve a pre-determined gross margin, and are competitive with those of other local providers. We bill our private pay consumers for services rendered weekly, bi-monthly or monthly.
Reimbursement rates and methods vary by state and service type, but are typically based on an hourly or unit-of-service basis. Rates are subject to adjustment based on statutory and regulatory changes, administrative rulings, government funding limitations and interpretations of policy by individual state agencies.
Rates are subject to adjustment based on statutory and regulatory changes, administrative rulings, government funding limitations and interpretations of policy by individual state agencies.
Our Growth Strategy The growth of our revenues is closely correlated with the number of consumers to whom we provide our services. Our continued growth depends on our ability to provide consistently high-quality care, maintain our existing payor relationships, establish relationships with new payors, increase our referral sources and attract and retain caregivers.
Our continued growth depends on our ability to provide consistent high-quality care, maintain our existing payor relationships, establish relationships with new payors, increase our referral sources and attract and retain caregivers. Our continued growth is also dependent upon the authorization by state agencies of new consumers to receive our services.
For the Years Ended December 31, 2022 2021 (Amounts in Thousands) Personal care $ 706,507 $ 685,854 Hospice 201,772 152,253 Home health 42,841 26,392 Total net service revenue by segment $ 951,120 $ 864,499 Net income $ 46,025 $ 45,126 Total assets 937,994 947,585 Our services and operating model address a number of crucial needs across the healthcare continuum.
For the Years Ended December 31, 2023 2022 (Amounts in Thousands) Personal care $ 794,718 $ 706,507 Hospice 207,155 201,772 Home health 56,778 42,841 Total net service revenue by segment $ 1,058,651 $ 951,120 Net income $ 62,516 $ 46,025 Total assets 1,024,426 937,994 Our services and operating model address a number of crucial needs across the healthcare continuum.
We believe, but cannot assure you, that our operations comply with the principles expressed by HHS in these reports, advisories and guidance. 13 Table of Contents HIPAA and Other Privacy and Security and Data Exchange Requirements The Health Insurance Portability and Accountability Act of 1996, as amended (“HIPAA”) and its implementing regulations require the use of uniform electronic data transmission standards and code sets for certain healthcare claims and reimbursement payment transactions submitted or received electronically.
HIPAA and Other Privacy and Security and Data Exchange Requirements The Health Insurance Portability and Accountability Act of 1996, as amended (“HIPAA”) and its implementing regulations require the use of uniform electronic data transmission standards and code sets for certain healthcare claims and reimbursement payment transactions submitted or received electronically.
Depending on the type of service, coverage for services may be predicated on a case manager, physician or nurse determination that the care is necessary or on the development of a plan for care in the home.
Depending on the type of service, coverage for services may be predicated on a case manager, physician or nurse determination that the care is necessary or on the development of a plan for care in the home. Medicare Medicare is a federal program that provides certain medical insurance benefits to persons aged 65 or older and other qualified persons.
Healthcare Reform The healthcare industry is subject to changing political, regulatory, and economic influences at the federal and state level that may affect our business. In recent years, the healthcare industry has undergone significant changes, many of which have been aimed at reducing costs and government spending and increasing access to health insurance.
In recent years, the healthcare industry has undergone significant changes, many of which have been aimed at reducing costs and government spending and increasing access to health insurance.
We believe that our model is well positioned to assist in meeting those goals while also improving consumer satisfaction, and, as a result, we expect increased referrals from managed care organizations.
We believe that our model is well positioned to assist in meeting those goals while also improving consumer satisfaction, and, as a result, we expect increased referrals from managed care organizations. 3 Table of Contents Our Market and Opportunity We provide home care services that primarily include personal care services to assist with activities of daily living, as well as hospice and home health services.
Hospice Medicare beneficiaries who have a terminal illness and a life expectancy of six months or less may elect to receive hospice benefits (i.e., palliative services for management of a terminal illness) in lieu of standard Medicare coverage for treatment.
Each of our hospice and home care agencies must comply with the extensive conditions of participation in the Medicare program in order to continue receiving Medicare reimbursement. 7 Table of Contents Hospice Medicare beneficiaries who have a terminal illness and a life expectancy of six months or less may elect to receive hospice benefits (i.e., palliative services for management of a terminal illness) in lieu of standard Medicare coverage for treatment.
Historically, there were limited barriers to entry in the home-based services industry. As a result, the personal care, home health and hospice service industries developed in a highly fragmented manner, with few large participants and many small ones. Few companies have a significant market share across multiple regions or states.
The personal care, hospice and home health service industries have developed in a fragmented manner, with many small participants and a few larger participants that have a significant market share across multiple regions or states.
Further, Medicare reimbursement is tied to reporting of quality measures. There is uncertainty regarding the potential impact of health reform efforts at the federal and state levels. For example, some members of Congress have proposed measures that would expand government-sponsored coverage, including single-payor models.
The final rule’s timetable on the OMB website projects a release by April 2024. 13 Table of Contents There is uncertainty regarding the potential impact of health reform efforts at the federal and state levels. For example, some members of Congress have proposed measures that would expand government-sponsored coverage, including single-payor models.
Grow Through Acquisitions In addition to our organic growth, we have been growing through acquisitions that have expanded our presence in current markets or facilitated our entry into new markets. We completed two acquisitions in 2022, despite the continuing challenges and disruptions related to the COVID-19 pandemic: JourneyCare Inc.
Grow Through Acquisitions In addition to our organic growth, we have been growing through acquisitions that have expanded our presence in current markets or facilitated our entry into new markets. We completed two acquisitions in 2023: Coastal Nursecare of Florida, Inc.
Healthcare providers and industry participants are also subject to a growing number of requirements intended to promote the interoperability and exchange of patient health information, including prohibitions on information blocking. Environmental, Health and Safety Laws We are subject to federal, state and local regulations governing the storage, transport, use and disposal of hazardous materials and waste products.
Healthcare providers and industry participants are also subject to a growing number of requirements intended to promote the interoperability and exchange of patient health information, including prohibitions on information blocking.
(“JourneyCare”) on February 1, 2022 and Apple Home Healthcare, LTD (“Apple Home”) on October 1, 2022. Acquisitions completed in 2022 accounted for $48.7 million in net service revenues for the year ended December 31, 2022.
Acquisitions completed in 2023 accounted for $18.8 million in net service revenues for the year ended December 31, 2023. We also completed two acquisitions in 2022: JourneyCare Inc. (“JourneyCare”) on February 1, 2022 and Apple Home Healthcare, LTD (“Apple Home”) on October 1, 2022. Our active pipeline and strong financial position support additional acquisitions.
From time to time, various federal and state agencies, such as HHS, issue pronouncements that identify practices and provider types that may be subject to heightened scrutiny, as well as practices that may violate fraud and abuse laws.
From time to time, various federal and state agencies, such as HHS, issue pronouncements that identify practices and provider types that may be subject to heightened scrutiny, as well as practices that may violate fraud and abuse laws. We believe, but cannot assure you, that our operations comply with the principles expressed by HHS in these reports, advisories and guidance.
For example, many states appropriate general funds or special use funds through targeted taxes or lotteries to finance personal care services for senior citizens and individuals with disabilities.
For example, many states appropriate general funds or special use funds through targeted taxes or lotteries to finance personal care services for senior citizens and individuals with disabilities. Depending on the state, these funds may be used to supplement existing Medicaid programs or for distinct programs that serve non-Medicaid eligible consumers.
The hospice services we provide include palliative nursing care, social work, spiritual counseling, homemaker services and bereavement counseling.
The hospice services we provide include palliative nursing care, social work, spiritual counseling, homemaker services and bereavement counseling. Generally, patients receiving hospice services have a life expectancy of six months or less.
In addition, we must report any breaches of unsecured protected health information. HIPAA violations may result in criminal penalties and significant civil penalties.
In addition, we must report any breaches of unsecured protected health information.
In addition, we use these technologies to record basic information about each visit, record start and end times for a scheduled shift, track mileage reimbursement, send text messages to the caregivers and communicate basic payroll information. We license the Qlik Business Intelligence (“Qlik”) platform to provide historical, current, and forward-looking operational performance analysis.
Our caregivers use a mix of Interactive Voice Response (“IVR”) and mobile applications for EVV. In addition, we use these technologies to record basic information about each visit, record start and end times for a scheduled shift, track mileage reimbursement, send text messages to the caregivers and communicate basic payroll information.
The training assists our caregivers with identifying changes in our consumers’ health and condition before acute intervention is required, which we believe lowers the overall cost of care. 4 Table of Contents Drive Organic Growth in Existing Markets We intend to drive organic growth through several initiatives, including continuing to build and enhance our sales and marketing capabilities, enhancing our business intelligence analytic capabilities, recruiting and retaining employees and investing in technology and operations to drive efficiencies.
Drive Organic Growth in Existing Markets We intend to drive organic growth through several initiatives, including continuing to build and enhance our sales and marketing capabilities, enhancing our business intelligence analytic capabilities, recruiting and retaining employees and investing in technology and operations to drive efficiencies.
Insurance Programs and Costs We maintain workers’ compensation, general and professional liability, cyber, automobile, directors’ and officers’ liability, fiduciary liability and excess liability insurance. We offer various health insurance plans to eligible full-time and part-time employees. We believe our insurance coverage and self-insurance reserves are adequate for our current operations.
Other private payors include workers’ compensation programs/insurance, preferred provider organizations and employers. 9 Table of Contents Insurance Programs and Costs We maintain workers’ compensation, general and professional liability, cyber, automobile, directors’ and officers’ liability, fiduciary liability and excess liability insurance. We offer various health insurance plans to eligible full-time and part-time employees.
Personal Care Our personal care segment provides non-medical assistance with activities of daily living, primarily to persons who are at increased risk of hospitalization or institutionalization, such as the elderly, chronically ill or disabled. The services we provide include assistance with bathing, grooming, oral care, feeding and dressing, medication reminders, meal planning and preparation, housekeeping and transportation services.
Without our services, many of our consumers would be at increased risk of placement in a long-term care institution. Personal Care Our personal care segment provides non-medical assistance with activities of daily living, primarily to persons who are at increased risk of hospitalization or institutionalization, such as the elderly, chronically ill or disabled.
Each local market has its own competitive profile and no single competitor has significant market share across all of our markets. Our competition consists of personal care service providers, home health providers, hospice providers, private caregivers, larger publicly held companies, privately held companies, privately held single-site agencies, hospital-based agencies, not-for-profit organizations, community-based organizations, managed care organizations and self-directed care programs.
Our competition consists of personal care service providers, home health providers, hospice providers, private caregivers, publicly held companies, privately held companies, privately held single-site agencies, hospital-based agencies, not-for-profit organizations, community-based organizations, managed care organizations and self-directed care programs. In addition, payors, including governmental agencies, contract with other providers for services we offer.
In order to comply with current and future state and federal laws and regulations around EVV use, we utilize several different vendors and have built interfaces between the EVV vendor and the patient accounting system utilized in the respective branch location. Our caregivers use a mix of Interactive Voice Response (“IVR”) and mobile applications for EVV.
Each application is hosted by the vendor in a secure data center, which provides multiple redundancies for storage, power, bandwidth and security. In order to comply with federal and state laws and regulations around EVV use, we utilize several different vendors and have built interfaces between the EVV vendor and the patient accounting system utilized in the respective branch location.
At the federal level, efforts have focused on improved coordination of regulation across the various types of Medicaid programs through which personal care services are offered. Federally required state mandates include implementing electronic visit verification (“EVV”), which is used to collect home visit data, and obtaining state licenses or registrations.
At the federal level, efforts have focused on improved coordination of regulation across the various types of Medicaid programs through which personal care services are offered. For example, federal standards require states to mandate that providers use an electronic visit verification (“EVV”) system to collect certain data from Medicaid-funded home visits.
Managed care plans aim to manage cost, utilization and quality through collaboration of health insurance plans and healthcare providers. We also offer personal 3 Table of Contents care services to private pay consumers.
In particular, the demand for personal care services is growing from managed care delivery models, including Medicaid Long-Term Services and Supports (“LTSS”) programs and Medicare Advantage plans. Managed care plans aim to manage cost, utilization and quality through collaboration of health insurance plans and healthcare providers. We also offer personal care services to private pay consumers.
The law has been, and continues to be, subject to legislative and regulatory changes and court challenges. Although the current presidential administration has indicated its intent to protect the ACA, it is possible that there may be continued changes to the ACA, its implementation or interpretation. States continue to explore payment and delivery reform initiatives, including quality of care incentives.
However, the law has been, and continues to be, subject to legislative and regulatory changes and court challenges. 12 Table of Contents States continue to explore payment and delivery reform initiatives, including quality of care incentives.
Failure to submit the NOA within five calendar days from the start of care date will result in a reduction to the 30-day period payment amount for each day from the start of care date until the date the NOA is submitted. 7 Table of Contents Medicaid Programs Medicaid is a state-administered program that provides certain social and medical services to qualified low-income individuals and is jointly funded by the federal government and individual states.
Failure to submit the NOA within five calendar days from the start of care date will result in a reduction to the 30-day period payment amount for each day from the start of care date until the date the NOA is submitted.
Reimbursement from the managed care organizations for personal care services is generally on an hourly, fee-for-service basis with rates consistent with or as a percentage of the individual state funded rates, where applicable.
Reimbursement from the managed care organizations for personal care services is generally on an hourly, fee-for-service basis with rates consistent with or as a percentage of the individual state funded rates, where applicable. 8 Table of Contents Illinois Department on Aging A significant amount of our net service revenues from our personal care segment are derived from once specific payor client, the Illinois Department on Aging, which accounted for 20.9% and 20.7% of our net service revenues for 2023 and 2022, respectively.
Managed care organizations are becoming an increasing portion of our personal care segment payor mix as states shift from administering fee-for-service programs to utilizing managed care models. See “ Management’s Discussion and Analysis of Financial Condition and Results of Operations—Overview ” for our revenue mix by payor type. Competition We believe our industry is highly competitive, fragmented and market specific.
Managed care organizations are becoming an increasing portion of our personal care segment payor mix as states shift from administering fee-for-service programs to utilizing managed care models.
Depending on the state, these funds may be used to supplement existing Medicaid programs or for distinct programs that serve non-Medicaid eligible consumers. 8 Table of Contents Commercial Insurance Most long-term care insurance policies contain benefits for in-home services. Policies are generally subject to dollar limitations on the amount of daily, weekly or monthly coverage provided.
Commercial Insurance Most long-term care insurance policies contain benefits for in-home services. Policies are generally subject to dollar limitations on the amount of daily, weekly or monthly coverage provided. Private Pay Our private pay services are provided on an hourly or type of services basis.
We maintain strong working relationships with these labor unions. We have numerous collective bargaining agreements with local affiliates of the Service Employees International Union (“SEIU”), which are renegotiated from time to time. We value our employees and believe they are the reason for our success. We strive to provide the following, among other things.
We have numerous collective bargaining agreements with local affiliates of the Service Employees International Union (“SEIU”), which are renegotiated from time to time. People Development and Experience: We believe in a strong workplace culture focused on people development.
Our continued growth is also dependent upon the authorization by state agencies of new consumers to receive our services. We believe there are several market opportunities for growth as the population ages.
We believe there are several market opportunities for growth as the population ages.
Human Capital The following is a breakdown of our part- and full-time employees, including the employees in our corporate support center, as of December 31, 2022: Full-time Part-time Total Caregivers and agency staff 5,835 26,892 32,727 Corporate support centers 449 6 455 6,284 26,898 33,182 Our caregivers, excluding agency staff, provide substantially all of our services and comprise approximately 94.4% of our total workforce.
Human Capital Management The following is a breakdown of our part- and full-time employees, including the employees in our corporate support center, as of December 31, 2023: Full-time Part-time Total Caregivers and agency staff 5,528 28,776 34,304 Corporate support centers 531 11 542 6,059 28,787 34,846 At Addus, our people are crucial to our mission.
Removed
Personal care services are a significant component of home and community-based services (“HCBS”), which have grown in significance and demand in recent years and during the COVID-19 pandemic. In particular, the demand for personal care services is growing from managed care delivery models, including Medicaid Long-Term Services and Supports (“LTSS”) programs and Medicare Advantage plans.
Added
States have flexibility in the model they use to implement the mandate, which means EVV systems, vendors and contracting processes can vary significantly by state. States increasingly require providers to register with regulatory authorities or obtain licenses.

… 55 more changes not shown on this page.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

118 edited+35 added−44 removed109 unchanged
Biggest changeWe may be more vulnerable to the effects of a public health emergency than other businesses due to the nature of our consumers and the physical proximity required by our operations.
Biggest changeAlthough we have contingency plans in place, including infection control plans, the potential impact of, as well as the public’s response and governmental responses to, any such future pandemic, epidemic or outbreak of infectious disease with respect to our markets is difficult to predict and could adversely impact our business and future results of operations and financial condition. 31 Table of Contents We may be more vulnerable to the effects of a public health emergency than other businesses due to the nature of our consumers and the physical proximity required by our operations.
Our inability to effectively manage growth could have a material adverse effect on our financial results. Previously completed or future acquisitions, or growth initiatives, may be unsuccessful and could expose us to unforeseen liabilities. Our growth strategy includes geographical expansion into new markets and the addition of new services in existing markets through the acquisition of local service providers.
Our inability to effectively manage growth could have a material adverse effect on our financial results. Previously completed or future acquisitions, or growth initiatives, may be unsuccessful and could expose us to unforeseen liabilities. Our growth strategy includes potential geographical expansion into new markets and the addition of new services in existing markets through the acquisition of local service providers.
The majority of our consumers and patients are older individuals, many of whom may be more vulnerable than the general public during a pandemic or in a public health emergency due to complex medical conditions or other socioeconomic factors. Our employees may also be at greater risk of contracting contagious diseases due to their increased exposure to vulnerable consumers.
The majority of our consumers and patients are older individuals, many of whom may be more vulnerable than the general public during a pandemic or in a public health emergency due to complex medical conditions or socioeconomic factors. Our employees may also be at greater risk of contracting contagious diseases due to their increased exposure to vulnerable consumers.
Since our personal care operations are concentrated in Illinois, New Mexico and New York, we are particularly sensitive to changes in laws and regulations in these states. Additionally, the current presidential administration has signaled its support for increases in minimum wage. We may not be able to offset any increased costs and expenses.
Since our personal care operations are concentrated in Illinois, New Mexico and New York, we are also particularly sensitive to changes in laws and regulations in these states. Additionally, the current presidential administration has signaled its support for increases in minimum wage. We may not be able to offset any increased costs and expenses.
The COVID-19 pandemic has increased some of these risks, with certain states modifying occupational health and safety guidelines in a manner that increases scrutiny and complexity of operations with respect to appropriate training and use in the workplace of PPE and the possibility of corresponding regulatory audit activity with respect to the adequacy of our practices and procedures.
The COVID-19 pandemic increased some of these risks, with certain states modifying occupational health and safety guidelines in a manner that increases scrutiny and complexity of operations with respect to appropriate training and use in the workplace of PPE and the possibility of corresponding regulatory audit activity with respect to the adequacy of our practices and procedures.
The most prominent of these legislative reform efforts, the ACA affects how healthcare services are covered, delivered, and reimbursed, and expanded health insurance coverage through a combination of public program expansion and private sector health insurance reforms. The ACA has been, and continues to be, subject to legislative and regulatory changes and court challenges.
The most prominent of these legislative reform efforts, the ACA affects how healthcare services are covered, delivered, and reimbursed, and expanded health insurance coverage through a combination of public program expansion and private sector health insurance reforms. However, the ACA has been, and continues to be, subject to legislative and regulatory changes and court challenges.
Our business plan calls for significant growth in business over the next several years through the expansion of our services in existing markets and the establishment of a presence in new markets. This growth has placed and continues to place significant demands on our management team, systems, internal controls and financial and professional resources.
Our business plan calls for significant growth in business over the next several years through the expansion of our services in existing markets and the potential establishment of a presence in new markets. This growth has placed and continues to place significant demands on our management team, systems, internal controls and financial and professional resources.
Further, to the extent that the EVV solutions that we use are determined to be noncompliant with federal or state EVV requirements, we could be subject to penalties. The COVID-19 pandemic also has led to a substantial increase in administrative employees working remotely and, consequently, accessing our system remotely.
Further, to the extent that the EVV solutions that we use are determined to be noncompliant with federal or state EVV requirements, we could be subject to penalties. The COVID-19 pandemic also led to a substantial increase in administrative employees working remotely and, consequently, accessing our system remotely.
The COVID-19 pandemic has also resulted in states modifying standards associated with payment amounts and required justifications to qualify for sick leave and unemployment benefits. These modifications may result in increased operational costs to us, which may adversely impact our financial performance.
The COVID-19 pandemic also resulted in states modifying standards associated with payment amounts and required justifications to qualify for sick leave and unemployment benefits. These modifications may result in increased operational costs to us, which may adversely impact our financial performance.
If any states in which we operate fail to properly implement EVV and lose an amount of their funding, or if those states adopt standards for EVV that are not compatible with our operations, our internal operations could be negatively affected.
If any states in which we operate fail to properly and timely implement EVV and lose an amount of their funding, or if those states adopt standards for EVV that are not compatible with our operations, our internal operations could be negatively affected.
Because a substantial portion of our business is concentrated in these states, any significant reduction in expenditures that pay for our services or other significant changes in these states may have a disproportionately negative impact on our future operating results.
Because a substantial portion of our business is concentrated in these states, any significant reduction in state expenditures that pay for our services or other significant changes in these states may have a disproportionately negative impact on our future operating results.
Our profitability depends principally on the levels of government-mandated payment rates and our ability to manage the cost of providing services. In some cases, commercial insurance companies and other private payors rely on government payment systems to determine payment rates.
Our profitability depends principally on the levels of government-mandated payment rates and our ability to manage the cost of providing services. In some cases, commercial insurance companies and other private payors rely on government payment systems to determine payment rates and policies.
From time to time, we are subject to claims alleging that we did not properly treat or care for a consumer that we failed to follow internal or external procedures that resulted in death or harm to a consumer or that our employees mistreated our consumers, resulting in death or harm.
From time to time, we are subject to claims alleging that we did not properly treat or care for a consumer, that we failed to follow internal or external procedures, resulting in death or harm to a consumer, or that our employees mistreated our consumers, resulting in death or harm.
Depending on the nature of the conduct found in such audits and whether the underlying conduct could be considered systemic, the resolution of these audits could have a material, adverse effect on our financial position, results of operations and liquidity.
Depending on the nature of the conduct found in such audits and investigations and whether the underlying conduct could be considered systemic, the resolution of these audits and investigations could have a material, adverse effect on our financial position, results of operations and liquidity.
Our credit facility contains various covenants that limit our ability to take certain actions, including our ability to: • make, create, incur, assume or suffer to exist any lien; • sell or otherwise dispose of assets, including capital stock of subsidiaries; • merge, consolidate, sell or otherwise dispose of all or substantially all our assets; • make restricted payments, including paying dividends and making certain loans and investments; • create, incur, assume, permit to exist, or otherwise become or remain directly or indirectly liable with respect to any additional indebtedness; • enter into transactions with affiliates; • engage in any line of additional line of business; 28 Table of Contents • amend our organization documents; • make a change in accounting treatment or reporting practices, change our name or change our jurisdiction of organization or formation; • make any payment or prepayment of certain subordinated indebtedness; • enter into agreements that restrict dividends and certain other payments from subsidiaries; • engage in a sale leaseback or similar transaction; and • make certain capital expenditures.
Our credit facility contains various covenants that limit our ability to take certain actions, including our ability to: • make, create, incur, assume or suffer to exist any lien; • sell or otherwise dispose of assets, including capital stock of subsidiaries; • merge, consolidate, sell or otherwise dispose of all or substantially all our assets; • make restricted payments, including paying dividends and making certain loans and investments; • create, incur, assume, permit to exist, or otherwise become or remain directly or indirectly liable with respect to any additional indebtedness; • enter into transactions with affiliates; • engage in any line of additional line of business; • amend our organization documents; • make a change in accounting treatment or reporting practices, change our name or change our jurisdiction of organization or formation; • make any payment or prepayment of certain subordinated indebtedness; • enter into agreements that restrict dividends and certain other payments from subsidiaries; • engage in a sale leaseback or similar transaction; and • make certain capital expenditures.
These laws include, but are not limited to the federal Anti-Kickback Statute, the federal Stark law, the federal FCA, the federal Civil Monetary Penalties Law, other federal and state fraud and abuse, insurance fraud, and fee-splitting laws, which may extend to services reimbursable by any payer, including private insurers, the No Surprises Act, and federal and state laws governing the security and privacy of health information.
These laws include, but are not limited to the federal Anti-Kickback Statute, the federal Stark Law, the federal FCA, the federal Civil Monetary Penalties Law, other federal and state fraud and abuse, insurance fraud, and fee-splitting laws, which may extend to services reimbursable by any payor, including private insurers, the No Surprises Act, and federal and state laws governing the security and privacy of health information.
Changes that may occur at the federal or state level to contain costs include: • limiting increases in, or decreasing, reimbursement rates; • redefining eligibility standards or coverage criteria for social and medical programs or the receipt of services under those programs; • increasing consumer responsibility, including through increased co-payment requirements; • decreasing benefits, such as limiting the number of hours of personal care services that will be covered; • changing reimbursement methodology and program participation eligibility; • slowing payments to providers; • increasing utilization of self-directed care alternatives or “all inclusive” programs; • shifting beneficiaries to managed care organizations; and • implementing demonstration projects and alternative payment models.
Changes that may occur at the federal or state level to contain costs include, for example: • limiting increases in, or decreasing, reimbursement rates; • redefining eligibility standards or coverage criteria for social and medical programs or the receipt of services under those programs; 21 Table of Contents • increasing consumer responsibility, including through increased co-payment requirements; • decreasing benefits, such as limiting the number of hours of personal care services that will be covered; • changing reimbursement methodology and program participation eligibility; • slowing payments to providers; • increasing utilization of self-directed care alternatives or “all inclusive” programs; • shifting beneficiaries to managed care organizations; and • implementing demonstration projects and alternative payment models.
We may face audits or investigations by government agencies or third parties, including certain of our contractual relationships.
We may face audits or investigations by government agencies or third parties, including under certain of our contractual relationships.
As federal healthcare expenditures continue to increase and as some state governments navigate budgetary pressures, federal and state governments have made, and may continue to make, significant changes to the Medicare and Medicaid programs and reimbursement received for services rendered to beneficiaries of such programs.
As federal healthcare expenditures continue to increase and as many state governments navigate budgetary pressures, federal and state governments have made, and may continue to make, significant changes to the Medicare and Medicaid programs and reimbursement received for services rendered to beneficiaries of such programs.
Insurers may choose to offer supplemental benefits, including in-home support services, and impose higher plan costs on beneficiaries. Nearly half of Medicare beneficiaries are enrolled in a Medicare Advantage plan, a figure that continues to grow.
Insurers may choose to offer supplemental benefits, including in-home support services, and impose higher plan costs on beneficiaries. Approximately half of Medicare beneficiaries are enrolled in a Medicare Advantage plan, a figure that continues to grow.
Since our credit facility provides for borrowings based on a multiple of an Adjusted EBITDA ratio, any declines in our Adjusted EBITDA would result in a decrease in our available borrowings under our credit facility. We cannot predict the timing, size and success of our acquisition efforts, our efforts to expand into new geographic regions or the associated capital commitments.
Since our credit facility provides for borrowings based on a multiple of an Adjusted EBITDA ratio, any declines in our Adjusted EBITDA would result in a decrease in our available borrowings under our credit facility. 17 Table of Contents We cannot predict the timing, size and success of our acquisition efforts, our efforts to expand into new geographic regions or the associated capital commitments.
The implementation of these changes may require us to increase our efforts to remain compliant, may reduce the authorizations for services to be provided, and may result in certain consumers no longer being eligible for our services, any of which may result in lower revenues and increased costs, reducing our operating performance and profitability.
The implementation of these changes may require us to modify our operations or increase our efforts to remain compliant, may reduce the authorizations for services to be provided, and may result in certain consumers no longer being eligible for our services, any of which may result in lower revenues and increased costs, reducing our operating performance and profitability.
We can give no assurance these agreements will be renewed on commercially reasonable terms or at all. Negative publicity or changes in public perception of our services may adversely affect our ability to receive referrals, obtain new agreements and renew existing agreements.
We can give no assurance these agreements will be renewed on commercially reasonable terms or at all. 19 Table of Contents Negative publicity or changes in public perception of our services may adversely affect our ability to receive referrals, obtain new agreements and renew existing agreements.
Liability Risks Our operations subject us to risk of litigation. Operating in the personal care services industry exposes us to an inherent risk of wrongful death, personal injury, professional malpractice and other potential claims or litigation brought by our consumers and employees.
Liability Risks Our operations subject us to risk of litigation. Operating in the healthcare and personal care services industries exposes us to an inherent risk of wrongful death, personal injury, professional malpractice and other potential claims or litigation brought by our consumers and employees.
A cyber-attack or security breach could cause a loss of confidential consumer data, give rise to remediation and other expenses, expose us to liability under HIPAA, consumer protection laws, common law and other legal theories, subject us to litigation and federal and state governmental inquiries, damage our reputation, and otherwise be disruptive to our business.
A cyber-attack or security breach could cause a loss of confidential consumer data, give rise to remediation and other expenses, expose us to liability under HIPAA, consumer protection laws, common law and other legal theories, subject us to litigation and federal and state governmental inquiries, damage our reputation, adversely impact our financial results, and otherwise be disruptive to our business.
Trends toward price transparency and value-based purchasing may have an impact on our competitive position, ability to obtain and maintain favorable contract terms, and consumer volumes. For example, starting January 1, 2023, health insurers must provide online price comparison tools to help individuals get personalized cost estimates for covered items and services.
Trends toward price transparency and value-based purchasing may have an impact on our competitive position, ability to obtain and maintain favorable contract terms, and consumer volumes. For example, health insurers must provide online price comparison tools to help individuals get personalized cost estimates for covered items and services.
If we or any of our third-party service providers or certain other third-parties are subject to cyber-attacks or experience security or data breaches in the future, this could result in harm to consumers, loss of protected patient medical data or other information subject to privacy laws, disruption to our information technology systems and/or business, reputational harm.
If we or any of our third-party service providers or certain other third-parties are subject to cyber-attacks or experience security or data breaches in the future, this could result in harm to consumers, loss, misappropriation, corruption, or unauthorized access of protected patient medical data or other information subject to privacy laws, disruption to our information technology systems and/or business, reputational harm.
As of December 31, 2022, 51.4% of our workforce was represented by labor unions. We have numerous agreements with local SEIU affiliates which are renegotiated from time to time. These negotiations are often initiated when we receive increases in our hourly rates from various state agencies.
As of December 31, 2023, 51.3% of our workforce was represented by labor unions. We have numerous agreements with local SEIU affiliates which are renegotiated from time to time. These negotiations are often initiated when we receive increases in our hourly rates from various state agencies.
After giving effect to the amount drawn on our credit facility, approximately $8.2 million of outstanding letters of credit at December 31, 2022 and 2021, and borrowing limits based on an advanced multiple of Adjusted EBITDA (as defined in the Credit Agreement), we had $237.2 million and $112.6 million available for borrowing under our credit facility as of December 31, 2022 and 2021, respectively.
After giving effect to the amount drawn on our credit facility, approximately $8.0 million and $8.2 million of outstanding letters of credit at December 31, 2023 and 2022, respectively, and borrowing limits based on an advanced multiple of Adjusted EBITDA (as defined in the Credit Agreement), we had $335.6 million and $237.2 million available for borrowing under our credit facility as of December 31, 2023 and 2022, respectively.
These requirements include matters related to: • licensure and certification and enrollment with government programs; • eligibility for services; • appropriateness and necessity of services provided; • adequacy and quality of services; 23 Table of Contents • qualifications and training of personnel; • confidentiality, maintenance, data breach, identity theft, security, access and exchange of health-related and personal information and medical records, and interoperability and refraining from information blocking; • environmental protection, health and safety; • relationships with physicians, other referral sources and recipients of referrals; • operating policies and procedures; • addition of, and changes to, facilities and services; • adequacy and manner of documentation for services provided; • billing and coding for services; • timely and proper handling of overpayments; and • debt collection and communications with consumers.
These requirements include matters related to: • licensure and certification and enrollment with government programs; • eligibility for services; 24 Table of Contents • appropriateness and necessity of services provided; • adequacy and quality of services; • qualifications and training of personnel; • confidentiality, maintenance, interoperability, data breach, identity theft, security, access and exchange of medical records and other health-related and personal information including information blocking, data breach, ransomware, identify theft and online tracking of personal information; • environmental protection, health and safety; • relationships with physicians, other referral sources and recipients of referrals; • operating policies and procedures; • addition of, and changes to, facilities and services; • adequacy and manner of documentation for services provided; • billing and coding for services; • timely and proper handling of overpayments; and • debt collection and communications with consumers.
Furthermore, any failure to comply with these laws, including even a seemingly minor infraction, can result in significant penalties which could harm our reputation and have a material adverse effect on our 24 Table of Contents business.
Furthermore, any failure to comply with these laws, including even a seemingly minor infraction, can result in significant penalties which could harm our reputation and have a material adverse effect on our business.
In addition, effective January 1, 2023, home health agencies undergoing changes of ownership are considered a “high-risk” provider type, subjecting provider enrollment applications to increased scrutiny, which may result in delays in processing. Further, in the past, CMS has limited enrollment of new home health agencies.
Home health agencies and (effective January 1, 2024) hospices undergoing changes of ownership are considered a “high-risk” provider type, subjecting provider enrollment applications to increased scrutiny, which may result in delays in processing. Further, in the past, CMS has limited enrollment of new home health agencies.
Future efforts to reduce the costs of the Illinois Department on Aging programs could adversely affect our service revenues and profitability. For the years ended December 31, 2022 and 2021, we derived approximately 20.7% and 21.4%, respectively, of our revenue from the Illinois Department on Aging programs.
Future efforts to reduce the costs of the Illinois Department on Aging programs could adversely affect our service revenues and profitability. For the years ended December 31, 2023 and 2022, we derived approximately 20.9% and 20.7%, respectively, of our revenue from the Illinois Department on Aging programs.
Some of our competitors may have greater financial, technical, political and marketing resources, name recognition or a larger number of consumers and payors than we do. In addition, some of these organizations offer more services than we do in the markets in which we operate.
Some of these providers and competitive care models may have greater financial, technical, political and marketing resources, name recognition or a larger number of consumers and payors than we do. In addition, some of our competitors offer more services than we do in the markets in which we operate.
Further, many of the states in which we operate are operating with budget deficits for the 2022 fiscal year and fiscal year 2023 state budgets could be impacted as economic conditions in the United States continue to be challenging in various respects. Various states may in the future delay reimbursement, which would adversely affect our liquidity.
Further, many of the states in which we operate are operating with budget deficits for the 2023 fiscal year and fiscal year 2024 state budgets could be impacted to the extent economic conditions in the United States are challenging in 2024. Various states may in the future delay reimbursement, which would adversely affect our liquidity.
Delays in receiving reimbursement or payments from Medicare, Medicaid and other payors may adversely impact our working capital. As a result, working capital management, including prompt and diligent billing and collection, is an important factor in our results of operations and liquidity. Our working capital management procedures may not successfully negate this risk.
Delays in receiving reimbursement or payments from Medicare, Medicaid and other payors may adversely impact our working capital. As a result, working capital management, including prompt and diligent billing and collection, is an important factor in our results of operations and liquidity.
These fiscal intermediaries are permitted to continue operating in all counties contained in their RFO application, provided they submitted an attestation and supporting information to the NYSDOH no later than November 29, 2022. The Company submitted an attestation on November 22, 2022.
These fiscal intermediaries are permitted to continue operating in all counties contained in their RFO application, provided they submitted an attestation and supporting information to the NYSDOH no later than November 29, 2022. The Company submitted an attestation on November 22, 2022, which allowed the Company to continue its CDPAP fiscal intermediary operations.
This may affect the timing on which we may obtain any additional funding and there can be no assurance that we will be able to raise additional funds on terms acceptable to us, if at all.
This may affect the timing on which we may obtain any additional funding and there can be no assurance that we will be able to raise additional funds on terms acceptable to us, if at all. Timing differences in reimbursement may cause liquidity problems.
We had $582.8 million and $504.4 million of goodwill and $72.2 million and $64.3 million of intangible assets recorded on our Consolidated Balance Sheets at December 31, 2022 and 2021, respectively. It is not possible at this time to determine if there will be any future impairment charge, or if there is, whether such charges would be material.
We had $663.0 million and $582.8 million of goodwill and $92.0 million and $72.2 million of intangible assets recorded on our Consolidated Balance Sheets at December 31, 2023 and 2022, respectively. It is not possible at this time to determine if there will be any future impairment charge, or if there is, whether such charges would be material.
Almost all of the states in which we operate have experienced periodic financial pressures and budgetary shortfalls due to challenging economic conditions, including as a result of the COVID-19 pandemic, and the rising costs of healthcare. Reductions to federal support for state Medicaid or other programs could also result in budgetary shortfalls.
Almost all of the states in which we operate have experienced periodic financial pressures and budgetary shortfalls due to challenging economic conditions and the rising costs of healthcare, among other factors. Reductions to federal support for state Medicaid or other programs could also result in budgetary shortfalls.
In addition, CMS administrators may make changes to Medicaid payment models or grant various flexibilities to states in the administration of state Medicaid programs, including by expanding the scope of waivers under which states may implement Medicaid expansion provisions, impose different eligibility or enrollment restrictions, or otherwise implement programs that vary from federal standards.
Likewise, CMS administrators may grant various flexibilities to states in the administration of state Medicaid programs, including by modifying the scope of waivers under which states may implement Medicaid expansion provisions, impose different eligibility or enrollment restrictions, or otherwise implement programs that vary from federal standards.
In July 2022, CMS released its first HCBS Quality Measure Set, which is intended to promote more common and consistent use of nationally standardized quality measures within and across state HCBS programs. Use of these HCBS measures by states, managed care organizations and other entities involved in HCBS is voluntary.
The HCBS Quality Measure Set, published by CMS, is intended to promote more common and consistent use of nationally standardized quality measures within and across state HCBS programs. Use of these HCBS measures by states, managed care organizations and other entities involved in HCBS is voluntary.
In certain states, payment of claims may be impacted by the Review Choice Demonstration for Home Health Services, a program intended to identify and prevent fraud, reduce the number of Medicare appeals, and improve provider compliance with Medicare program requirements. The program is limited to home health agencies in Illinois, Ohio, North Carolina, Florida and Texas.
In certain states, payment of home health claims may be impacted by the Review Choice Demonstration for Home Health Services, a program intended to identify and prevent fraud, reduce the number of Medicare appeals, and improve provider compliance with Medicare program requirements.
Moreover, the increased staffing challenges have resulted in, and may continue to result in, increased labor cost to satisfy our staffing requirements. In addition, labor shortages could be further exacerbated by COVID-19 vaccination requirements. We may not be able to offset higher labor costs by increasing the rates we charge for our services.
Moreover, the increased staffing challenges have resulted in, and may continue to result in, increased labor cost to satisfy our staffing requirements. We may not be able to offset higher labor costs by increasing the rates we charge for our services.
As a result, changes to government healthcare programs that reduce Medicare, Medicaid or other payments may negatively impact payments from private payors, as well. Any reduction in reimbursements or imposition of copayments that dissuade the use of our services, or any reduction in reimbursement from private payors, could also materially adversely affect our profitability.
As a result, changes to government healthcare programs that reduce Medicare, Medicaid or other payments may negatively impact payments from private payors, as well. Any reduction in reimbursements from governmental or private payors or policies that negatively affect utilization of our services, such as the imposition of copayments or prior authorization requirements, could also materially adversely affect our profitability.
If another moratorium is imposed on enrollment of new providers in a geographic area we desire to service, our ability to expand operations may be impacted. Our ability to expand operations in a state will depend on our ability to obtain a state license to operate, and where required, CON approval. States may limit the number of licenses they issue.
If another moratorium is imposed on enrollment of new providers in a geographic area we desire to service, our ability to expand operations may be impacted. Our ability to expand operations in a state will also depend, where required, on our ability to obtain a state license to operate and, in some cases, CON approval.
The Company has received amounts from the Provider Relief Fund and returned any unused funds. It has acquired and may in the future acquire companies that have received funds from the Provider Relief Fund. We believe we have structured our use of these funds in accordance with the terms and conditions.
We have also acquired and may in the future acquire companies that received funds from the Provider Relief Fund. We believe we have structured our use of these funds in accordance with the terms and conditions.
Subject us to litigation and governmental enforcement actions (including under HIPAA and other applicable laws), which could result in fines, settlement agreements, corrective action plans, and of which could have a material adverse effect on our business, financial position and results of operations.
We may also be subject us to litigation and governmental enforcement actions (including under HIPAA and other applicable laws) as a result of cyber-attacks or security or data breaches, which could result in fines, settlement agreements, corrective action plans, and of which could have a material adverse effect on our business, financial position and results of operations.
We have a compliance officer who monitors and reports on our compliance efforts. The laws and regulations governing our operations are subject to change.
We have a compliance department, headed by our chief compliance officer, that monitors and reports on our compliance efforts. The laws and regulations governing our operations are subject to change.
Our insurance liability coverage may not be sufficient for our business needs. Although we maintain insurance consistent with industry practice, the insurance we maintain may not be sufficient to satisfy all claims made against us.
Although we maintain insurance consistent with industry practice, the insurance we maintain may not be sufficient to satisfy all claims made against us.
Further, some of the losses associated with cybersecurity and data breach risks may not be sufficient to cover all losses or the types of claims that may arise. Human Capital Risks We may not be able to attract and retain qualified personnel or we may incur increased costs in doing so.
Further, our insurance coverage intended to address cybersecurity and data breach risks may not be sufficient to cover all losses or the types of claims that may arise. 29 Table of Contents Human Capital Risks We may not be able to attract and retain qualified personnel or we may incur increased costs in doing so.
Each of our subsidiaries that employ an average of at least 50 full-time employees in a calendar year are required to offer a minimum level of health coverage for 95% of our full-time employees in 2021 or be subject to an annual penalty. Our business may be adversely impacted by healthcare reform efforts.
Each of our subsidiaries that employ an average of at least 50 full-time employees in a calendar year are required to offer a minimum level of health coverage for 95% of our full-time employees in 2023 or be subject to an annual penalty, for example.
An adverse outcome under any such audit or investigation, a determination that we have violated applicable laws and regulations, or a public announcement that we are being investigated for possible violations could result in liability, result in adverse publicity, require us to change our operations to implement plans of correction for alleged deficiencies, and other negative consequences that could adversely affect our business, financial condition, or results of operations.
An adverse outcome under any such audit or investigation, a determination that we have violated applicable laws and regulations, or a public announcement that we are being investigated for possible violations could result in liability, result in adverse publicity, require us to change our operations to implement plans of correction for alleged deficiencies, and result in other negative consequences that could adversely affect our business, financial condition, or results of operations. 25 Table of Contents We are subject to federal, state and local laws and regulations that govern our employment practices, including minimum wage, living wage, and paid time-off requirements.
Under the 21 st Century Cures Act, as amended, states must require the use of EVV for all Medicaid-funded personal care services and home health services, by deadlines of January 1, 2020, and January 1, 2023, respectively. States that failed to meet these deadlines may be subject to incremental reductions in federal funding, absent approval of a good faith exemption.
Under the 21st Century Cures Act, states must require the use of EVV for all Medicaid-funded personal care services and home health services that require an in-home visit by a provider. States that failed to meet the deadlines for implementation may be subject to incremental reductions in federal funding, absent approval of a good faith exemption.
Instead, the buyer must enroll the acquired home health agencies as new providers with Medicare. The 36 Month Rule can increase competition for acquisition targets that are not subject to the rule and may cause significant Medicare billing delays for the purchases of home health agencies that are subject to the rule.
The 36 Month Rule can increase competition for acquisition targets that are not subject to the rule and may cause significant Medicare billing delays for the purchases of home health agencies and hospices that are subject to the rule.
We rely on these providers to provide continual maintenance, enhancements, as well as security of any protected data. To the extent that our EVV vendors fail to support these processes, our internal operations could be negatively affected.
We license this software through CellTrak and partner with states that utilize other software. We rely on these vendors to provide continual maintenance and enhancements, as well as security of any protected data. To the extent that our EVV vendors fail to support these processes, our internal operations could be negatively affected.
To the extent that we now or in the future have deficiencies in our internal control over financial reporting that are not remediated, our ability to accurately and timely report our financial position, results of operations, cash flows or key operating metrics could be impaired, which could result in a material misstatement in our financial statements, late filings of our annual and quarterly reports under the Exchange Act, restatements of our consolidated financial statements or other corrective disclosures, or other material adverse effects on our business, reputation, results of operations, financial condition or liquidity and could create a perception that our financial results do not fairly state our financial condition or results of operations, any of which could have an adverse effect on the value of our stock.
Compliance with Section 404(b) of the Sarbanes-Oxley Act has increased our legal and financial compliance costs making some activities more difficult, time-consuming or costly and may also place strain on our personnel, systems and resources. 20 Table of Contents To the extent that we now or in the future have deficiencies in our internal control over financial reporting that are not remediated, our ability to accurately and timely report our financial position, results of operations, cash flows or key operating metrics could be impaired, which could result in a material misstatement in our financial statements, late filings of our annual and quarterly reports under the Exchange Act, restatements of our consolidated financial statements or other corrective disclosures, or other material adverse effects on our business, reputation, results of operations, financial condition or liquidity and could create a perception that our financial results do not fairly state our financial condition or results of operations, any of which could have an adverse effect on the value of our stock.
A breach of any of these covenants could result in a default under our credit facility. Upon the occurrence of an event of default under our credit facility, all amounts outstanding under our credit facility may become immediately due and payable and all commitments under our credit facility to extend further credit may be terminated.
Upon the occurrence of an event of default under our credit facility, all amounts outstanding under our credit facility may become immediately due and payable and all commitments under our credit facility to extend further credit may be terminated. The acceleration of any such indebtedness will result in an event of default under all of our other long-term indebtedness.
Economic conditions in the United States continue to be challenging in various respects, and the United States economy continues to experience significant inflationary pressures, elevated interest rates, challenging labor market conditions, and disruptions to supply networks.
Economic conditions in the United States continue to be challenging in various respects, and the United States economy continues to experience significant inflationary pressures, elevated interest rates, challenging labor market conditions, potential adverse effects associated with current geopolitical conditions.
The transition to SOFR is not expected to have a material impact on the Company’s results of operations or liquidity. General Risks Factors beyond our control, including inclement weather, natural disasters, acts of terrorism, pandemics, riots, civil insurrection or social unrest, looting, protests, strikes and street demonstrations, may impact our ability to provide services.
General Risks Factors beyond our control, including inclement weather, natural disasters, acts of terrorism, pandemics, riots, civil insurrection or social unrest, looting, protests, strikes and street demonstrations, may impact our ability to provide services.
Alongside this quality and public reporting effort, CMS began implementing a nationwide expansion of the HHVBP Model in January 2022. Under the model, home health agencies will receive increases or decreases to their Medicare fee-for-service payments of up to 5% based on performance against specific quality measures relative to the performance of other home health providers.
Alongside this quality and public reporting effort, home health agencies receive, under the HHVBP Model, increases or decreases to their Medicare fee-for-service payments of up to 5% based on performance against specific quality measures relative to the performance of other home health providers. Data collected in each performance year impacts Medicare payments two years later.
We face routine and periodic surveys, audits and investigations by governmental agencies and private payors, which could have adverse findings that may negatively impact our business. We are and have been subject to routine and periodic surveys, audits and investigations by various governmental agencies.
Our working capital management procedures may not successfully negate this risk. 18 Table of Contents We face routine and periodic surveys, audits and investigations by governmental agencies and private payors, which could have adverse findings that may negatively impact our business. We are and have been subject to routine and periodic surveys, audits and investigations by various governmental agencies.
Several states have implemented, or plan to implement, accountable care models for their Medicaid populations. If we are not included in these programs, or if ACOs establish programs that overlap with our services, we are at risk for losing market share and for a loss of our current business.
If we are not included in these programs, or if ACOs establish programs that overlap with our services, we are at risk for losing market share and for a loss of our current business.
Furthermore, because the techniques 27 Table of Contents used in cyber-attacks change frequently, they may not be immediately recognized, and we may experience or be affected by security or data breaches that remain undetected for an extended time.
Furthermore, because the techniques used in cyber-attacks change frequently, they may not be immediately recognized, and we may experience or be affected by security or data breaches that remain undetected for an extended time. The current cyber threat environment presents increased risk for all companies, including companies in our industry.
In 2022, we derived approximately 43.8% of our net service revenues from services provided in Illinois, 17.9% of our net service revenues in New Mexico and 9.1% of our net service revenues in New York.
In 2023, we derived approximately 44.5% of our net service revenues from services provided in Illinois, 17.0% of our net service revenues in New Mexico and 8.7% of our net service revenues in New York.
If changes in Medicare, Medicaid or other state and local medical and social programs result in a reduction in available funds for the services we offer, a reduction in the number of beneficiaries eligible for our services or a reduction in the number of hours or amount of services that beneficiaries eligible for our services may receive, then our revenues and profitability could be negatively impacted.
Payment policies for different types of providers and for various items and services continue to evolve, and future health reform efforts could impact both federal and state programs. 22 Table of Contents If changes in Medicare, Medicaid or other state and local medical and social programs result in a reduction in available funds for the services we offer, a reduction in the number of beneficiaries eligible for our services or a reduction in the number of hours or amount of services that beneficiaries eligible for our services may receive, then our revenues and profitability could be negatively impacted.
We have grown our business through de novo offices and we may in the future selectively open new offices in existing and new states. De novo offices involve risks, including those relating to licensing, accreditation, and payor program enrollment, hiring new personnel, establishing relationships with referral sources and delays or difficulty in installing our operating and information systems.
De novo offices involve risks, including those relating to licensing, accreditation, and payor program enrollment, hiring new personnel, establishing relationships with referral sources and delays or difficulty in installing our operating and information systems. We may not be successful in generating sufficient business activity to sustain the operating costs of such de novo operations.
Difficulties with operational processes may negatively affect our revenue growth rates, cash flow and profitability for services provided. Other alternative payment models may be presented by the government and commercial payors to control costs that subject our Company to financial risk. We cannot predict at this time what effect alternative payment models may have on our Company.
Difficulties with operational processes may negatively affect our revenue growth rates, cash flow and profitability for services provided. Other alternative payment models may be presented by the government and commercial payors that subject our Company to financial risk. It is difficult to predict the nature and success of any such models.
If we continue to serve our consumers without addressing changes in laws and regulations, we are at risk for non-compliance with program requirements and potential penalties. Our hospice operations are subject to annual Medicare caps. If we exceed the caps, our business and consolidated financial condition, results of operations and cash flows could be materially adversely affected.
If we continue to serve our consumers without addressing changes in laws and regulations, we are at risk for non-compliance with program requirements and potential penalties, which may be significant. Our hospice operations are subject to annual Medicare caps.
Our industry is highly competitive, fragmented and market-specific. The healthcare and long-term care industries are highly competitive among service providers. We compete with personal care service providers, hospice providers, home health providers, private caregivers, larger publicly held companies, privately held companies, privately held single-site agencies, hospital-based agencies, not-for-profit organizations, community-based organizations and self-directed care programs.
We compete with personal care service providers, hospice providers, home health providers, private caregivers, publicly held companies, privately held companies, privately held single-site agencies, hospital-based agencies, not-for-profit organizations, community-based organizations and self-directed care programs.
For instance, New York law limits the number of home care providers with which a managed Medicaid long-term care plan can contract.
We may experience increased competition for managed care contracts due to state regulation and limitations. For instance, New York law limits the number of home care providers with which a managed Medicaid long-term care plan can contract.
Moreover, potential changes to federal labor laws and regulations, including those supported by the current presidential administration, could increase the likelihood of employee unionization activity and the ability of employees to unionize.
Moreover, potential changes to federal labor laws and regulations, including those supported by the current presidential administration, could increase the likelihood of employee unionization activity and the ability of employees to unionize. Labor costs are the most significant component of our total expenditures and, therefore, an increase in the cost of labor could significantly harm our business.
We cannot predict whether states material to our operating results will timely pass budgets in subsequent years or experience changes or other challenges that negatively impact our ability to be reimbursed for our services in a timely manner.
We cannot predict whether states material to our operating results will experience changes or other challenges that negatively impact our ability to be reimbursed for our services in a timely manner. Changes in the volume of uninsured patients could adversely affect our cash flows and results of operations.
It is unclear whether alternative models will successfully coordinate care and reduce costs or whether they will decrease overall reimbursement. While we believe we are adapting our business strategies to compete in a value-based reimbursement environment, we are unable at this time to predict how this trend will affect our results of operations.
While we believe we are adapting our business strategies to compete in a value-based reimbursement environment, we are unable at this time to predict how this trend will affect our results of operations.
In addition to surveys to determine compliance with the conditions of participation, CMS has engaged a number of contractors (including Medicare Administrative Contractors (“MACs”), RACs and UPICs) to conduct audits and investigations to evaluate billing practices and identify overpayments. These audits and investigations can result in recoupments by Medicare and other payors of amounts previously paid to us.
In addition to surveys to determine compliance with the conditions of participation, CMS has engaged a number of contractors (including Medicare Administrative Contractors (“MACs”), RACs and UPICs) to conduct audits and investigations to evaluate billing practices and identify overpayments. In addition, individual states have similar integrity programs, including Medicaid RAC Programs.
Initiatives aimed at improving quality and cost of care include alternative payment models, such as ACOs and bundled payment arrangements. The CMS Innovation Center is aiming to have all fee-for-service Medicare beneficiaries and most Medicaid beneficiaries in a care relationship with accountability for quality and total cost of care by 2030. There are also several state-driven value-based care initiatives.
The CMS Innovation Center is aiming to have all fee-for-service Medicare beneficiaries and most Medicaid beneficiaries in a care relationship with accountability for quality and total cost of care by 2030. There are also several state-driven value-based care initiatives. For example, some states have aligned quality metrics across payors through legislation or regulation.
If payments received under any of our hospice provider numbers exceed these caps, we may be required to reimburse Medicare such excess amounts, which could have a material adverse effect on our business and consolidated financial condition, results of operations and cash flows. 20 Table of Contents Reductions in reimbursement and other changes to Medicare, Medicaid, and other federal, state and local medical and social programs could adversely affect our consumer caseload, units of service, revenues, gross profit and profitability.
If payments received under any of our hospice provider numbers exceed these caps, we may be required to reimburse Medicare such excess amounts, which could have a material adverse effect on our business and consolidated financial condition, results of operations and cash flows.
Accordingly, certain public health emergencies could have a material adverse effect on our financial condition and results of operations. Risks Related to our Growth Strategy Our growth strategy depends on our ability to manage growing and effectively integrating operations and we may not be successful in managing this growth.
Risks Related to our Growth Strategy Our growth strategy depends on our ability to manage growing and effectively integrating operations and we may not be successful in managing this growth.
Goodwill and intangible assets with finite lives represent a significant portion of our assets. Goodwill represents the excess of cost over the fair market value of net assets acquired in business combinations.
If we were required to write down all or part of our goodwill and/or our intangible assets, our net earnings and net worth could be materially adversely affected. Goodwill and intangible assets with finite lives represent a significant portion of our assets. Goodwill represents the excess of cost over the fair market value of net assets acquired in business combinations.
You should refer to the explanation of the qualifications and limitations on forward-looking statements under “Special Caution Concerning Forward-Looking Statements.” All forward-looking statements made by us are qualified by the risk factors described below. Risks Related to Economic Conditions and the COVID-19 Pandemic Our financial results have been, and may continue to be, adversely impacted by negative macroeconomic conditions.
You should refer to the explanation of the qualifications and limitations on forward-looking statements under “Special Caution Concerning Forward-Looking Statements.” All forward-looking statements made by us are qualified by the risk factors described below.

… 117 more changes not shown on this page.

Item 2. Properties

Properties — owned and leased real estate

2 edited+0 added−0 removed0 unchanged
Biggest changeWe sublease approximately 21,000 and 53,000 square feet of our office space in Downers Grove and Frisco, respectively, to third parties. Of that 53,000 square feet of our Frisco office space, we subleased approximately 37,400 square feet in November 2022.
Biggest changeWe sublease approximately 21,000 and 37,400 square feet of our office space in Downers Grove and Frisco, respectively, to third parties. 33 Table of Contents
ITEM 2. P ROPERTIES We do not own any real property. We lease administrative offices for our local branches, none of which are individually material. We lease approximately 59,000 and 106,000 square feet of office space in Downers Grove, Illinois and Frisco, Texas, respectively, which serve as our support centers.
ITEM 2. P ROPERTIES We do not own any real property. We lease administrative offices for our local branches, none of which are individually material. We lease approximately 59,000 and 75,000 square feet of office space in Downers Grove, Illinois and Frisco, Texas, respectively, which serve as our support centers.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+0 added−0 removed1 unchanged
Biggest changeFurther information with respect to this item may be found in Note 11 to the Consolidated Financial Statements in Part II, Item 8—”Financial Statements and Supplementary Data,” which is incorporated herein by reference. ITEM 4. MINE SAF ETY DISCLOSURES Not applicable. 30 Table of Contents PART II
Biggest changeFurther information with respect to this item may be found in Note 11 to the Consolidated Financial Statements in Part II, Item 8—“Financial Statements and Supplementary Data,” which is incorporated herein by reference. ITEM 4. MINE SAF ETY DISCLOSURES Not applicable. 34 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

3 edited+0 added−0 removed3 unchanged
Biggest changeAn insignificant amount of common stock is held by individual holders. As of February 17, 2023, Addus HomeCare Corporation had approximately 28,340 shareholders of its common stock, including 79 shareholders of record.
Biggest changeAn insignificant amount of common stock is held by individual holders. As of February 16, 2024, Addus HomeCare Corporation had approximately 32,080 shareholders of its common stock, including 89 shareholders of record.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STO CKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common stock is listed on The Nasdaq Global Market under the symbol “ADUS.” Holders As of December 31, 2022, 2.0% of our shares of common stock were held by our officers and directors and approximately 98.0% of our common stock was held by 342 institutional investors.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STO CKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common stock is listed on The Nasdaq Global Market under the symbol “ADUS.” Holders As of December 31, 2023, 2.0% of our shares of common stock were held by our officers and directors and approximately 98.0% of our common stock was held by 374 institutional investors.
ITE M 6. [ Reserved] 31 Table of Contents
ITE M 6. [ Reserved] 35 Table of Contents

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

151 edited+27 added−19 removed82 unchanged
Biggest changeFor the years ended December 31, 2022, 2021 and 2020, our revenue by payor and significant states by segment were as follows: Personal Care 2022 2021 2020 Amount (in Thousands) % of Segment Net Service Revenues Amount (in Thousands) % of Segment Net Service Revenues Amount (in Thousands) % of Segment Net Service Revenues State, local and other governmental programs $ 348,234 49.3 % $ 338,325 49.3 % $ 324,670 50.2 % Managed care organizations 326,778 46.3 311,801 45.5 287,032 44.3 Private pay 18,301 2.6 19,991 2.9 20,398 3.2 Commercial insurance 7,689 1.1 9,820 1.4 9,991 1.5 Other 5,505 0.7 5,917 0.9 5,142 0.8 Total personal care segment net service revenues $ 706,507 100.0 % $ 685,854 100.0 % $ 647,233 100.0 % Illinois $ 360,778 51.1 % $ 328,619 47.9 % $ 288,326 44.6 % New York 86,592 12.3 99,732 14.5 115,510 17.8 New Mexico 105,315 14.9 97,784 14.3 86,618 13.4 All other states 153,822 21.7 159,719 23.3 156,779 24.2 Total personal care segment net service revenues $ 706,507 100.0 % $ 685,854 100.0 % $ 647,233 100.0 % 33 Table of Contents Hospice 2022 2021 2020 Amount (in Thousands) % of Segment Net Service Revenues Amount (in Thousands) % of Segment Net Service Revenues Amount (in Thousands) % of Segment Net Service Revenues Medicare $ 183,407 90.9 % $ 142,086 93.3 % $ 94,068 92.9 % Managed care organizations 7,353 3.6 5,664 3.7 4,931 4.9 Other 11,012 5.5 4,503 3.0 2,298 2.2 Total hospice segment net service revenues $ 201,772 100.0 % $ 152,253 100.0 % $ 101,297 100.0 % Ohio $ 70,503 35.0 % $ 61,415 40.3 % $ — — % New Mexico 30,722 15.2 36,063 23.7 42,648 42.1 Illinois 47,181 23.4 — — — — All other states 53,366 26.4 54,775 36.0 58,649 57.9 Total hospice segment net service revenues $ 201,772 100.0 % $ 152,253 100.0 % $ 101,297 100.0 % With the acquisition of Queen City Hospice in late 2020, the Company expanded its hospice services in the state of Ohio, and with the JourneyCare acquisition in 2022, the Company also expanded its hospice services in the state of Illinois.
Biggest changeFor the years ended December 31, 2023, 2022 and 2021, our revenue by payor and significant states by segment were as follows: Personal Care 2023 2022 2021 Amount (in Thousands) % of Segment Net Service Revenues Amount (in Thousands) % of Segment Net Service Revenues Amount (in Thousands) % of Segment Net Service Revenues State, local and other governmental programs $ 400,753 50.4 % $ 348,234 49.3 % $ 338,325 49.3 % Managed care organizations 367,557 46.2 326,778 46.3 311,801 45.5 Private pay 16,268 2.0 18,301 2.6 19,991 2.9 Commercial insurance 6,321 0.8 7,689 1.1 9,820 1.4 Other 3,819 0.6 5,505 0.7 5,917 0.9 Total personal care segment net service revenues $ 794,718 100.0 % $ 706,507 100.0 % $ 685,854 100.0 % Illinois $ 411,081 51.7 % $ 360,778 51.1 % $ 328,619 47.9 % New Mexico 115,986 14.6 105,315 14.9 97,784 14.3 New York 92,469 11.6 86,592 12.3 99,732 14.5 All other states 175,182 22.1 153,822 21.7 159,719 23.3 Total personal care segment net service revenues $ 794,718 100.0 % $ 706,507 100.0 % $ 685,854 100.0 % With the acquisition of CareStaff in 2023, the Company expanded its personal care services to consumers in the state of Florida. 37 Table of Contents Hospice 2023 2022 2021 Amount (in Thousands) % of Segment Net Service Revenues Amount (in Thousands) % of Segment Net Service Revenues Amount (in Thousands) % of Segment Net Service Revenues Medicare $ 186,317 89.9 % $ 183,407 90.9 % $ 142,086 93.3 % Managed care organizations 7,037 3.4 7,353 3.6 5,664 3.7 Other 13,801 6.7 11,012 5.5 4,503 3.0 Total hospice segment net service revenues $ 207,155 100.0 % $ 201,772 100.0 % $ 152,253 100.0 % Ohio $ 74,871 36.1 % $ 70,503 35.0 % $ 61,415 40.3 % Illinois 47,247 22.8 47,181 23.4 — — New Mexico 30,782 14.9 30,722 15.2 36,063 23.7 All other states 54,255 26.2 53,366 26.4 54,775 36.0 Total hospice segment net service revenues $ 207,155 100.0 % $ 201,772 100.0 % $ 152,253 100.0 % With the acquisition of JourneyCare in 2022, the Company expanded its hospice services to patients in the state of Illinois, and with the acquisition of Tennessee Quality Care in 2023, the Company also expanded its hospice services to patients in the state of Tennessee.
To the extent that we continue to experience a shortage of caregivers, it may continue to hinder our ability to attract and retain sufficient caregivers to meet the continuing demand for both our non-clinical and clinical services. The ongoing staffing challenges may also continue to result in increased labor costs to satisfy our staffing requirements.
To the extent that we continue to experience a shortage of caregivers, it may hinder our ability to attract and retain sufficient caregivers to meet the continuing demand for both our non-clinical and clinical services. The ongoing staffing challenges may also continue to result in increased labor costs to satisfy our staffing requirements.
Many of these metrics serve as the basis of reported revenues and assessment of these, provide direct correlation to the results of operations from period to period and facilitate comparison with the results of our peers.
Many of these metrics serve as the basis of reported revenues and assessment of these, provide direct correlation to the results of operations from period to period and facilitate comparison with the results of our peers.
Historical trends established in these metrics can be used to evaluate current operating results, identify trends affecting our business, determine the allocation of resources and assess the quality and potential variability of our cash flows and earnings.
Historical trends established in these metrics can be used to evaluate current operating results, identify trends affecting our business, determine the allocation of resources and assess the quality and potential variability of our cash flows and earnings.
We believe they are useful to investors in evaluating and understanding our business but should not be used solely in assessing the Company’s performance.
We believe they are useful to investors in evaluating and understanding our business but should not be used solely in assessing the Company’s performance.
These key performance indicators should not be considered superior to, as a substitute for or as an alternative to, and should be considered in conjunction with, the GAAP financial measures presented herein to fully evaluate and understand the business as a whole. These measures may not be comparable to similarly-titled performance indicators used by other companies.
These key performance indicators should not be considered superior to, as a substitute for or as an alternative to, and should be considered in conjunction with, the GAAP financial measures presented herein to fully evaluate and understand the business as a whole. These measures may not be comparable to similarly-titled performance indicators used by other companies.
Many of these metrics serve as the basis of reported revenues and assessment of these, provide direct correlation to the results of operations from period to period and facilitate comparison with the results of our peers.
Many of these metrics serve as the basis of reported revenues and assessment of these, provide direct correlation to the results of operations from period to period and facilitate comparison with the results of our peers.
Historical trends established in these metrics can be used to evaluate current operating results, identify trends affecting our business, determine the allocation of resources and assess the quality and potential variability of our cash flows and earnings.
Historical trends established in these metrics can be used to evaluate current operating results, identify trends affecting our business, determine the allocation of resources and assess the quality and potential variability of our cash flows and earnings.
We believe they are useful to investors in evaluating and understanding our business but should not be used solely in assessing the Company’s performance.
We believe they are useful to investors in evaluating and understanding our business but should not be used solely in assessing the Company’s performance.
It should not be considered in isolation or as a substitute for net income, operating income or any other measure of financial performance calculated in accordance with GAAP. Additionally, our calculation of Adjusted EBITDA may not be comparable to similarly titled measures reported by other companies.
It should not be considered in isolation or as a substitute for net income, operating income or any other measure of financial performance calculated in accordance with GAAP. Additionally, our calculation of Adjusted EBITDA may not be comparable to similarly titled measures reported by other companies.
Historical trends established in these metrics can be used to evaluate current operating results, identify trends affecting our business, determine the allocation of resources and assess the quality and potential variability of our cash flows and earnings.
Historical trends established in these metrics can be used to evaluate current operating results, identify trends affecting our business, determine the allocation of resources and assess the quality and potential variability of our cash flows and earnings.
We believe they are useful to investors in evaluating and understanding our business but should not be used solely in assessing the Company’s performance.
We believe they are useful to investors in evaluating and understanding our business but should not be used solely in assessing the Company’s performance.
These key performance indicators should not be considered superior to, as a substitute for or as an alternative to, and should be considered in conjunction with, the GAAP financial measures presented herein to fully evaluate and understand the business as a whole. These measures may not be comparable to similarly-titled performance indicators used by other companies.
These key performance indicators should not be considered superior to, as a substitute for or as an alternative to, and should be considered in conjunction with, the GAAP financial measures presented herein to fully evaluate and understand the business as a whole. These measures may not be comparable to similarly-titled performance indicators used by other companies.
Our investing activities for the year ended December 31, 2022 consisted of $86.6 million primarily for the acquisition of JourneyCare, $12.7 million for the acquisition of Apple Home and $8.3 million in purchases of property and equipment primarily related to technology infrastructure.
Our investing activities for the year ended December 31, 2022 primarily consisted of $86.6 million primarily for the acquisition of JourneyCare, $12.7 million for the acquisition of Apple Home and $8.3 million in purchases of property and equipment primarily related to technology infrastructure.
In April 2022, the New York legislature passed the fiscal year 2023 state budget, which amended the Fiscal Intermediary RFO process to authorize all fiscal intermediaries that submitted an RFO application and served at least 200 clients in New York City or 50 clients in other counties between January 1, 2020, and March 31, 2020, but that were not initially awarded a contract, to contract with the New York State Department of Health.
In April 2022, the New York legislature passed the fiscal year 2023 state budget, which amended the RFO process to authorize all fiscal intermediaries that submitted an RFO application and served at least 200 clients in New York City or 50 clients in other counties between January 1, 2020, and March 31, 2020, but that were not initially awarded a contract, to contract with the New York State Department of Health.
This measure highlights the performance of existing stores, while excluding the impact of acquisitions, new store openings and closures, the New York CDPAP program and ARPA associated revenue from this calculation. * Management deems these metrics to be key performance indicators. Management uses these metrics to monitor our performance, both in our existing operations and acquisitions.
This measure highlights the performance of existing stores, while excluding the impact of acquisitions, new store openings and closures, the New York CDPAP and ARPA associated revenue from this calculation. * Management deems these metrics to be key performance indicators. Management uses these metrics to monitor our performance, both in our existing operations and acquisitions.
Medicare sequester The CARES Act and related legislation also include other provisions offering financial relief, for example temporarily suspending the Medicare sequester, which would have otherwise reduced payments to Medicare providers by 2% as required by the Budget Control Act of 2011.
Medicare sequester The CARES Act and related legislation also include other provisions offering financial relief, including, for example, temporarily suspending the Medicare sequester, which would have otherwise reduced payments to Medicare providers by 2% as required by the Budget Control Act of 2011.
Additionally, there can be no assurance that we will be able to raise additional funds on terms acceptable to us, if at all. 45 Table of Contents Borrowing Capacity The Company’s Credit Agreement provides for a $600.0 million revolving credit facility and a $125.0 million incremental loan facility, which incremental loan facility may be for term loans or an increase to the revolving loan commitments.
Additionally, there can be no assurance that we will be able to raise additional funds on terms acceptable to us, if at all. 49 Table of Contents Borrowing Capacity The Company’s Credit Agreement provides for a $600.0 million revolving credit facility and a $125.0 million incremental loan facility, which incremental loan facility may be for term loans or an increase to the revolving loan commitments.
Expenses related to streamlining our operations such as costs related to 37 Table of Contents terminated employees, termination of professional services relationships, other contract termination costs and asset write-offs are also included in general and administrative expenses. Depreciation and Amortization Expenses Depreciable assets consist principally of furniture and equipment, network administration and telephone equipment and operating system software.
Expenses related to streamlining our operations such as costs related to terminated employees, termination of professional services relationships, other contract termination costs and asset write-offs are also included in general and administrative expenses. 41 Table of Contents Depreciation and Amortization Expenses Depreciable assets consist principally of furniture and equipment, network administration and telephone equipment and operating system software.
Our business will benefit from the rate increases noted above as planned for 2023, but there is no assurance that there will be additional offsetting rate increases in Illinois for fiscal years beyond fiscal year 2023, and our financial performance will be adversely impacted for any periods in which an additional offsetting reimbursement rate increase is not in effect.
Our business will benefit from the rate increases noted above as planned for 2024, but there is no assurance that there will be additional offsetting rate increases in Illinois for fiscal years beyond fiscal year 2024, and our financial performance will be adversely impacted for any periods in which an additional offsetting reimbursement rate increase is not in effect.
Depending on the severity and length of any potential economic downturn, states could face significant fiscal challenges and revise their revenue forecasts and adjust their budgets, and sales tax collections and income tax withholdings could be depressed in fiscal year 2021 (which began July 1 in most states), and, potentially, future fiscal years.
Depending on the severity and length of any potential economic downturn, states could face significant fiscal challenges and revise their revenue forecasts and adjust their budgets, and sales tax collections and income tax withholdings could be depressed in fiscal year 2023 (which began July 1 in most states), and, potentially, future fiscal years.
For additional information regarding the risks to us from the current competitive labor market and increasing labor costs, see Item 1A—Risk Factors — “ We may not be able to attract and retain qualified personnel or we may incur increased costs in doing so. ” 51 Table of Contents
For additional information regarding the risks to us from the current competitive labor market and increasing labor costs, see Item 1A—Risk Factors — “ We may not be able to attract and retain qualified personnel or we may incur increased costs in doing so. ” 55 Table of Contents
Based on the totality of the information available, we concluded that it was more likely than not that the estimated fair values of our reporting units were greater than their carrying values. Consequently, we concluded that there were no impairments for the years ended December 31, 2022, 2021 or 2020.
Based on the totality of the information available, we concluded that it was more likely than not that the estimated fair values of our reporting units were greater than their carrying values. Consequently, we concluded that there were no impairments for the years ended December 31, 2023 , 2022 or 2021.
The Company recognized $3.6 million related to the rate increase for the year ended December 31, 2021. 34 Table of Contents The Illinois fiscal year 2023 budget included an increase of hourly rates for in-home care services to $25.66, to be effective January 1, 2023.
The Company recognized $3.6 million related to the rate increase for the year ended December 31, 2021. 38 Table of Contents The Illinois fiscal year 2023 budget included an increase of hourly rates for in-home care services to $25.66, to be effective January 1, 2023.
We performed a sensitivity analysis on this reporting unit and determined that a more than 3.1% increase to the weighted- average cost of capital, the most sensitive assumption used in the estimate, would result in the fair value being lower than the carrying value.
We performed a sensitivity analysis on this reporting unit and determined that a more than 1.2% increase to the weighted- average cost of capital, the most sensitive assumption used in the estimate, would result in the fair value being lower than the carrying value.
The discussion of our financial condition and results of operations for the year ended December 31, 2021 compared to the year ended December 31, 2020, included in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) can be found in the Annual Report on Form 10-K for the year ended December 31, 2021.
The discussion of our financial condition and results of operations for the year ended December 31, 2022 compared to the year ended December 31, 2021, included in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) can be found in the Annual Report on Form 10-K for the year ended December 31, 2022.
The transition to SOFR is not expected to have a material impact on the Company’s results of operations or liquidity. See Note 7, Long-Term Debt, to the Notes to Consolidated Financial Statements for additional details of our long-term debt.
The transition to SOFR did not and is not expected to have a material impact on the Company’s results of operations or liquidity. See Note 7, Long-Term Debt, to the Notes to Consolidated Financial Statements for additional details of our long-term debt.
No impairment charge was recorded for the years ended December 31, 2022, 2021 or 2020. Amortization of intangible assets is reported in the statement of income caption, “Depreciation and amortization” and not included in the income statement caption cost of service revenues.
No impairment charge was recorded for the years ended December 31, 2023, 2022 or 2021. Amortization of intangible assets is reported in the statement of income caption, “Depreciation and amortization” and not included in the income statement caption cost of service revenues.
We have historically not used collection agencies. An uncollectible amount is written off to the allowance account after reasonable collection efforts have been exhausted. We calculate our DSO by taking the accounts receivable outstanding, net of the allowance for doubtful accounts, divided by the net service revenues for the last quarter, multiplied by the number of days in that quarter.
We have historically not used collection agencies. An uncollectible amount is written off to the allowance account after reasonable collection efforts have been exhausted. We calculate our DSO by taking the accounts receivable outstanding, net of the allowance for credit losses, divided by the net service revenues for the last quarter, multiplied by the number of days in that quarter.
Changes in Reimbursement Rates Illinois On November 26, 2019, the City of Chicago voted to approve additional increases in the Chicago minimum wage to $14 per hour beginning July 1, 2020 and to $15 per hour beginning July 1, 2021.
Changes in Illinois Reimbursement On November 26, 2019, the City of Chicago voted to approve increases in the Chicago minimum wage to $14 per hour beginning July 1, 2020 and to $15 per hour beginning July 1, 2021.
Our significant accounting policies are described in Note 1 to the Notes to Consolidated Financial Statements. An accounting policy is deemed to be critical if it involves a significant level of estimation uncertainty and has had or is reasonably likely to have a 48 Table of Contents material impact on our financial condition or results of operations.
Our significant accounting policies are described in Note 1 to the Notes to Consolidated Financial Statements. An accounting policy is deemed to be critical if it involves a significant level of estimation uncertainty and has had or is reasonably likely to have a material impact on our financial condition or results of operations.
Managed care revenues accounted for 36.0%, 37.2% and 38.6% of our revenue during the years ended December 31, 2022, 2021, and 2020 respectively. A summary of certain consolidated financial and statistical data results for 2022, 2021 and 2020 are provided in the table below.
Managed care revenues accounted for 36.6%, 36.0% and 37.2% of our revenue during the years ended December 31, 2023, 2022, and 2021 respectively. A summary of certain consolidated financial and statistical data results for 2023, 2022 and 2021 are provided in the table below.
The sequestration adjustment resumed with a 1% reduction beginning April 1, 2022, and a 2% reduction beginning July 1, 2022. These sequestration cuts have been extended through 2032. In our hospice segment, Medicare sequester relief resulted in an increase in net service revenues of $1.4 million and $2.9 million for the years ended December 31, 2022 and 2021, respectively.
The sequestration adjustment resumed with a 1% reduction beginning April 1, 2022, and a 2% reduction beginning July 1, 2022. These sequestration cuts have been extended through April 2032. In our hospice segment, Medicare sequester relief resulted in an increase in net service revenues of $0.0 million and $1.4 million for the years ended December 31, 2023 and 2022, respectively.
Our corporate and support center expenses include costs for accounting, information systems, human resources, billing and collections, contracting, marketing and executive leadership. These expenses consist of compensation, including stock-based compensation, payroll taxes, employee benefits, legal, accounting and other professional fees, travel, general insurance, rents, provision for doubtful accounts and related facility costs.
Our corporate and support center expenses include costs for accounting, information systems, human resources, billing and collections, contracting, marketing and executive leadership. These expenses consist of compensation, including stock-based compensation, payroll taxes, employee benefits, legal, accounting and other professional fees, travel, general insurance, rents, provision for credit losses and related facility costs.
These measures highlight the performance of existing stores, while excluding the impact of acquisitions, new store openings and closures. * Management deems these metrics to be key performance indicators. Management uses these metrics to monitor our performance, both in our existing operations and acquisitions.
These measures highlight the performance of existing stores, while excluding the impact of acquisitions, new store openings and closures. 46 Table of Contents * Management deems these metrics to be key performance indicators. Management uses these metrics to monitor our performance, both in our existing operations and acquisitions.
We believe that Adjusted EBITDA allows management, investors and others to evaluate and compare our core operating results, including return on capital and operating efficiencies, from period to period, by removing the impact of our capital structure (interest expense), asset base (amortization and depreciation), tax consequences, stock-based compensation expense and other identified adjustments. • We believe that Adjusted EBITDA is a measure widely used by securities analysts, investors and others to evaluate the financial performance of other public companies. • We recorded stock-based compensation expense of $10.6 million, $9.4 million and $6.0 million for the years ended December 31, 2022, 2021 and 2020, respectively.
We believe that Adjusted EBITDA allows management, investors and others to evaluate and compare our core operating results, including return on capital and operating efficiencies, from period to period, by removing the impact of our capital structure (interest expense), asset base (amortization and depreciation), tax consequences, stock-based compensation expense and other identified adjustments. • We believe that Adjusted EBITDA is a measure widely used by securities analysts, investors and others to evaluate the financial performance of other public companies. 47 Table of Contents • We recorded stock-based compensation expense of $10.3 million, $10.6 million and $9.4 million for the years ended December 31, 2023, 2022 and 2021, respectively.
For the years ended December 31, 2022, 2021 and 2020, we performed the quantitative analysis to evaluate whether an impairment occurred.
For the years ended December 31, 2023, 2022 and 2021, we performed the quantitative analysis to evaluate whether an impairment occurred.
In our home health segment, Medicare sequester relief resulted in an increase in net service revenues of $0.3 million and $0.5 million, for the years ended December 31, 2022 and 2021, respectively. However, the ARPA increases the federal budget deficit in a manner that triggers an additional statutorily mandated sequestration under the PAYGO Act.
In our home health segment, Medicare sequester relief resulted in an increase in net service revenues of $0.0 million and $0.3 million, for the years ended December 31, 2023 and 2022, respectively. However, the ARPA increased the federal budget deficit in a manner that triggers an additional statutorily mandated sequestration under the PAYGO Act.
Some of these limitations include: • Adjusted EBITDA does not reflect our cash expenditures or future requirements for capital expenditures or other contractual commitments; • Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs; • Adjusted EBITDA does not reflect interest expense or interest income; • Adjusted EBITDA does not reflect cash requirements for income taxes; • although depreciation and amortization are non-cash charges, the assets being depreciated or amortized will often have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for these replacements; • Adjusted EBITDA does not reflect any acquisition and de novo expenses; • Adjusted EBITDA does not reflect any stock-based compensation; • Adjusted EBITDA does not reflect any restructure expense and other related costs; • Adjusted EBITDA does not reflect any net COVID-19 expense arising from the pandemic from the second quarter of 2020 to the first quarter of 2021; • Adjusted EBITDA does not reflect any gains or losses on the sale of assets; • Adjusted EBITDA does not reflect any secondary offering costs; and • other companies in our industry may calculate Adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure.
Some of these limitations include: • Adjusted EBITDA does not reflect our cash expenditures or future requirements for capital expenditures or other contractual commitments; • Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs; • Adjusted EBITDA does not reflect interest expense or interest income; • Adjusted EBITDA does not reflect cash requirements for income taxes; • although depreciation and amortization are non-cash charges, the assets being depreciated or amortized will often have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for these replacements; • Adjusted EBITDA does not reflect any acquisition expenses; • Adjusted EBITDA does not reflect any stock-based compensation; • Adjusted EBITDA does not reflect any restructure expense and other non-recurring costs; • Adjusted EBITDA does not reflect any net COVID-19 expense arising from the pandemic from the second quarter of 2020 to the first quarter of 2021; and • other companies in our industry may calculate Adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure.
The Company bases its fair value estimates on assumptions management believes to be reasonable but which are unpredictable and inherently uncertain. Actual future results may differ from those estimates. As of December 31, 2022 and 2021, intangibles, net of accumulated amortization, was $72.2 million and $64.3 million, respectively, included in our Consolidated Balance Sheets.
The Company bases its fair value estimates on assumptions management believes to be reasonable but which are unpredictable and inherently uncertain. Actual future results may differ from those estimates. As of December 31, 2023 and 2022, intangibles, net of accumulated amortization, was $92.0 million and $72.2 million, respectively, included in our Consolidated Balance Sheets.
Cash from operations could also be affected by various risks and uncertainties, including, but not limited to the effects of risks detailed in Part I, Item 1A—”Risk Factors” Debt As of December 31, 2022, the Company had outstanding debt on our revolving loan under our credit facility of $134.9 million, payable on July 30, 2026.
Cash from operations could also be affected by various risks and uncertainties, including, but not limited to the effects of risks detailed in Part I, Item 1A—”Risk Factors” Debt As of December 31, 2023, the Company had outstanding debt on our revolving loan under our credit facility of $126.4 million, payable on July 30, 2026.
The Company estimates the fair value of non-competition agreements based on a method of analyzing the factors to compete and factors not to compete, which involves estimating historical financial data, forecasted financial statements, growth rates, tax amortization benefit, discount rate, review of factors to compete and factors not to compete as well as an assessment of the probability of successful competition for each non-competition agreement. 49 Table of Contents As of December 31, 2022 and 2021, goodwill was $582.8 million and $504.4 million, respectively, included in our Consolidated Balance Sheets.
The Company estimates the fair value of non-competition agreements based on a method of analyzing the factors to compete and factors not to compete, which involves estimating historical financial data, forecasted financial statements, growth rates, tax amortization benefit, discount rate, review of factors to compete and factors not to compete as well as an assessment of the probability of successful competition for each non-competition agreement. 53 Table of Contents As of December 31, 2023 and 2022, goodwill was $663.0 million and $582.8 million, respectively, included in our Consolidated Balance Sheets.
A significant amount of our revenue is derived from one payor client, the Illinois Department on Aging, the largest payor program for our Illinois personal care operations, which accounted for 20.7% and 21.4% of our net service revenues for the years ended December 31, 2022 and 2021, respectively.
A significant amount of our revenue is derived from one payor client, the Illinois Department on Aging, the largest payor program for our Illinois personal care operations, which accounted for 20.9% and 20.7% of our net service revenues for the years ended December 31, 2023 and 2022, respectively.
The hospice segment’s general and administrative expenses primarily consist of administrative employee wages, taxes and benefit costs, rent, information technology and office expenses. General and administrative expenses, expressed as a percentage of net service revenues, was 24.7% and 22.7% for the years ended December 31, 2022 and 2021, respectively.
The hospice segment’s general and administrative expenses primarily consist of administrative employee wages, taxes and benefit costs, rent, information technology and office expenses. General and administrative expenses, expressed as a percentage of net service revenues, was 25.1% and 24.7% for the years ended December 31, 2023 and 2022, respectively.
The calculated interest payable amounts use actual rates available through January 2023 and assumes the January rates of 6.13%, respectively, for all future interest payable on the revolving loans. See Note 7, Long-Term Debt, to the Notes to Consolidated Financial Statements for additional details of our long-term debt.
The calculated interest payable amounts use actual rates available through January 2024 and assumes the January rates of 7.21%, respectively, for all future interest payable on the revolving loans. See Note 7, Long-Term Debt, to the Notes to Consolidated Financial Statements for additional details of our long-term debt.
Recent Accounting Pronouncements Refer to Note 1 to the Notes to Consolidated Financial Statements for further discussion. 50 Table of Contents Standby letters of credit We had outstanding letters of credit of $8.2 million at December 31, 2022. These standby letters of credit benefit our third-party insurer for our high deductible workers’ compensation insurance program.
Recent Accounting Pronouncements Refer to Note 1 to the Notes to Consolidated Financial Statements for further discussion. 54 Table of Contents Standby Letters of Credit We had outstanding letters of credit of $8.0 million at December 31, 2023. These standby letters of credit benefit our third-party insurer for our high deductible workers’ compensation insurance program.
Revenues per billable hour is revenue, attributed to billable hours, divided by billable hours. (3) Same store growth reflects the change in year-over-year revenue for the same store base. We define the same store base to include those stores open for at least 52 full weeks.
Revenues per billable hour is revenue, attributed to billable hours, divided by billable hours. 43 Table of Contents (3) 2023 same store growth reflects the change in year-over-year revenue for the same store base. We define the same store base to include those stores open for at least 52 full weeks.
For the fiscal year 2022 impairment tests, the fair value of the reporting units exceeded their respective carrying values (commonly referred to as “headroom”) by at least 100% in the personal care reporting unit, 75% in the home health reporting unit, and 67% in the hospice reporting unit.
For the fiscal year 2023 impairment tests, the fair value of the reporting units exceeded their respective carrying values (commonly referred to as “headroom”) by at least 100% in the personal care and in the home health reporting unit, and 20% in the hospice reporting unit.
One payor client, the Illinois Department on Aging, accounted for 20.7% and 21.4% of net service revenues for the years ended December 31, 2022 and 2021, respectively. Net service revenues from state, local and other governmental programs accounted for 49.3% and 49.3% of net service revenues for the years ended December 31, 2022 and 2021, respectively.
One payor client, the Illinois Department on Aging, accounted for 20.9% and 20.7% of net service revenues for the years ended December 31, 2023 and 2022, respectively. Net service revenues from state, local and other governmental programs accounted for 50.4% and 49.3% of net service revenues for the years ended December 31, 2023 and 2022, respectively.
Our DSOs were 45 days and 54 days at December 31, 2022 and 2021, respectively. The DSOs for our largest payor, the Illinois Department on Aging, at December 31, 2022 and 2021 were 42 days and 43 days, respectively. Off-Balance Sheet Arrangements As of December 31, 2022, we did not have any off-balance sheet guarantees or arrangements with unconsolidated entities.
Our DSOs were 39 days and 45 days at December 31, 2023 and 2022, respectively. The DSOs for our largest payor, the Illinois Department on Aging, at December 31, 2023 and 2022 were 50 days and 42 days, respectively. Off-Balance Sheet Arrangements As of December 31, 2023, we did not have any off-balance sheet guarantees or arrangements with unconsolidated entities.
Gross profit, expressed as a percentage of net service revenues, was 50.0% and 50.6% for the years ended December 31, 2022 and 2021, respectively. The decrease in gross profit as a percentage of net service revenues was mainly attributed to higher direct employee wages, taxes and benefit costs.
Gross profit, expressed as a percentage of net service revenues, was 46.8% and 50.0% for the years ended December 31, 2023 and 2022, respectively. The decrease in gross profit as a percentage of net service revenues was mainly attributed to higher direct employee wages, taxes and benefit costs of $6.4 million.
The personal care segment derives a significant amount of net service revenues from operations in Illinois, which represented 51.1% and 47.9% of our net service revenues for the years ended December 31, 2022 and 2021, respectively.
The personal care segment derives a significant amount of net service revenues from operations in Illinois, which represented 51.7% and 51.1% of our net service revenues for the years ended December 31, 2023 and 2022, respectively.
Managed care organizations accounted for 46.3% and 45.5% of net service revenues for the years ended December 31, 2022 and 2021, respectively, with commercial insurance, private pay and other payors accounting for the remainder of net service revenues.
Managed care organizations accounted for 46.2% and 46.3% of net service revenues for the years ended December 31, 2023 and 2022, respectively, with commercial insurance, private pay and other payors accounting for the remainder of net service revenues.
The open receivable balance from the Illinois Department on Aging, the largest payor program for the Company’s Illinois personal care operation, increased by $0.5 million from $22.0 million as of December 31, 2021 to $22.5 million as of December 31, 2022. Our collection procedures include review of account aging and direct contact with our payors.
The open receivable balance from the Illinois Department on Aging, the largest payor program for the Company’s Illinois personal care operation, increased by $7.3 million from $22.5 million as of December 31, 2022 to $29.8 million as of December 31, 2023. Our collection procedures include review of account aging and direct contact with our payors.
After giving effect to the amounts drawn on our credit facility, approximately $8.2 million of outstanding letters of credit and borrowing limits based on an advance multiple of Adjusted EBITDA (as defined in the Credit Agreement), we had $380.2 million of capacity and $237.2 million available for borrowing under our credit facility.
After giving effect to the amounts drawn on our credit facility, approximately $8.0 million of outstanding letters of credit and borrowing limits based on an advance multiple of Adjusted EBITDA (as defined in the Credit Agreement), we had $470.0 million of capacity and $335.6 million available for borrowing under our credit facility.
Net service revenues increased by $49.5 million for the year ended December 31, 2022 compared to the year ended December 31, 2021 primarily due to increases in average daily census and revenue per patient day, mainly attributed to the organic growth and the acquisitions of the operations of JourneyCare on February 1, 2022 and Armada on August 1, 2021.
Net service revenues increased by $5.4 million for the year ended December 31, 2023 compared to the year ended December 31, 2022 primarily due to increases in average daily census and revenue per patient day, mainly attributed to the organic growth and the acquisitions of the operations of Tennessee Quality Care on August 1, 2023 and JourneyCare on February 1, 2022.
Liquidity and Capital Resources Overview Our primary sources of liquidity are cash on hand and cash from operations and borrowings under our credit facility. At December 31, 2022 and 2021, we had cash balances of $80.0 million and $168.9 million, respectively.
Liquidity and Capital Resources Overview Our primary sources of liquidity are cash on hand and cash from operations and borrowings under our credit facility. At December 31, 2023 and 2022, we had cash balances of $64.8 million and $80.0 million, respectively.
Leases The Company has lease arrangements for local branches, our corporate headquarters and certain equipment. As of December 31, 2022, the Company had fixed lease payment obligations aggregating to $52.0 million, with $12.5 million payable within 12 months. See Note 2, Leases, to the Notes to Consolidated Financial Statements for additional details of our leases.
Leases The Company has lease arrangements for local branches, our corporate headquarters and certain equipment. As of December 31, 2023, the Company had fixed lease payment obligations aggregating to $61.2 million, with $13.8 million payable within 12 months. See Note 2, Leases, to the Notes to Consolidated Financial Statements for additional details of our leases.
The program applies to home health agencies in Illinois, Ohio, North Carolina, Florida and Texas and may expand, in the future, into additional states. Providers in states subject to the Review Choice Demonstration may initially select from the following claims review and approval processes: pre-claim review, post-payment review or a minimal post-payment review with a 25% payment reduction.
The program currently applies to home health agencies in certain states, including Illinois, Ohio, Oklahoma, North Carolina, Florida and Texas. Providers in states subject to the Review Choice Demonstration may initially select from the following claims review and approval processes: pre-claim review, post-payment review or a minimal post-payment review with a 25% payment reduction.
Net service revenues increased by 3.0% for the year ended December 31, 2022 compared to the year ended December 31, 2021 primarily as a result of an increase in revenues per billable hour of 5.3%, mainly attributed to rate increases discussed above.
Net service revenues increased by 12.5% for the year ended December 31, 2023 compared to the year ended December 31, 2022 primarily as a result of an increase in revenues per billable hour of 8.2%, mainly attributed to rate increases discussed above.
We derive a significant amount of our net service revenues in Illinois, which represented 43.8% and 38.2% of our net service revenues for the years ended December 31, 2022 and 2021, respectively.
We derive a significant amount of our net service revenues in Illinois, which represented 44.5% and 43.8% of our net service revenues for the years ended December 31, 2023 and 2022, respectively.
Interest payments associated with the debt aggregate to $34.4 million, with $9.9 million payable within 12 months. As described in Note 7 to the Notes to Consolidated Financial Statements, interest on borrowings under the revolving loan are variable.
Interest payments associated with the debt aggregate to $27.1 million, with $10.8 million payable within 12 months. As described in Note 7 to the Notes to Consolidated Financial Statements, interest on borrowings under the revolving loan are variable.
Current Macroeconomic Conditions and the COVID-19 Pandemic Economic conditions in the United States continue to be challenging in various respects, including as a result of the COVID-19 pandemic. For example, the United States economy continues to experience significant inflationary pressures, elevated interest rates, challenging labor market conditions, and disruptions to supply networks.
Current Macroeconomic Conditions and COVID-19 Relief Funding Economic conditions in the United States continue to be challenging in various respects. For example, the United States economy continues to experience significant inflationary pressures, elevated interest rates, challenging labor market conditions, and disruptions to supply networks.
For calendar year 2023, CMS estimates that Medicare payments to home health agencies will increase by 0.7%.
For calendar year 2024, CMS estimates that Medicare payments to home health agencies will increase by 0.8%.
By comparing our Adjusted EBITDA in different periods, our investors can evaluate our operating results without stock-based compensation expense, which is a non-cash expense which we believe is not a key measure of our operations. 43 Table of Contents In addition, management has chosen to use Adjusted EBITDA as a performance measure because we believe that the amount of non-cash expenses, such as depreciation, amortization and stock-based compensation expense, may not directly correlate to the underlying performance of our business operations, and because such expenses can vary significantly from period to period as a result of new acquisitions, full amortization of previously acquired tangible and intangible assets or the timing of new stock-based awards, as the case may be.
In addition, management has chosen to use Adjusted EBITDA as a performance measure because we believe that the amount of non-cash expenses, such as depreciation, amortization and stock-based compensation expense, may not directly correlate to the underlying performance of our business operations, and because such expenses can vary significantly from period to period as a result of new acquisitions, full amortization of previously acquired tangible and intangible assets or the timing of new stock-based awards, as the case may be.
Our financing activities for the year ended December 31, 2022 included borrowings of $47.0 million on the revolver portion of our credit facility to fund two acquisitions and the payment of $137.0 million of our revolving loans.
Our financing activities for the year ended December 31, 2023 included borrowings of $110.0 million on the revolver portion of our credit facility to fund two acquisitions and the payment of $118.5 million of our revolving loans.
Our effective income tax rate was 23.5% and 25.2% for the years ended December 31, 2022 and 2021, respectively. The difference between our federal statutory and effective income tax rates is principally due to the inclusion of state taxes and non-deductible compensation, offset by an excess tax benefit and the use of federal employment tax credits.
Our effective income tax rate was 23.1% and 23.5% for the years ended December 31, 2023 and 2022, respectively. The difference between our federal statutory and effective income tax rates was principally due to the inclusion of state taxes, non-deductible compensation, excess tax expense/benefit and the use of federal employment tax credits.
As required under the statute, CMS and the HHS Office of the Assistant Secretary for Planning and Evaluation issued a report presenting a prototype for a unified post-acute care payment model in July 2022.
As required under the statute, CMS and the HHS Office of the Assistant Secretary for Planning and Evaluation issued a report in July 2022 presenting a prototype for a unified post-acute care payment model, and MedPAC submitted a report to Congress in June 2023 evaluating a prototype design.
The increase in general and administrative expenses was primarily due to acquisitions that resulted in a $11.2 million increase in administrative employee wages, taxes and benefit costs and a $2.4 million increase in rent expenses for the year ended December 31, 2022.
The increase in general and administrative expenses was primarily due to acquisitions that resulted in a $2.4 million increase in administrative employee wages for the year ended December 31, 2023.
We believe that consideration of Adjusted EBITDA, together with a careful review of our GAAP financial measures, is the most informed method of analyzing our Company. 44 Table of Contents The following table sets forth a reconciliation of net income, the most directly comparable GAAP measure, to Adjusted EBITDA: For the Years Ended December 31, 2022 2021 2020 (Amounts In Thousands) Reconciliation of net income to Adjusted EBITDA (a): Net income $ 46,025 $ 45,126 $ 33,133 Interest expense, net 8,566 5,538 2,565 Income tax expense 14,146 15,272 8,809 Depreciation and amortization 14,060 14,494 12,051 Acquisition and de novo expenses 7,657 7,306 6,956 Stock-based compensation expense 10,625 9,434 6,005 Restructure expense and other related costs 461 1,057 5,614 COVID-19 expense, net (b) — (591 ) 1,480 (Gain) loss on sale of assets (60 ) 25 294 Adjusted EBITDA* $ 101,480 $ 97,661 $ 76,907 (a) The selected historical Consolidated Statements of Income data for the fiscal years ended December 31, 2022, 2021 and 2020, were derived from our audited Consolidated Financial Statements.
We believe that consideration of Adjusted EBITDA, together with a careful review of our GAAP financial measures, is the most informed method of analyzing our Company. 48 Table of Contents The following table sets forth a reconciliation of net income, the most directly comparable GAAP measure, to Adjusted EBITDA: For the Years Ended December 31, 2023 2022 2021 (Amounts In Thousands) Reconciliation of net income to Adjusted EBITDA (a): Net income $ 62,516 $ 46,025 $ 45,126 Interest expense, net 9,630 8,566 5,538 Impact of retroactive New York rate increase (868 ) — — Income tax expense 18,810 14,146 15,272 Depreciation and amortization 14,126 14,060 14,494 Acquisition expenses 6,220 7,657 7,306 Stock-based compensation expense 10,319 10,625 9,434 Restructure expense and other related costs 269 461 1,057 COVID-19 expense, net (b) — — (591 ) (Gain) loss on sale of assets (2 ) (60 ) 25 Adjusted EBITDA* $ 121,020 $ 101,480 $ 97,661 (a) The selected historical Consolidated Statements of Income data for the fiscal years ended December 31, 2023, 2022 and 2021, were derived from our audited Consolidated Financial Statements.
The increase in our hospice segment revenue was primarily due to an increase in average daily census and revenue per patient day, mainly attributed to the acquisition of JourneyCare on February 1, 2022.
The increase in our hospice segment revenue was primarily due to an increase in average daily census and revenue per patient day, mainly attributed to the acquisition of Tennessee Quality Care on August 1, 2023.
Many of these metrics serve as the basis of reported revenues and assessment of these, provide direct correlation to the results of operations from period to period and facilitate comparison with the results of our peers.
Management uses these metrics to monitor our performance, both in our existing operations and acquisitions. Many of these metrics serve as the basis of reported revenues and assessment of these, provide direct correlation to the results of operations from period to period and facilitate comparison with the results of our peers.
The IMPACT Act requires HHS, together with the Medicare Payment Advisory Commission, to work toward a unified payment system for post-acute care services provided by home health agencies, inpatient rehabilitation facilities, skilled nursing facilities, and long-term care hospitals.
The IMPACT Act required HHS, together with MedPAC, to consider and propose a unified payment system for post-acute care services provided by home health agencies, inpatient rehabilitation facilities, skilled nursing facilities, and long-term care hospitals.
States must use the monies attributable to this matching fund increase to supplement, not supplant, their level of spending for the implementation of activities enhanced under the Medicaid HCBS in effect as of April 1, 2021. States will be permitted to use the state funds equivalent to the additional federal funds through March 31, 2025.
States must use the monies attributable to this matching fund increase to supplement, not supplant, their level of state spending for the implementation of activities enhanced under the Medicaid HCBS in effect as of April 1, 2021.
Net service revenue increased due to a 5.3% increase in revenues per billable hour for the year ended December 31, 2022 in our personal care segment compared to 2021.
Net service revenue increased due to a 8.2% increase in revenues per billable hour and a 4.2% increase in billable hours for the year ended December 31, 2023 in our personal care segment compared to 2022.
As of December 31, 2022, the deferred portion of ARPA funding was $12.9 million, which is included within Government stimulus advances on the Company’s Consolidated Balance Sheets.
The deferred portion of ARPA funding was $5.8 million and $12.9 million for the years ended December 31, 2023 and 2022, respectively, which is included within Government stimulus advances on the Company’s Consolidated Balance Sheets.
This is based on a home health payment update percentage of 4.0, which reflects a 4.1% market basket update reduced by a productivity adjustment of negative 0.1 percentage points, and an estimated 3.5% decrease associated with the transition to the PDGM that is intended to help achieve budget-neutrality on a prospective basis, among other changes.
This is based on a home health payment update percentage of 3.0, which reflects a 3.3% market basket update reduced by a productivity adjustment of negative 0.3 percentage points, and an estimated 2.6% decrease associated with the transition to the PDGM, among other changes.
In each subsequent year, the City is required to raise the wage based on increases in the Consumer Price Index (“CPI”) subject to a cap and other requirements. On July 1, 2022, the rate was adjusted to $15.40 based on the increase in the CPI.
In each subsequent year, the City is required to raise the wage based on the lower of the increases in the Consumer Price Index (“CPI”) or 2.5% subject to a cap and other requirements. On July 1, 2023, the rate was adjusted to $15.80.
Net service revenue increased by $20.7 million, $49.5 million and $16.4 million in our personal care, hospice and home health segments, respectively, for the year ended December 31, 2022, compared to 2021.
Net service revenue increased by $88.2 million, $5.4 million and $13.9 million in our personal care, hospice and home health segments, respectively, for the year ended December 31, 2023, compared to 2022.
The JourneyCare acquisition was funded with a combination of a $35.0 million draw on the Company’s revolving credit facility and available cash. With the JourneyCare acquisition, the Company expanded its hospice services in the state of Illinois.
The JourneyCare acquisition was funded with a combination of a $35.0 million draw on the Company’s revolving credit facility and available cash.

… 117 more changes not shown on this page.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

3 edited+0 added−0 removed0 unchanged
Biggest changeIf the variable rates on this debt were 100 basis points higher than the rate applicable to the borrowing during the year ended December 31, 2022, our net income would have decreased by $1.6 million, or $0.10 per diluted share. We do not currently have any derivative or hedging arrangements, or other known exposures, to changes in interest rates.
Biggest changeIf the variable rates on this debt were 100 basis points higher than the rate applicable to the borrowing during the year ended December 31, 2023, our net income would have decreased by $1.0 million, or $0.06 per diluted share. We do not currently have any derivative or hedging arrangements, or other known exposures, to changes in interest rates.
ITEM 7A. QUANTITATIVE AND QUALITA TIVE DISCLOSURES ABOUT MARKET RISK We are exposed to market risk associated with changes in interest rates on our variable rate long-term debt. As of December 31, 2022, we had outstanding borrowings of approximately $134.9 million on our credit facility, all of which was subject to variable interest rates.
ITEM 7A. QUANTITATIVE AND QUALITA TIVE DISCLOSURES ABOUT MARKET RISK We are exposed to market risk associated with changes in interest rates on our variable rate long-term debt. As of December 31, 2023, we had outstanding borrowings of approximately $126.4 million on our credit facility, all of which was subject to variable interest rates.
As of December 31, 2021, we had outstanding borrowings of approximately $224.9 million on our credit facility, all of which was subject to variable interest rates.
As of December 31, 2022, we had outstanding borrowings of approximately $134.9 million on our credit facility, all of which was subject to variable interest rates.

Other ADUS 10-K year-over-year comparisons