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What changed in Addus HomeCare Corp's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Addus HomeCare Corp's 2023 and 2024 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 2024 report.

+461 added−452 removedSource: 10-K (2025-02-25) vs 10-K (2024-02-27)

Top changes in Addus HomeCare Corp's 2024 10-K

461 paragraphs added · 452 removed · 329 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

84 edited+50 added−23 removed92 unchanged
Biggest changeCurrently, personal care services and other HCBS are largely reimbursed on a fee-for-service basis. Some states have received permission from CMS to provide HCBS under waivers of traditional Medicaid requirements. In an effort to control escalating Medicaid costs, states are increasingly requiring Medicaid beneficiaries to enroll in managed care plans for better coordination of HCBS and healthcare services.
Biggest changeMany states are moving the administration of their Medicaid hospice and home healthcare programs to managed care organizations in order to effectively manage costs by making spending more predictable for states. Personal care services and other HCBS are largely reimbursed on a fee-for-service basis.
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.
Without our services, many of our consumers would be at increased risk of hospitalization or 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.
In addition, differences among state laws may impede our ability to expand into certain markets. If we fail to comply with applicable laws and regulations, we could suffer administrative civil or criminal penalties, including substantial fines, the loss of our licenses to operate and our ability to participate in federal or state programs.
In addition, differences among state laws may impede our ability to expand into certain markets. If we fail to comply with applicable laws and regulations, we could suffer administrative civil or criminal penalties, including substantial fines, the loss of our licenses to operate and the loss of our ability to participate in federal or state programs.
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.
In particular, the demand for personal care services is growing from managed care delivery models, including Medicaid Long-Term Services and Supports 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.
States typically cover intermittent home health services for Medicaid beneficiaries, but cover continuous services for children and young adults with complicated medical conditions and home and community-based services for seniors and people with disabilities. Payment models vary by state. Currently, home health services are often reimbursed by state Medicaid programs on a fee-for-service basis.
States typically cover intermittent home health services for Medicaid beneficiaries, but cover continuous services for children and young adults with complicated medical conditions and home and community-based services for seniors and people with disabilities. Payment models vary by state. Home health services are often reimbursed by state Medicaid programs on a fee-for-service basis.
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.
In addition, 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.
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.
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.
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.
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. 14 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.
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.
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 these organizations. 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.
By leveraging our People Development and Experience Department, we aspire to create a workplace that values and listens to its employees, provides ample opportunities for their skills development, and effectively recognizes their achievements throughout the employee life cycle. Addus prioritizes a robust listening strategy that allows for regular opportunities for feedback throughout an employee’s tenure.
By leveraging our People Development and Experience Department, we aspire to create a workplace that values and listens to its employees, provides ample opportunities for their skills development, and effectively recognizes their achievements throughout the employee life cycle. Addus prioritizes a robust listening strategy that offers regular feedback opportunities throughout an employee’s tenure.
The Illinois Department on Aging coordinates programs and community-based services intended to improve quality of life and preserve the independence of older individuals. The Illinois Department on Aging is funded by Medicaid, Illinois’s Commitment to Human Services Fund, and general revenue funds of the state of Illinois, and also receives funding available under the federal Older Americans Act (“OAA”).
The Illinois Department on Aging coordinates programs and community-based services intended to improve quality of life and preserve the independence of older individuals. The Illinois Department on Aging is funded by Medicaid, Illinois’ Commitment to Human Services Fund, and general revenue funds of the state of Illinois, and also receives funding available under the federal Older Americans Act (“OAA”).
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.
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, 2024.
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.
As of December 31, 2024, 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.
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.
New laws and regulations, or changes to 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.
The federal, state and local programs under which the agencies operate are subject to legislative and budgetary restrictions, changes and other risks that can influence reimbursement rates. Managed care organizations that operate as an extension of government payors are subject to similar economic pressures.
The federal, state and local programs under which the agencies operate are subject to legislative, administrative and budgetary restrictions, changes and other risks that can influence reimbursement rates. Managed care organizations that effectively operate as an extension of government payors are subject to similar economic pressures.
Recruitment strategies, including company-wide hiring events, local partnerships with colleges and nursing schools, sponsored clinical rotations, and student scholarships have better positioned the company to attract top talent. 11 Table of Contents Technology We currently utilize multiple applications to support our various lines of business and locations for patient accounting.
Recruitment strategies, including company-wide hiring events, local partnerships with colleges and nursing schools, sponsored clinical rotations, and student scholarships have better positioned the company to attract top talent. Technology We currently utilize multiple applications to support our various lines of business and locations for patient accounting.
For instance, the Illinois Insurance Claims Fraud Prevention Act penalizes the knowing offer or payment of remuneration to induce a person to procure client or patients under a contract of insurance, including commercial insurance plans.
For instance, the Illinois Insurance Claims Fraud Prevention Act penalizes the knowing offer or payment of remuneration to induce a person to procure clients or patients under a contract of insurance, including commercial insurance plans.
Consumers are identified by “care coordinators” contracted independently with the Illinois Department on Aging. Once a consumer has been evaluated and determined to be eligible for a program, an assigned care coordinator refers the consumer to a list of authorized providers, from which the consumer selects the provider.
Consumers are identified by “care coordinators” contracted independently with local organizations affiliated with the Illinois Department on Aging. Once a consumer has been evaluated and determined to be eligible for a program, an assigned care coordinator refers the consumer to a list of authorized providers, from which the consumer selects the provider.
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.
Providers must dedicate substantial resources toward continuing compliance with all applicable laws and regulations, and significant expenditures may be necessary to offer new services or to expand into new markets.
We currently have relationships and agreements with the Veterans Health Administration to provide personal care services in several states, principally in New Mexico, Illinois and California. Other Other sources of funding are available to support personal care, hospice and home health services in different states and localities.
We currently have relationships and agreements with the Veterans Health Administration to provide personal care services in several states, principally in New Mexico, Illinois and California. 9 Table of Contents Other Other sources of funding are available to support personal care, hospice and home health services in different states and localities.
We believe that our personal care program and our technology make us well-suited to partner with managed care organizations to address the needs of the “dual eligible” population, and we believe that our ability to identify changes in our consumers’ health and condition before acute intervention is required will lower the overall cost of care.
We believe that our personal care program and our technology make us well-suited to partner with managed care organizations to address the needs of the dual-eligible population, and we believe that our ability to identify changes in our consumers’ health and condition before acute intervention is required will lower the overall cost of care.
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.
Under the Home Health Value-Based Purchasing (“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.
For financial management, we utilize Oracle’s Planning Budgeting Cloud Service as our solution for budgeting, forecasting, and financial reporting and Oracle Fusion for the general ledger, accounts payable and fixed assets. Government Regulation Overview Our business is subject to extensive federal, state and local regulation.
For financial management, we utilize Oracle’s Planning Budgeting Cloud Service as our solution for budgeting, forecasting, and financial reporting and Oracle Fusion for the general ledger, accounts payable and fixed assets. 12 Table of Contents Government Regulation Overview Our business is subject to extensive federal, state and local regulation.
Some states also require a provider to obtain a certificate of need or permit of approval (“CON”) before establishing, constructing, acquiring or expanding certain health services, operations or facilities or making certain capital expenditures. These requirements are intended to avoid unnecessary duplication of services.
Some states also require a provider to obtain a CON or permit of approval before establishing, constructing, acquiring or expanding certain health services, operations or facilities or making certain capital expenditures. These requirements are intended to avoid unnecessary duplication of services.
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.
Market to Managed Care Organizations As a large-scale provider of home-based care, we market to and partner with managed care organizations, taking advantage of an industry shift from traditional fee-for-service Medicare and Medicaid toward managed care models that aim to better coordinate care, among other goals.
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.
The Illinois Department on Aging’s Community Care Program (“CCP”) provides adult day services, emergency home response, automated medication dispenser services, and in-home services, which include personal care services, to individuals who are age 60 and over and meet other eligibility requirements. Some of these services are provided through a Medicaid waiver granted by CMS.
At the core of our operations is a dedicated team of 5,528 full-time caregivers, clinical staff, and administrative employees. Complementing their efforts are 28,776 part-time caregivers and administrative employees. We offer flexibility in the form of adaptable work options, which may not be as readily available in other industries.
At the core of our operations is a dedicated team of 5,548 full-time caregivers, clinical staff, and administrative employees. Complementing their efforts are 43,517 part-time caregivers and administrative employees. We offer flexibility in the form of adaptable work options, which may not be as readily available in other industries.
We receive substantially all of our personal care consumers through third-party referrals, including state departments on aging, rehabilitation, mental health and children’s services, county departments of social services, managed care organizations, the Veterans Health Administration and city departments on aging.
We receive substantially all of our personal care consumers through third-party referrals, including state departments and local government agencies on aging, social services, rehabilitation, mental health and children’s services, managed care organizations and the Veterans Health Administration.
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.
Generally, family members of potential consumers are made aware of available in-home services or alternative living arrangements through state or local case management systems, which may be operated by governmental or private agencies.
Payment for Services We are reimbursed for substantially all of our services by federal, state and local government programs, such as Medicare and Medicaid state programs, managed care organizations, other state agencies and the Veterans Health Administration. In addition, we are reimbursed by commercial insurance and private pay consumers.
Payment for Services Substantially all of the reimbursement we receive for services we provide comes from federal, state and local government programs, such as Medicare, Medicaid and other state programs, managed care organizations and the Veterans Health Administration. In addition, we are reimbursed by commercial insurance and private pay consumers.
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.
Our consumers are predominantly “dual eligible,” meaning they are eligible to receive both Medicare and Medicaid benefits. As of December 31, 2024, we provided services in 23 states through approximately 258 offices. For the year ended December 31, 2024, we served approximately 105,000 discrete consumers.
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.
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 such as the operational requirements discussed in the next paragraph are increasing.
In our most recent annual employee engagement survey, our workforce scored work-life balance at an 80% satisfaction rating. Two corporate support centers house a total of 542 administrative and professional employees. Approximately 17,859 or 51.3% of our total employees are represented by labor unions. We maintain strong working relationships with these labor unions.
In our most recent annual employee engagement survey, our workforce scored work-life balance at an 80% satisfaction rating. We have over 600 administrative and professional employees at our two corporate support centers. Approximately 17,283 or 34.8% of our total employees are represented by labor unions. We maintain strong working relationships with these labor unions.
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.
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.
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.
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. Many states require providers to register with regulatory authorities or obtain licenses.
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.
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.
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.
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.
CMS uses the Patient-Driven Groupings Model (“PDGM”) as the case-mix classification model to place periods of care into payment categories, classifying patients based on clinical characteristics. An outlier adjustment may be paid for periods of care in which costs exceed a specific threshold amount. CMS updates home health payment rates annually using a market basket index.
The daily home health payment rate is adjusted for case-mix and area wage levels. CMS uses the Patient-Driven Groupings Model (“PDGM”) as the case-mix classification model to place periods of care into payment categories, classifying patients based on clinical characteristics. An outlier adjustment may be paid for periods of care in which costs exceed a specific threshold amount.
The Medicare-Medicaid Coordination Office (“MMCO”) was established within the Centers for Medicare & Medicaid Services (“CMS”) to improve services for consumers who are eligible for both Medicare and Medicaid, also known as “dual eligibles,” and improve coordination between the federal government and states to enhance access to quality services to which they are entitled.
The Medicare-Medicaid Coordination Office (“MMCO”) was established within the Centers for Medicare & Medicaid Services (“CMS”) to improve services for dual-eligible individuals and improve coordination between the federal government and states to enhance access to quality services to which they are entitled.
We establish new referral relationships with various managed care organizations that contract with the states to service the Medicaid programs. We have met with many contracted managed care organizations in markets we serve and believe we are building the relationships necessary to generate continued referrals of new clients.
We also focus on establishing new and maintaining existing referral relationships with various managed care organizations that contract with the states to service the Medicaid programs. We believe these relationships are necessary to generate continued referrals of new clients in markets we serve.
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.
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. Our consumers are predominantly “dual eligibles,” meaning they are eligible for both Medicare and Medicaid.
We target these agencies in our current markets and in geographical areas that we have identified as potential markets for expansion. We also seek to identify service needs or changes in the service delivery or reimbursement systems of governmental entities and attempt to work with and provide input to the responsible government personnel, provider associations and consumer advocacy groups.
We also seek to identify service needs or changes in the service delivery or reimbursement systems of governmental entities and attempt to work with and provide input to the responsible government personnel, provider associations and consumer advocacy groups.
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.
We believe, but cannot assure you, that our operations comply with the principles expressed by these agencies. 15 Table of Contents HIPAA and Other Privacy and Security, Data Exchange and AI 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.
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.
For the Years Ended December 31, 2024 2023 (Amounts in Thousands) Personal care $ 856,581 $ 794,718 Hospice 228,191 207,155 Home health 69,827 56,778 Total net service revenue by segment $ 1,154,599 $ 1,058,651 Net income $ 73,598 $ 62,516 Total assets $ 1,412,634 $ 1,024,426 Our services and operating model address a number of crucial needs across the healthcare continuum.
Rates are subject to adjustment based on statutory and regulatory changes, administrative rulings, government funding limitations and interpretations of policy by individual state agencies.
Reimbursement rates and methods vary by state and service type, but are typically based on an hourly or unit-of-service rate. Rates are subject to adjustment based on statutory and regulatory changes, administrative rulings, government funding limitations and interpretations of policy by individual state agencies.
For example, the CMS Innovation Center has supported testing of new models of care for “dual eligibles,” funding of home health providers that offer chronic care management services, and establishment of pilot programs that bundle acute care hospital services with physician services and post-acute care services, which may include home health services for certain patients.
For example, the CMS Innovation Center has established pilot programs that bundle acute care hospital services with physician services and post-acute care services, which may include home health services for certain patients.
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.
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.
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.
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.
Healthcare Reform The healthcare industry is subject to changing political, regulatory, and economic influences at the federal and state level, along with scientific and technological initiatives and innovations that may affect our business.
Developments in Healthcare Policy The healthcare industry is subject to changing political, regulatory, economic and other influences at the federal and state level, along with scientific and technological initiatives and innovations that may affect our business. Healthcare reform efforts at the federal and state levels have been aimed at reducing costs and government spending and increasing access to health insurance.
Employee Welfare As part of our commitment to providing high quality care and service to our clients and patients, while also promoting the health and well-being of our employees, Addus takes a multifaceted approach to employee wellness and safety.
Addus Ink is a semi-annual publication that highlights local stories and news from around the country that celebrate our mission and values. 11 Table of Contents Employee Welfare As part of our commitment to providing high quality care and service to our clients and patients, while also promoting the health and well-being of our employees, Addus takes a multifaceted approach to employee wellness and safety.
Additionally, Addus deploys ongoing learning opportunities throughout the employee life cycle via the Addus Learning Academy and clinical learning management systems. The Addus Learning Academy allows employees to access online resources needed to build and enhance the important skills related to their respective roles at Addus and to provide beneficial soft-skills training for personal growth.
The Addus Learning Academy allows employees to access online resources needed to build and enhance the important skills related to their respective roles at Addus and to provide beneficial soft-skills training for personal growth. Addus’ clinical learning management systems provide a catalog of continuing learning opportunities for patient-facing employees to improve their clinical skills and promote consistent, quality care.
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.
These cuts continue through the first eight months of federal fiscal year 2032. 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.
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.
Acquisitions completed in 2023 accounted for $18.8 million in net service revenues for the year ended December 31, 2023. Our active pipeline and strong financial position support additional acquisitions.
Clinical ladder initiatives focus on clinical certification advancement of existing employees. External recruitment has been bolstered by new investments in job search efforts, programmatic job advertising, and new recruitment technologies, most recently with the introduction of a new mobile-optimized Applicant Tracking System.
Clinical ladder initiatives focus on clinical certification advancement of existing employees. External recruitment has been bolstered by new investments in job search efforts, programmatic job advertising, and new recruitment technologies, most recently with the introduction of an artificial intelligence (“AI”) powered conversation and scheduling assistant designed to engage in real-time with potential job candidates.
For hospice services, the state pays an amount for each day that a beneficiary is under the care of a hospice provider based on the type and intensity of services furnished. Many states are moving the administration of their Medicaid hospice and home healthcare programs to managed care organizations in order to effectively manage costs.
For hospice services, the state pays an amount for each day that a beneficiary is under the care of a hospice provider based on the type and intensity of services furnished.
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.
From time to time, various federal and state agencies, such as HHS, issue guidance that identifies practices and provider types that may be subject to heightened scrutiny, as well as practices that may violate fraud and abuse laws.
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.
CMS updates home health payment rates annually using a market basket index. Home health agencies that do not submit required quality data are subject to a 2 percentage point reduction to the market basket update.
States continue to implement managed care programs for Medicaid enrollees, and, as a result, managed care organizations have been increasingly responsible for the healthcare needs and the related healthcare costs of our consumers. Managed care organizations have an economic incentive to better manage the healthcare expenditures of their members, lower costs and improve outcomes.
Managed care organizations have an economic incentive to better manage the healthcare expenditures of their members, lower costs and improve outcomes.
The CMS Innovation Center tests innovative payment and service delivery systems to reduce Medicare and Medicaid program expenditures while maintaining or enhancing quality.
Payment and delivery reform initiatives also include value-based purchasing models and related initiatives that incentivize reporting of and improvements in quality of care and cost-effectiveness. The CMS Innovation Center tests innovative payment and service delivery systems to reduce Medicare and Medicaid program expenditures while maintaining or enhancing quality.
In addition, the MMCO and the CMS Innovation Center are considering or have implemented demonstration projects affecting reimbursement for services provided to dual eligibles.
In addition, the MMCO and the CMS Innovation Center are considering or have implemented demonstration projects affecting reimbursement for services provided to dual eligibles, and some members of Congress and the presidential administration have raised potential changes such as integrating Medicare and Medicaid coverage for dual eligibles in a single plan or program.
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.
States that do not comply face incremental reductions in federal Medicaid funding. 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.
For example, over three-quarters of Medicaid beneficiaries in Illinois are a part of the Health Choice Illinois statewide managed care program, which is serviced by various managed care organizations.
For example, over three-quarters of Medicaid beneficiaries in Illinois are a part of the HealthChoice Illinois statewide managed care program, which is serviced by various managed care organizations and includes senior citizens, adults with disabilities who are not eligible for Medicare, and dual eligibles receiving certain long-term services and supports.
Violations may result in penalties or other negative financial impacts. 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.
The cost to comply with such laws and regulations could be significant and would increase our operating expenses. 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.
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.
Managed care organizations are a significant portion of our personal care segment payor mix as a result of states shifting 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.
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.
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. 6 Table of Contents Our strategies are designed to help our service lines remain competitive.
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.
Illinois Department on Aging A significant amount of our net service revenues from our personal care segment are derived from one specific payor client, the Illinois Department on Aging, which accounted for 21.0% and 20.9% of our net service revenues for 2024 and 2023, respectively.
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.
In addition, some states use, or have applied to use, waivers granted by CMS to impose non-standard eligibility or enrollment restrictions, implement Medicaid expansion under the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (collectively, the “ACA”), or otherwise implement programs that vary from federal standards.
Hospice services are paid under the Medicare Hospice Prospective Payment System (“HPPS”), under which CMS sets a daily rate for each day a patient is enrolled in the hospice benefit. CMS requires hospice providers to submit quality reporting data each year and updates hospice payment rates annually using a market basket index.
Hospice services are paid under the Medicare Hospice Prospective Payment System (“HPPS”), under which CMS sets a daily rate for each day a patient is enrolled in the hospice benefit. The daily rate depends on the level of care provided to a patient (routine home care, continuous home care, inpatient respite care, or general inpatient care).
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.
We expect value-based purchasing programs, including models that condition reimbursement on patient outcome measures, to become more common with both governmental and non-governmental payors. 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.
In addition, enrollment in managed Medicaid plans has increased in recent years, as state governments seek to control the cost of Medicaid programs. Managed Medicaid programs enable states to contract with one or more entities for patient enrollment, care management and claims adjudication. The states usually do not relinquish program responsibilities for financing, eligibility criteria and core benefit plan design.
Managed Medicaid programs enable states to contract with entities for patient enrollment, care management and claims adjudication, with states usually retaining program responsibilities for financing, eligibility criteria and core benefit plan design. Many states have implemented state-directed payment (“SDP”) arrangements to direct certain Medicaid managed care plan expenditures.
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.
Sales and Marketing We focus on initiating and maintaining working relationships with state and local governmental agencies responsible for the oversight and provision of the services we offer. We target these agencies in our current markets and in geographical areas that we have identified as potential markets for expansion.
Virginia and certain other states have also passed comprehensive privacy legislation, and several privacy bills have been proposed both at the federal and state level that may result in additional legal requirements that impact our business.
Several states have passed comprehensive privacy legislation, and several privacy bills have been proposed both at the federal and state levels that may result in additional legal requirements that impact our business. The potential effects of these laws are far-reaching and may require us to incur substantial expenses, including costs associated with modifying our data processing practices and policies.
Home Health CMS reimburses home health agencies under a prospective payment system, paying a national, standardized 30-day period payment rate if a period of care meets a threshold of home health visits. The daily home health payment rate is adjusted for case-mix and area wage levels.
Additionally, hospice providers are subject to two specific payment limit caps under the Medicare program each federal fiscal year: the inpatient cap and the aggregate cap. Home Health CMS reimburses home health agencies under a prospective payment system, paying a national, standardized 30-day period payment rate if a period of care meets a threshold of home health visits.
AddusConnect is a biweekly e-newsletter that succinctly features important company updates, information, and resources. Addus Ink is a semi-annual publication that highlights local stories and news from around the country that celebrate our mission and values.
AddusConnect is a biweekly e-newsletter that succinctly features important company updates, information, and resources.
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.
We believe our insurance coverage and self-insurance reserves are adequate for our current operations.
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. Reimbursement rates and methods vary by state and service type, but are typically based on an hourly or unit-of-service basis.
Medicaid Programs Medicaid is a state-administered program that provides certain social and medical services to qualifying low-income individuals and is jointly funded by the federal government and individual states. The federal government pays a percentage match for state Medicaid expenditures that varies by state and other factors, with no pre-set limit on federal spending.
Hospices that do not satisfy quality reporting requirements are subject to a 2 percentage point reduction to the market basket percentage update. Beginning in federal fiscal year 2024, the reduction to the market basket update for failure to satisfy quality reporting requirements will increase to 4 percentage points.
CMS requires hospice providers to submit quality reporting data each year and updates hospice payment rates annually using a market basket index. Hospices that do not satisfy quality reporting requirements are subject to a 4 percentage point reduction to the market basket percentage update.
See “ Management’s Discussion and Analysis of Financial Condition and Results of Operations—Overview ” for our revenue mix by payor type. 6 Table of Contents Competition We believe our industry is highly competitive, fragmented and market specific. Each local market has its own competitive profile and no single competitor has significant market share across all of our markets.
Competition We believe our industry is highly competitive, fragmented and market specific. Each local market has its own competitive profile, and no single competitor has significant market share across all of our markets. Other providers, entities and individuals in the communities we serve provide services similar to those we offer.
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.
Other federal and state laws and regulations that apply to the collection, use, retention, protection, security, disclosure, transfer and other processing of personal data may impose additional or inconsistent obligations and/or result in additional penalties. For example, various state laws and regulations require us to notify affected individuals in the event of a data breach involving individually identifiable information.
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.
However, we cannot be certain that any potential losses or asserted claims will not exceed such insurance coverage and self-insurance reserves. 10 Table of Contents 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, 2024: Full-time Part-time Total Caregivers and agency staff 5,548 43,517 49,065 Corporate support centers 617 21 638 6,165 43,538 49,703 At Addus, our people are crucial to our mission.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThese 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.
Biggest changeThese legal and regulatory requirements relate to, among other matters: • facility and personnel licensure, and certification and enrollment with government programs; • eligibility for services; • appropriateness and necessity of services provided; • adequacy and quality of services; • qualifications, training and supervision of personnel; • confidentiality, maintenance, interoperability, exchange and security of medical records and other health-related and personal information, including information blocking, data breach, ransomware, identify theft and online tracking of personal information; • the provision of services via telehealth, including technological standards and coverage restrictions or other limitations on reimbursement; • the development and use of AI and other predictive algorithms, including those used in clinical decision support tools; • 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; 23 Table of Contents • 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.
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.
Our business plan calls for significant growth 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.
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.
De novo offices involve risks, including those relating to licensing, accreditation, 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.
Negative publicity, changes in public perceptions of our services or government investigations of our operations could damage our reputation and hinder our ability to receive referrals, retain agreements or obtain new agreements. Increased government scrutiny may also contribute to an increase in compliance costs and could discourage consumers from using our services.
Negative publicity, changes in public perceptions of our services or government investigations of our operations could damage our reputation, hinder our ability to receive referrals, retain agreements or obtain new agreements and discourage consumers from using our services. Increased government scrutiny may also contribute to an increase in compliance costs.
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.
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 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; and • engage in a sale leaseback or similar transaction.
We may be similarly impacted by increased enrollment of Medicare and Medicaid beneficiaries in managed care plans, which is part of the general shift away from traditional fee-for-service models. Under the managed Medicare program, also known as Medicare Advantage, the federal government contracts with private health insurers to provide Medicare benefits.
We may be similarly impacted by increased enrollment of Medicare and Medicaid beneficiaries in managed care plans, which is part of the general shift away from traditional fee-for-service models. Under the managed Medicare program, known as Medicare Advantage, the federal government contracts with private health insurers to provide Medicare benefits.
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.
Trends toward clinical and 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.
Moreover, we could be affected by climate change and other environmental issues to the extent such issues adversely affect the general economy, adversely impact our supply chain or increase the costs of supplies needed for our operations, or otherwise result in disruptions impacting the communities in which our facilities are located.
We could be affected by climate change and other environmental issues to the extent such issues adversely affect the general economy, adversely impact our supply chain or increase the costs of supplies needed for our operations, or otherwise result in disruptions impacting the communities in which our facilities are located.
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.
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. 21 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.
Additionally, failure to satisfy any of the numerous technical renewal requirements in connection with our proposals for agreements could result in a proposal being rejected even if it contains favorable pricing terms. Failure to obtain, renew or retain agreements with major payors may negatively impact our results of operations and revenue.
Additionally, failure to satisfy any of the numerous technical renewal requirements in connection with the proposals we submit for agreements could result in a proposal being rejected even if it contains favorable pricing terms. Failure to obtain, renew or retain agreements with major payors may negatively impact our results of operations and revenue.
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.
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. 28 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.
Our ability to meet these restrictive covenants and financial ratios and tests may be affected by events beyond our control, and we cannot assure you that we will meet those tests. 30 Table of Contents A breach of any of these covenants could result in a default under our credit facility.
Our ability to meet these restrictive covenants and financial ratios and tests may be affected by events beyond our control, and we cannot assure you that we will meet those tests. 29 Table of Contents A breach of any of these covenants could result in a default under our credit facility.
For example, the Budget Control Act of 2011 (“BCA”) requires automatic spending reductions to reduce the federal deficit, resulting in a uniform reduction across all Medicare programs of 2% per fiscal year that extends through the first seven months of 2032.
For example, the Budget Control Act of 2011 (“BCA”) requires automatic spending reductions to reduce the federal deficit, resulting in a uniform reduction across all Medicare programs of 2% per fiscal year that extends through the first eight months of 2032.
Further, the laws and regulations governing our business are subject to change, interpretations may evolve and enforcement focus may shift. These changes could subject us to allegations of impropriety or illegality, require restructuring of relationships with referral sources and recipients or otherwise require changes to our operations.
Further, the laws and regulations and program requirements governing our business are subject to change, interpretations may evolve and enforcement focus may shift. These changes could subject us to allegations of impropriety or illegality, require restructuring of relationships with referral sources and recipients or otherwise require changes to our operations.
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.
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 2024 or be subject to an annual penalty, for example.
Even if we are successful in our defense, lawsuits or regulatory proceedings could distract us from running our business or irreparably damage our reputation. 27 Table of Contents Our insurance liability coverage may not be sufficient for our business needs.
Even if we are successful in our defense, lawsuits or regulatory proceedings could distract us from running our business or irreparably damage our reputation. 26 Table of Contents Our insurance liability coverage may not be sufficient for our business needs.
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.
Changes that have occurred or 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; • 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.
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.
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.
However, our technology, and that of our third-party service providers, may fail to adequately secure the protected health information and personally identifiable information we create, receive, transmit and maintain in our databases. We may be at increased risk because we outsource certain services or functions to, or have systems that interface with, third parties.
However, despite these efforts, our technology, and that of our third-party service providers, may fail to adequately secure the protected health information and personally identifiable information we create, receive, transmit and maintain in our databases. We may be at increased risk because we outsource certain services or functions to, or have systems that interface with, third parties.
Actions taken against one of our entities may subject our other entities to adverse consequences. While we endeavor to comply with applicable laws and regulations, we cannot ensure you that our practices are fully compliant or that courts or regulatory agencies will not interpret those laws and regulations in ways that will adversely affect our practices.
Actions taken against one of our entities may subject our other entities to adverse consequences. While we endeavor to comply with applicable laws and regulations and government program requirements, we cannot ensure you that our practices are fully compliant or that courts or regulatory agencies will not interpret those laws and regulations in ways that will adversely affect our practices.
These factors had an unfavorable impact on our financial results during the year ended December 31, 2023, and may have an unfavorable impact on our financial results in future periods which could be material.
These factors had an unfavorable impact on our financial results during the year ended December 31, 2024, and may have an unfavorable impact on our financial results in future periods which could be material.
We are also subject to claims arising out of accidents involving vehicle collisions brought by consumers whom we are transporting, from employees driving to or from home visits or other affected individuals.
We are also subject to claims arising out of accidents involving vehicle collisions brought by consumers whom we transport, from employees driving to or from home visits or other affected individuals.
Our professional and general liability insurance may not cover all claims against us. In addition, regulatory agencies have previously brought and may in the future initiate administrative proceedings alleging violations of statutes and regulations arising from our services and seek to impose monetary penalties on us.
Our professional and general liability insurance may not cover all claims against us. In addition, regulatory agencies have previously brought and may in the future initiate administrative proceedings alleging violations of statutes and regulations arising from our services and seek to impose monetary penalties or other sanctions on us.
Any of these events could have a negative effect on our business, financial condition and operating results. Our business may be harmed by labor relations matters. We are subject to a risk of work stoppages and other labor relations matters because our hourly workforce is highly unionized.
Any of these events could reduce consumer volumes and have a negative effect on our business, financial condition and operating results. Our business may be harmed by labor relations matters. We are subject to a risk of work stoppages and other labor relations matters because our hourly workforce is highly unionized.
State government officials have in the past attempted, and in the future may attempt, to reduce government spending by proposing changes aimed at reducing expenditures by this department. The nature and extent of any proposed future cost reduction initiatives is unknown.
State government officials have in the past attempted, and in the future may attempt, to reduce government spending by proposing changes aimed at reducing expenditures by this department. The nature and extent of any proposed future cost reduction initiatives is difficult to predict.
To the extent that the United States continues to have low unemployment levels and shortages of caregivers and skilled healthcare staff, it may continue to hinder our ability to attract and retain sufficient caregivers and skilled healthcare staff to meet the continuing demand for both our non-clinical and clinical services.
To the extent that the United States experiences low unemployment levels and shortages of caregivers and skilled healthcare staff, it may continue to hinder our ability to attract and retain sufficient caregivers and skilled healthcare staff to meet the continuing demand for both our non-clinical and clinical services.
Our ability to expand in a manner consistent with historic practices may be limited if we are unable to obtain such consent from our lenders. Business Risks Our financial results have been, and may continue to be, adversely impacted by negative macroeconomic conditions.
Our ability to expand in a manner consistent with historic practices may be limited if we are unable to obtain such consent from our lenders. 17 Table of Contents Business Risks Our financial results have been, and may continue to be, adversely impacted by negative macroeconomic conditions.
Further, consolidation within the payor industry, vertical integration efforts involving payors and healthcare providers, and cost-reduction strategies by payors continue to increase, which may affect our competitive position. In addition, existing competitors may offer new or enhanced services that we do not provide or be viewed by consumers as a more desirable local alternative.
Further, consolidation within the payor industry, vertical integration efforts involving payors and healthcare providers, and cost-reduction strategies by payors continue to increase. In addition, existing competitors may offer new or enhanced services that we do not provide or be viewed by consumers as a more desirable local alternative.
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.
Home health agencies and 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.
If a hospice’s Medicare payments exceed its inpatient or aggregate caps, it must repay Medicare for the excess amount.
If a hospice’s Medicare payments exceed its inpatient or aggregate caps, it must repay to Medicare the excess amount.
We cannot predict at this time what effect alternative payment models may have on our Company. Our industry is highly competitive, fragmented and market-specific. The healthcare and long-term care industries are highly competitive among service providers and care models.
We cannot predict at this time what effect alternative payment models may have on our Company. 22 Table of Contents Our industry is highly competitive, fragmented and market-specific. The healthcare and long-term care industries are highly competitive among service providers and care models.
If we inadvertently hire or contract with an excluded person, or if any of our current employees or contractors becomes an excluded person in the future without our knowledge, we may be subject to substantial civil penalties, including civil monetary penalties, an assessment of up to three times the amount claimed and exclusion from the program.
If we inadvertently hire or contract with an excluded person, or if any of our current employees or contractors becomes an excluded person in the future without our knowledge, we may be subject to substantial civil penalties, including civil monetary penalties, an assessment of up to three times the amount claimed and exclusion from the program, and may also face liability under the FCA.
We may be unable to pursue acquisitions or expand into new geographic regions without obtaining additional capital or consent from our lenders. At December 31, 2023 and 2022, we had cash balances of $64.8 million and $80.0 million, respectively, and $126.4 million and $134.9 million, respectively, of outstanding debt on our credit facility.
We may be unable to pursue acquisitions or expand into new geographic regions without obtaining additional capital or consent from our lenders. At December 31, 2024 and 2023, we had cash balances of $98.9 million and $64.8 million, respectively, and $223.0 million and $126.4 million, respectively, of outstanding debt on our credit facility.
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.
After giving effect to the amount drawn on our credit facility, approximately $8.0 million of outstanding letters of credit at each of December 31, 2024 and 2023, and borrowing limits based on an advanced multiple of Adjusted EBITDA (as defined in the Credit Agreement), we had $346.6 million and $335.6 million available for borrowing under our credit facility as of December 31, 2024 and 2023, respectively.
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.
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, 2024 and 2023, we derived approximately 21.0% and 20.9%, respectively, of our revenue from the Illinois Department on Aging programs.
If we fail to comply with applicable laws and regulations, which are subject to change, we could be subject to civil sanctions and criminal penalties, including substantial monetary penalties, the termination of rights to participate in federal and state healthcare programs, exclusion from federal healthcare programs, the suspension or revocation of licenses, and we could face nonpayment or encounter delays in our ability to bill and collect for services provided, any of which could adversely affect our business, results of operations, or financial results.
If we fail to comply with applicable laws and regulations, which are subject to change, we could be subject to civil sanctions and criminal penalties, including substantial monetary penalties, exclusion from participation in Medicare, Medicaid and other federal and state healthcare programs, the suspension or revocation of licenses, we could face nonpayment or encounter delays in our ability to bill and collect for services provided, and we could be subject to civil lawsuits, any of which could adversely affect our business, results of operations, or financial results.
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.
As of December 31, 2024, 34.8% 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.
For example, accountable care organizations (“ACOs”) incentivize hospitals, physician groups, and other providers to organize and coordinate patient care while reducing unnecessary costs. Several states have implemented, or plan to implement, accountable care models for their Medicaid populations.
For example, ACOs incentivize hospitals, physician groups, and other providers to organize and coordinate patient care while reducing unnecessary costs. Some states have implemented, or plan to implement, accountable care models for their Medicaid populations.
HHS also requires health insurers to publish online the charges negotiated with providers for healthcare services. In addition, the CMS Care Compare website makes publicly available certain data on home health agency and hospice performance on quality measures and patient satisfaction.
HHS also requires health insurers to publish online the charges negotiated with providers for healthcare services. In addition, CMS websites make publicly available certain data on home health agency and hospice performance on quality measures and patient satisfaction.
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.
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, interruptions and delays in services provided 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, the inability to access data, reputational harm, or adversely impact our financial results.
The laws and regulations governing our operations, along with the terms of participation in various government programs, impose certain requirements on the way in which we do business, the services we offer, and our interactions with providers and consumers.
The laws and regulations governing our operations, along with the terms of participation in various government programs, affect the way in which we do business, the services we offer, and our interactions with providers and consumers.
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.
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.
In addition, the CMS Care Compare website makes publicly available certain data on home health agency and hospice performance on quality measures and patient satisfaction. Medicare reimbursement for these provider types is tied to reporting of quality measures.
In addition, the CMS websites make publicly available certain data on home health agency and hospice performance on quality measures and patient satisfaction. Medicare reimbursement for these provider types is tied to reporting of quality measures.
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.
We had $970.6 million and $663.0 million of goodwill and $109.6 million and $92.0 million of intangible assets recorded on our Consolidated Balance Sheets at December 31, 2024 and 2023, 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.
Information systems may be vulnerable to damage from a variety of sources, including telecommunications or network failures, human acts and natural disasters. The number of administrative employees working remotely has increased substantially in recent years, increasing our dependence on systems that facilitate remote access, and we may experience increased risks as a result.
Information systems may be vulnerable to damage from a variety of sources, including telecommunications or network failures, human acts and natural disasters. We have a significant number of administrative employees working remotely, increasing our dependence on systems that facilitate remote access to our system, and we may experience increased risks as a result.
The inpatient cap limits the number of days of inpatient care to no more than 20% of total patient care days. The aggregate cap limits the amount of Medicare reimbursement a hospice may receive, based on the number of Medicare patients served.
The inpatient cap limits the number of days of inpatient care for which Medicare will pay to no more than 20% of total patient care days. The aggregate cap limits the amount of Medicare reimbursement a hospice may receive each year, based on the number of Medicare patients served.
For the year ended December 31, 2023, we derived approximately 59.5% of our net service revenues from state and local governmental agencies, primarily through Medicaid state programs and 21.5% from Medicare. However, changes in government healthcare programs may decrease the reimbursement we receive or limit access to, or utilization of, our services.
For the year ended December 31, 2024, we derived approximately 61.8% of our net service revenues from state and local governmental agencies, primarily through Medicaid state programs and 22.2% from Medicare. However, changes in government healthcare programs may decrease the reimbursement we receive or limit access to, or utilization of, our services.
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.
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 decrease consumer volumes and adversely affect our ability to receive referrals, obtain new agreements and renew existing agreements, any of which could adversely affect our business.
If we fail to comply with the laws and extensive regulations governing our business, we could be subject to penalties or be required to make changes to our operations, which could negatively impact our profitability. The federal government and the states in which we operate regulate our industry extensively.
If we fail to comply with the extensive laws and regulations governing our business, we could be subject to penalties or be required to make changes to our operations, which could negatively impact our business and profitability. Our industry is extensively regulated at the federal and state government levels.
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 addition, CMS may change Medicaid payment models and grant states additional flexibilities 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.
We are regularly the target of attempted cybersecurity and other threats that could have a security impact, and we expect to continue to experience an increase in cybersecurity threats in the future.
We are regularly the target of attempted cybersecurity and other threats that could have a security impact, and we expect to continue to experience an increase in cybersecurity threats in the future, as the volume and intensity of cyberattacks on healthcare entities and vendors continue to increase.
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.
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.
Accordingly, any change in the current demographic, economic, competitive or regulatory conditions in these states could have an adverse effect on our business, financial condition or results of operations. Changes to the Medicaid programs in these states could also have a disproportionately adverse effect on our business, financial condition, results of operations or cash flows.
Accordingly, any change in the current demographic, economic, competitive or regulatory conditions in these states could have an adverse effect on 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.
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 and/or 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.
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.
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. Private third-party payors may also conduct audits and investigations, and we also perform internal audits and monitoring.
It is difficult to predict whether, when, or what other deficit reduction initiatives may be proposed by Congress, but future legislation may include additional Medicare spending reductions. The Medicaid program, which is jointly funded by the federal and state governments, is often a state’s largest program. Governmental agencies generally condition their agreements upon a sufficient budgetary appropriation.
It is difficult to predict whether, when, or what other deficit reduction initiatives may be proposed by Congress, but future legislation may include additional Medicare spending reductions. 20 Table of Contents The Medicaid program, which is jointly funded by the federal and state governments, is often a state’s largest program.
States may limit the number of licenses they issue. In addition, some states require disclosures by healthcare entities to state attorneys general or other designated entities in advance of sales or other transactions. The failure to obtain any required CON or license or other required approvals could impair our ability to operate or expand our business.
In addition, some states require healthcare entities to make disclosures to or receive approval from state attorneys general or other designated entities in advance of sales or other transactions. The failure to obtain any required CON or license or other required approvals or make required disclosure could impair our ability to operate or expand our business.
In addition, if we fail to attract and retain qualified and skilled personnel, our ability to conduct our business operations effectively and our results of operations would be harmed. Competition may be greater for managers, such as regional and agency directors.
We may not be able to offset higher labor costs by increasing the rates we charge for our services. In addition, if we fail to attract and retain qualified and skilled personnel, our ability to conduct our business operations effectively and our results of operations would be harmed. Competition may be greater for managers, such as regional and agency directors.
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.
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.
Moreover, adverse weather conditions may become more frequent and/or severe as the result of climate change.
The impact of disasters and similar events is inherently uncertain. Moreover, adverse weather conditions may become more frequent and/or severe as the result of climate change.
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.
Economic conditions in the United States continue to be challenging in certain respects, including as a result of inflationary pressures, elevated interest rates, challenging labor market conditions and potential adverse effects associated with current geopolitical conditions.
We rely extensively on computer systems to manage clinical and financial data, to communicate with our consumers, payors, vendors and other third parties, and to summarize and analyze our operating results. We frequently exchange clinical and financial data with third parties in connection with our routine operations and in order to meet our contractual and regulatory obligations.
We rely extensively on computer systems to manage clinical and financial data, to communicate with our consumers, payors, vendors and other third parties, and to summarize and analyze our operating results.
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.
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.
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.
Since our personal care operations are concentrated in Illinois and New Mexico, we are also particularly sensitive to changes in laws and regulations in these states. We may not be able to offset any increased costs and expenses.
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.
The healthcare industry has been and continues to be impacted by healthcare reform efforts. For example, 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.
Although 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.
Although 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. 30 Table of Contents ITEM 1B.
Licensure is generally required of agencies providing home health and hospice services, though requirements vary by state. Some states also require a provider to obtain a CON before establishing certain health services, operations or facilities. CON restrictions may reduce the level of competition in a given industry or in a particular geographic region.
Licensure is generally required of agencies providing home health and hospice services, though requirements vary by state. Some states also require a provider to obtain a CON or other type of approval before establishing, purchasing, or expanding certain health services, operations or facilities.
Our success depends upon the continued employment of certain members of our executive team to manage several of our key functional areas, including operations, business development, accounting, finance, human resources, marketing, information systems, contracting and compliance. Moreover, the current competitive labor market may make it more difficult to retain or hire members of our executive team.
We depend on the services of our executive team members. Our success depends upon the continued employment of certain members of our executive team to manage several of our key functional areas, including operations, business development, accounting, finance, human resources, marketing, information systems, contracting and compliance.
The departure of any member of our executive team may materially adversely affect our operations. Risk Related to Our Indebtedness Restrictive covenants in the agreements governing our indebtedness may adversely affect us.
Risk Related to Our Indebtedness Restrictive covenants in the agreements governing our indebtedness may adversely affect us.
These delays may result from such factors as changes by payors to data submission requirements, requests by fiscal intermediaries for additional data or documentation, other Medicare or Medicaid issues, or information system problems.
These delays may result from such factors as changes by payors to data submission requirements, requests by fiscal intermediaries for additional data or documentation, other Medicare or Medicaid issues, or information system problems. Further, state budgets could be impacted to the extent economic conditions in the United States are challenging in 2025.
Our ability to realize rate increases from government programs and private payors, which represent most of our revenue, might be limited despite inflation. Higher interest rates also raise our financing costs.
We might not be able to realize rate increases from government programs and private payors, which represent most of our revenue, and any rate increases obtained may not be sufficient to offset increases to operating expenses. Higher interest rates also raise our financing costs.
Congress, CMS and state authorities may implement changes to reimbursement for or coverage of items and services that affect our business and operations. For example, from time to time, CMS revises the reimbursement systems used to reimburse healthcare providers, including through changes to the home health and hospice reimbursement systems, which may result in reduced Medicare and/or Medicaid payments.
For example, CMS periodically revises the reimbursement systems used to reimburse healthcare providers, including through changes to the home health and hospice reimbursement systems, which may result in reduced Medicare and/or Medicaid payments.
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.
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.
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.
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.
We are unable to predict the nature and success of current and future healthcare reform initiatives, any of which may have an adverse effect on our business, financial condition, and operating results. The industry trend toward value-based purchasing may negatively impact our revenues.
It is difficult to predict the nature and/or success of current and future public policy changes, any of which may have an adverse effect on our business, financial condition, and operating results. The industry trend toward value-based purchasing may negatively impact our revenues. There is a trend toward value-based purchasing of healthcare services among both government and commercial payors.
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.
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 privacy laws, consumer protection laws, common law and other legal theories, subject us to litigation and federal and state governmental inquiries, damage our reputation, result in interruptions or delays to services, adversely impact our financial results, and otherwise be disruptive to our business. 27 Table of Contents We, directly and through our vendors and other third parties, collect and store sensitive information, including proprietary business information, protected health information of our patients and personally identifiable information of our employees, patients and consumers.
The impact of these or other factors beyond our control could have an adverse effect on our business, financial position and results of operations. The emergence and effects related to a potential future pandemic, epidemic, or outbreak of infectious disease could adversely impact our business and future results of operations and financial condition.
The impact of these or other factors beyond our control could have an adverse effect on our business, financial position and results of operations.
If we are unable to attract and retain qualified personnel, we may be unable to provide our services, the quality of our services may decline, and we could lose consumers and referral sources. We depend on the services of our executive team members.
Our ability to attract and retain personnel depends on several factors, including our ability to provide employees with attractive assignments and competitive benefits and salaries. If we are unable to attract and retain qualified personnel, we may be unable to provide our services, the quality of our services may decline, and we could lose consumers and referral sources.
Some of these program changes may reduce the number of Medicaid enrollees in certain states. Other recent reform initiatives and proposals at the federal and state levels include those focused on price transparency and value-based pricing, which may impact our competitive position, patient volumes, and the relationships between providers, patients, and payors.
Some of these Medicaid changes may decrease Medicaid enrollment, result in reductions to various state healthcare programs or have other effects that could adversely affect our business. 25 Table of Contents Other recent reform initiatives and proposals at the federal and state levels include those focused on price transparency and value-based pricing, which may impact our competitive position, patient volumes, and the relationships between providers, patients, and payors.
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.
Furthermore, because the tools and techniques used in cyber-attacks change frequently and may not be immediately recognized, we may be unable to anticipate techniques or implement adequate preventative measures, and we may experience or be affected by security or data breaches that remain undetected for an extended time.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeFor additional information, see “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.” included in Part I, Item 1A of this Form 10-K.
Biggest changeFor additional information, see “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 privacy laws, consumer protection laws, common law and other legal theories, subject us to litigation and federal and state governmental inquiries, damage our reputation, result in interruptions or delays to services, adversely impact our financial results, and otherwise be disruptive to our business” included in Part I, Item 1A of this Form 10-K.
The Chief Information Security Officer has extensive cybersecurity experience, including more than 15 years working in senior IT infrastructure and IT security roles in the healthcare sector (seven of which years were spent as the Chief Information Security Officer).
The Chief Information Security Officer has extensive cybersecurity experience, including more than 15 years working in senior IT infrastructure and IT security roles in the healthcare se ctor (seven of which years were spent as the Chief Information Security Officer).

Item 2. Properties

Properties — owned and leased real estate

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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
Biggest changeWe sublease approximately 21,000 and 37,400 square feet of our office space in Downers Grove and Frisco, respectively, to third parties. 31 Table of Contents

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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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
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. 32 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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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.
Biggest changeAn insignificant amount of common stock is held by individual holders. As of February 18, 2025, Addus HomeCare Corporation had approximately 43,455 shareholders of its common stock, including 85 shareholders of record.
Our credit facility restricts our ability to declare or pay any dividend or other distribution to Holdings unless no default or event of default has occurred and is continuing or would arise as a result thereof and the aggregate amount of dividends and distributions paid in any fiscal year does not exceed $7.5 million per annum.
Our credit facility restricts our ability to declare or pay any dividend or other distribution to Holdings unless no default or event of default has occurred and is continuing or would arise as a result thereof and the aggregate amount of dividends and distributions paid in any fiscal year does not exceed $10.0 million per annum.
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.
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, 2024, 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 440 institutional investors.
ITE M 6. [ Reserved] 35 Table of Contents
ITE M 6. [ Reserved] 33 Table of Contents

Item 7. Management's Discussion & Analysis

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

115 edited+34 added−67 removed78 unchanged
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.
Biggest changeFor the years ended December 31, 2024, 2023 and 2022, our revenue by payor and significant states by segment were as follows: Personal Care 2024 2023 2022 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 $ 456,885 53.3 % $ 400,753 50.4 % $ 348,234 49.3 % Managed care organizations 376,604 44.0 367,557 46.2 326,778 46.3 Private pay 15,589 1.8 16,268 2.0 18,301 2.6 Commercial insurance 5,593 0.7 6,321 0.8 7,689 1.1 Other 1,910 0.2 3,819 0.6 5,505 0.7 Total personal care segment net service revenues $ 856,581 100.0 % $ 794,718 100.0 % $ 706,507 100.0 % Illinois $ 441,012 51.5 % $ 411,081 51.7 % $ 360,778 51.1 % New Mexico 115,381 13.5 115,986 14.6 105,315 14.9 New York 71,763 8.4 92,469 11.6 86,592 12.3 All other states 228,425 26.6 175,182 22.1 153,822 21.7 Total personal care segment net service revenues $ 856,581 100.0 % $ 794,718 100.0 % $ 706,507 100.0 % With the acquisition of Upstate and the Gentiva Acquisition in 2024, the Company expanded its personal care services to consumers in the state of Arizona, Arkansas, California, Missouri, North Carolina, South Carolina and Texas. 35 Table of Contents Hospice 2024 2023 2022 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 $ 208,099 91.2 % $ 186,317 89.9 % $ 183,407 90.9 % Managed care organizations 7,603 3.3 7,037 3.4 7,353 3.6 Other 12,489 5.5 13,801 6.7 11,012 5.5 Total hospice segment net service revenues $ 228,191 100.0 % $ 207,155 100.0 % $ 201,772 100.0 % Ohio $ 84,811 37.2 % $ 74,871 36.1 % $ 70,503 35.0 % Illinois 52,560 23.0 47,247 22.8 47,181 23.4 New Mexico 28,532 12.5 30,782 14.9 30,722 15.2 All other states 62,288 27.3 54,255 26.2 53,366 26.4 Total hospice segment net service revenues $ 228,191 100.0 % $ 207,155 100.0 % $ 201,772 100.0 % With the acquisition of Tennessee Quality Care in 2023, the Company expanded its hospice services to patients in the state of Tennessee and with the acquisition of JourneyCare in 2022, the Company also expanded its hospice services to patients in the state of Illinois.
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.
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.
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.
Home Health Home health services provided to Medicare beneficiaries are paid under the Medicare Home Health Prospective Payment System (“HHPPS”), which uses national, standardized 30-day period payment rates for periods of care that meet a certain threshold of home health visits (periods of care that do not meet the visit threshold are paid a per-visit payment rate for providing care).
Home Health Home health services provided to Medicare beneficiaries are paid under the Medicare Home Health Prospective Payment System (“HHPPS”), which uses national, standardized 30-day period payment rates for periods of care that meet a certain threshold of home health visits (periods of care that do not meet the visit threshold are paid a per-visit payment rate for the discipline providing care).
Our critical accounting policies requiring estimates, assumptions and judgments that we believe have the most significant impact on our consolidated financial statements are described below. 52 Table of Contents Revenue Recognition, Accounts Receivable and Allowances Net service revenue is recognized at the amount that reflects the consideration the Company expects to receive in exchange for providing services directly to consumers.
Our critical accounting policies requiring estimates, assumptions and judgments that we believe have the most significant impact on our consolidated financial statements are described below. 48 Table of Contents Revenue Recognition, Accounts Receivable and Allowances Net service revenue is recognized at the amount that reflects the consideration the Company expects to receive in exchange for providing services directly to consumers.
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
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
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.
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, 2024 , 2023 or 2022.
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 discussion of our financial condition and results of operations for the year ended December 31, 2023 compared to the year ended December 31, 2022, 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, 2023.
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.
No impairment charge was recorded for the years ended December 31, 2024, 2023 or 2022. 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.
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.
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. Depreciation and Amortization Expenses Depreciable assets consist principally of furniture and equipment, network administration and telephone equipment and operating system software.
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.
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 $8.0 million at December 31, 2024. These standby letters of credit benefit our third-party insurer for our high deductible workers’ compensation insurance program.
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.
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.
For the years ended December 31, 2023, 2022 and 2021, we performed the quantitative analysis to evaluate whether an impairment occurred.
For the years ended December 31, 2024, 2023 and 2022, we performed the quantitative analysis to evaluate whether an impairment occurred.
CMS uses the PDGM as the case-mix classification model to place periods of care into payment categories, classifying patients based on clinical characteristics and their resource needs. An outlier adjustment may be paid for periods of care where costs exceed a specific threshold amount. CMS updates the HHPPS payment rates each calendar year.
CMS uses the Patient-Driven Groupings Model (“PDGM”) as the case-mix classification model to place periods of care into payment categories, classifying patients based on clinical characteristics and their resource needs. An outlier adjustment may be paid for periods of care where costs exceed a specific threshold amount. CMS updates the HHPPS payment rates each calendar year.
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.
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, 2024 and 2023, intangibles, net of accumulated amortization, was $109.6 million and $92.0 million, respectively, included in our Consolidated Balance Sheets.
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.
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 $577.7 million of capacity and $346.6 million available for borrowing under our credit facility.
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.
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 $11.2 million, $10.3 million and $10.6 million for the years ended December 31, 2024, 2023 and 2022, 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.
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 21.0% and 20.9% of our net service revenues for the years ended December 31, 2024 and 2023, respectively.
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.
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.
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.
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 enforcement for each non-competition agreement. 49 Table of Contents As of December 31, 2024 and 2023, goodwill was $970.6 million and $663.0 million, respectively, included in our Consolidated Balance Sheets.
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.
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; and • other companies in our industry may calculate Adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure.
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.
Our DSOs were 39 days at each of December 31, 2024 and 2023. The DSOs for our largest payor, the Illinois Department on Aging, at December 31, 2024 and 2023 were 40 days and 50 days, respectively. Off-Balance Sheet Arrangements As of December 31, 2024, we did not have any off-balance sheet guarantees or arrangements with unconsolidated entities.
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.
Leases The Company has lease arrangements for local branches, our corporate headquarters and certain equipment. As of December 31, 2024, the Company had fixed lease payment obligations aggregating to $65.0 million, with $15.8 million payable within 12 months. See Note 2, Leases, to the Notes to Consolidated Financial Statements for additional details of our leases.
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.
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, 2024, the Company had outstanding debt on our revolving loan under our credit facility of $223.0 million, payable on July 30, 2028.
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.
Managed care revenues accounted for 34.8%, 36.6% and 36.0% of our revenue during the years ended December 31, 2024, 2023, and 2022 respectively. A summary of certain consolidated financial and statistical data results for 2024, 2023 and 2022 are provided in the table below.
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.
The calculated interest payable amounts use actual rates available through January 2024 and assumes the January rates of 6.34%, for all future interest payable on the revolving loans. See Note 9, Long-Term Debt, to the Notes to Consolidated Financial Statements for additional details of our long-term debt.
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.
Managed care organizations accounted for 44.0% and 46.2% of net service revenues for the years ended December 31, 2024 and 2023, respectively, with commercial insurance, private pay and other payors accounting for the remainder of net service revenues.
The Company utilized $10.5 million and $8.6 million of these funds during the years ended December 31, 2023 and 2022, respectively, primarily for caregivers and adding support to recruiting and retention efforts.
The Company utilized $10.2 million and $10.5 million of these funds during the years ended December 31, 2024 and 2023, respectively, primarily for caregivers and adding support to recruiting and retention efforts.
With the purchase of Apple Home, the Company expanded clinical services for its home health segment to Illinois. On January 1, 2023, we completed the acquisition of CareStaff for approximately $1.0 million, with funding provided by available cash. With the purchase of CareStaff, the Company expanded its personal care services to consumers in Florida.
On January 1, 2023, we completed the acquisition of CareStaff for approximately $1.0 million, with funding provided by available cash. With the purchase of CareStaff, the Company expanded its personal care services to consumers in Florida.
Additionally, the law provided for a 10 percentage point increase in federal matching funds for Medicaid HCBS from April 1, 2021, through March 31, 2022, provided the state satisfied certain conditions. States are permitted to use the state funds equivalent to the additional federal funds through March 31, 2025.
Additionally, the law provided for a 10-percentage point increase in federal matching funds for Medicaid HCBS from April 1, 2021, through March 31, 2022, provided the state satisfied certain conditions. States are generally permitted to use the state funds equivalent to the additional federal funds through March 31, 2025, but CMS has granted extensions to several states.
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.
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, 2024 and 2023, we had cash balances of $98.9 million and $64.8 million, respectively.
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.
The deferred portion of ARPA funding was $11.2 million and $5.8 million for the years ended December 31, 2024 and 2023, respectively, which is included within Government stimulus advances on the Company’s Consolidated Balance Sheets.
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.
The open receivable balance from the Illinois Department on Aging, the largest payor program for the Company’s Illinois personal care operation, decreased by $3.1 million from $29.8 million as of December 31, 2023 to $26.7 million as of December 31, 2024. Our collection procedures include review of account aging and direct contact with our payors.
The Company received state funding provided by the ARPA in an aggregate amount of $3.7 million and $23.4 million for the years ended December 31, 2023 and 2022, respectively.
The Company received state funding provided by the ARPA in an aggregate amount of $15.7 million and $3.7 million for the years ended December 31, 2024 and 2023, respectively.
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.
Net service revenue in our personal care segment increased due to a 5.2% increase in revenues per billable hour and a 2.1% increase in billable hours for the year ended December 31, 2024 compared to 2023.
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.
One payor client, the Illinois Department on Aging, accounted for 21.0% and 20.9% of net service revenues for the years ended December 31, 2024 and 2023, respectively. Net service revenues from state, local and other governmental programs accounted for 53.3% and 50.4% of net service revenues for the years ended December 31, 2024 and 2023, respectively.
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.
This measure highlights the performance of existing stores, while excluding the impact of acquisitions, new store openings and closures, and American Rescue Plan Act of 2021 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.
The home health segment’s general and administrative expenses 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 23.9% for the years ended December 31, 2023 and 2022, respectively.
The home health segment’s general and administrative expenses 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, were 25.5% and 24.7% for the years ended December 31, 2024 and 2023, respectively.
Cost of Service Revenues We incur direct care wages, payroll taxes and benefit-related costs in connection with providing our services. We also provide workers’ compensation and general liability coverage for our employees. Employees are also reimbursed for their travel time and related travel costs in certain instances.
Cost of Service Revenues We incur direct care wages, payroll taxes and benefit-related costs in connection with providing our services. We also provide workers’ compensation and general liability coverage for our employees.
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.
Net service revenues increased by $21.0 million for the year ended December 31, 2024 compared to the year ended December 31, 2023 primarily due to increases in average daily census and revenue per patient day, mainly attributed to the organic growth and the acquisition of the operations of Tennessee Quality Care on August 1, 2023.
The related receivables due from the Illinois Department on Aging represented 25.8% and 18.0% of net accounts receivable at December 31, 2023 and 2022, respectively. 51 Table of Contents Net cash used in investing activities was $119.2 million for the year ended December 31, 2023, compared to $106.6 million for the year ended December 31, 2022.
The related receivables due from the Illinois Department on Aging represented 21.7% and 25.8% of net accounts receivable at December 31, 2024 and 2023, respectively. 47 Table of Contents Net cash used in investing activities was $354.6 million for the year ended December 31, 2024, compared to $119.2 million for the year ended December 31, 2023.
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 personal care 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 7.9% and 8.1% for the years ended December 31, 2024 and 2023, respectively.
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.
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. 44 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.
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. Outstanding Accounts Receivable Gross accounts receivable as of December 31, 2023 and 2022 were $117.8 million and $127.1 million, respectively.
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. Outstanding Accounts Receivable Gross accounts receivable as of December 31, 2024 and 2023 were $126.4 million and $117.8 million, respectively.
Impact of Inflation The United States has recently experienced high rates of inflation. These inflationary conditions have resulted in, and may continue to result in, increased operating costs, particularly as the result of increased wages we have paid and may continue to pay our caregivers and other personnel and our ability to attract and retain personnel.
These inflationary conditions have resulted in, and may continue to result in, increased operating costs, particularly as the result of increased wages we have paid and may continue to pay our caregivers and other personnel and our ability to attract and retain personnel.
Under the Home Health Value-Based Purchasing (“HHVBP”) Model, home health agencies 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.
Under the nationwide Home Health Value-Based Purchasing (“HHVBP”) Model, home health agencies 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. Data collected in each performance year will impact Medicare payments two years later.
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.
Net service revenue increased by $61.9 million, $21.0 million and $13.0 million in our personal care, hospice and home health segments, respectively, for the year ended December 31, 2024, compared to 2023.
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.
The personal care segment derives a significant amount of its net service revenues from operations in Illinois, which represented 38.2% and 38.8% of our net service revenues for the years ended December 31, 2024 and 2023, respectively.
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.
Interest payments associated with the debt aggregate to $54.5 million, with $15.6 million payable within 12 months. As described in Note 9 to the Notes to Consolidated Financial Statements, interest on borrowings under the revolving loan are variable.
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.
Our effective income tax rate was 25.9% and 23.1% for the years ended December 31, 2024 and 2023, respectively. The difference between our federal statutory and effective income tax rates was principally due to the inclusion of state taxes, non-deductible compensation, and non-deductible permanent items, partially offset by the use of federal employment tax credits.
For the Years Ended December 31, 2023 2022 2021 (Amounts in Thousands, except States and Locations) Net service revenues $ 1,058,651 $ 951,120 $ 864,499 Net income $ 62,516 $ 46,025 $ 45,126 Total assets $ 1,024,426 $ 937,994 $ 947,585 Adjusted EBITDA (1) $ 121,020 $ 101,480 $ 97,661 States served at period end 22 22 22 Locations at period end 219 202 206 (1) The Company defines adjusted EBITDA as earnings before interest expense, other non-operating income, taxes, depreciation, amortization, acquisition expense, stock-based compensation expense, restructure expenses and other non-recurring costs and loss on the sale of assets and retroactive rate increases from New York.
For the Years Ended December 31, 2024 2023 2022 (Amounts in Thousands, except States and Locations) Net service revenues $ 1,154,599 $ 1,058,651 $ 951,120 Net income $ 73,598 $ 62,516 $ 46,025 Total assets $ 1,412,634 $ 1,024,426 $ 937,994 Adjusted EBITDA (1) $ 140,290 $ 121,020 $ 101,480 States served at period end 23 22 22 Locations at period end 258 219 202 (1) The Company defines adjusted EBITDA as earnings before interest expense, other non-operating income, taxes, depreciation, amortization, acquisition expense, stock-based compensation expense, restructure and other non-recurring costs, gain or loss on the sale of assets, impairment of operating lease assets, retroactive rate increases from New York and the retroactive impact from collective bargaining negotiations.
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.
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. 45 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, 2024 2023 2022 (Amounts In Thousands) Reconciliation of net income to Adjusted EBITDA (a): Net income $ 73,598 $ 62,516 $ 46,025 Interest expense, net 3,338 9,630 8,566 Impact of retroactive New York rate increase (3,004 ) (868 ) — Income tax expense 25,755 18,810 14,146 Depreciation and amortization 13,530 14,126 14,060 Acquisition expenses 14,678 6,220 7,657 Stock-based compensation expense 11,165 10,319 10,625 Restructure expense and other related costs — 269 461 Impairment of operating lease assets 4,968 — — Gain on sale of assets (3,738 ) (2 ) (60 ) Adjusted EBITDA* $ 140,290 $ 121,020 $ 101,480 (a) The selected historical Consolidated Statements of Income data for the fiscal years ended December 31, 2024, 2023 and 2022, were derived from our audited Consolidated Financial Statements. * Management deems Adjusted EBITDA to be a key performance indicator.
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 key performance indicators 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.
Changes in Medicare and Medicaid Reimbursement Hospice Hospice services provided to Medicare beneficiaries are paid under the Medicare Hospice Prospective Payment System, under which CMS sets a daily rate for each day a patient is enrolled in the hospice benefit. CMS updates these rates each federal fiscal year. Effective October 1, 2023, CMS increased hospice payment rates by 3.1%.
Changes in Medicare and Medicaid Reimbursement Hospice Hospice services provided to Medicare beneficiaries are paid under the Medicare Hospice Prospective Payment System, under which CMS sets a daily rate for each day a patient is enrolled in the hospice benefit.
Net cash used in financing activities was $8.2 million for the year ended December 31, 2023 compared to $87.4 million for the year ended December 31, 2022.
Net cash provided by financing activities was $272.3 million for the year ended December 31, 2024 compared to net cash used in $8.2 million for the year ended December 31, 2023.
Home Health 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 $ 41,078 72.3 % $ 31,505 73.5 % $ 20,700 78.4 % Managed care organizations 12,613 22.2 8,698 20.3 4,457 16.9 Other 3,087 5.5 2,638 6.2 1,235 4.7 Total home health segment net service revenues $ 56,778 100.0 % $ 42,841 100.0 % $ 26,392 100.0 % New Mexico $ 32,949 58.0 % $ 34,111 79.6 % $ 24,735 93.7 % Illinois 12,851 22.6 8,730 20.4 1,657 6.3 Tennessee 10,978 19.4 — — — — Total home health segment net service revenues $ 56,778 100.0 % $ 42,841 100.0 % $ 26,392 100.0 % With the acquisition of Tennessee Quality Care in 2023, the Company also expanded its home health services to patients in the state of Tennessee.
Home Health 2024 2023 2022 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 $ 48,562 69.5 % $ 41,078 72.3 % $ 31,505 73.5 % Managed care organizations 17,603 25.2 12,613 22.2 8,698 20.3 Other 3,662 5.3 3,087 5.5 2,638 6.2 Total home health segment net service revenues $ 69,827 100.0 % $ 56,778 100.0 % $ 42,841 100.0 % New Mexico $ 32,766 46.9 % $ 32,949 58.0 % $ 34,111 79.6 % Illinois 10,564 15.1 12,851 22.6 8,730 20.4 Tennessee 26,497 38.0 10,978 19.4 — — Total home health segment net service revenues $ 69,827 100.0 % $ 56,778 100.0 % $ 42,841 100.0 % With the Gentiva Acquisition, the Company expanded its home health services to patients in the state of Tennessee.
The changes in accounts receivable were primarily related to the growth in revenue and a decrease in days sales outstanding (“DSO”) during the year ended December 31, 2023 compared to 2022, as described below.
The changes in accounts receivable were primarily related to the growth in revenue during the year ended December 31, 2024 compared to 2023, as described below.
We drew approximately $110.0 million on the revolver portion of our credit facility to fund, in part, the purchase price paid in connection with the Tennessee Quality Care acquisition, and repaid $118.5 million under our revolving credit facility in 2023.
We drew approximately $233.0 million on the revolver portion of our credit facility to fund, in part, the purchase price paid in connection with the Gentiva Acquisition and repaid $136.4 million under our revolving credit facility in 2024.
Outstanding accounts receivable, net of the allowance for credit losses, decreased by $10.0 million as of December 31, 2023 compared to December 31, 2022.
Outstanding accounts receivable, net of the allowance for credit losses, increased by $7.4 million as of December 31, 2024 compared to December 31, 2023.
At December 31, 2023, we had a total of $126.4 million in revolving loans, with an interest rate of 7.21% outstanding on our credit facility.
At December 31, 2024, we had a total of $223.0 million in revolving loans, with an interest rate of 6.34% outstanding on our credit facility.
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.
For calendar year 2025, CMS estimates that Medicare payments to home health agencies will increase by 0.5%. This is based on a home health payment update percentage of 2.7%, which reflects a 3.2% market basket update, reduced by a productivity adjustment of 0.5 percentage points and an estimated 1.8% decrease associated with the transition to the PDGM, among other changes.
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 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.
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.
Net service revenues increased by 7.8% for the year ended December 31, 2024 compared to the year ended December 31, 2023 primarily as a result of an increase in revenues per billable hour of 5.2%, mainly attributed to the rate increases discussed above. 41 Table of Contents Gross profit, expressed as a percentage of net service revenues, increased from 27.9% for the year ended December 31, 2023 to 28.3% for the year ended December 31, 2024 due to an increase in the reimbursement rate.
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.
Depending on the severity and length of any potential economic downturn as well as the extent of any federal support, 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.
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.
Adjusted EBITDA is a performance measure used by management that is not calculated in accordance with GAAP. 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.
On August 1, 2023, we completed the acquisition of Tennessee Quality Care for approximately $111.2 million, with funding primarily provided by drawing on the Company’s revolving credit facility. The purchase price is subject to the completion of working capital and related adjustments.
On August 1, 2023, we completed the acquisition of Tennessee Quality Care for approximately $111.2 million, with funding primarily provided by drawing on the Company’s revolving credit facility. With the purchase of Tennessee Quality Care, the Company expanded its services within its hospice and home health segment to Tennessee.
The increase in general and administrative expenses was primarily due to acquisitions that resulted in a $3.1 million increase in administrative employee wages, taxes and benefit costs and a $0.3 million increase in rent expenses for the year ended December 31, 2023.
The increase in general and administrative expenses was primarily due to increases in administrative employee wages, taxes and benefit costs for the year ended December 31, 2024.
The increase in general and administrative expenses was primarily due to acquisitions that resulted in an increase in administrative employee wages, taxes and benefit costs of $16.3 million. General and administrative expenses, expressed as a percentage of net service revenues, decreased to 22.2% for 2023, from 22.8% in 2022.
The increase in general and administrative expenses was primarily due to the full-year effect of the Tennessee Quality Care acquisition that resulted in an increase in administrative employee wages, taxes and benefit costs of $11.7 million. General and administrative expenses, expressed as a percentage of net service revenues, slightly increased to 22.4% for 2024, from 22.2% in 2023.
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.
CMS approved an amendment to Illinois’ Persons who are Elderly waiver program that included this rate increase, effective January 1, 2025. 36 Table of Contents Our business will benefit from the rate increases noted above as planned for 2025, but there is no assurance that there will be additional rate increases in Illinois for fiscal years beyond fiscal year 2025 to offset increases to minimum wage, and our financial performance will be adversely impacted for any periods in which an additional offsetting reimbursement rate increase is not in effect.
Home Health Segment For the Years Ended December 31, 2023 2022 Change Amount % of Segment Net Service Revenues Amount % of Segment Net Service Revenues Amount % (Amounts in Thousands, Except Percentages) Operating Results Net service revenues $ 56,778 100.0 % $ 42,841 100.0 % $ 13,937 32.5 % Cost of services revenues 35,749 63.0 29,808 69.6 5,941 19.9 Gross profit 21,029 37.0 13,033 30.4 7,996 61.4 General and administrative expenses 14,017 24.7 10,251 23.9 3,766 36.7 Segment operating income $ 7,012 12.3 % $ 2,782 6.5 % $ 4,230 152.0 % Business Metrics (Actual Numbers) Locations at period end 24 13 New admissions * (1) 16,251 14,452 1,799 12.4 % Recertifications * (2) 9,030 5,838 3,192 54.7 Total volume * (3) 25,281 20,290 4,991 24.6 Visits * (4) 344,919 293,381 51,538 17.6 % Organic growth - Revenue * (5) (7.1 ) % 8.2 % (1) Represents new patients during the period.
Home Health Segment For the Years Ended December 31, 2024 2023 Change Amount % of Segment Net Service Revenues Amount % of Segment Net Service Revenues Amount % (Amounts in Thousands, Except Percentages) Operating Results Net service revenues $ 69,827 100.0 % $ 56,778 100.0 % $ 13,049 23.0 % Cost of services revenues 44,115 63.2 35,749 63.0 8,366 23.4 Gross profit 25,712 36.8 21,029 37.0 4,683 22.3 General and administrative expenses 17,778 25.5 14,017 24.7 3,761 26.8 Segment operating income $ 7,934 11.3 % $ 7,012 12.3 % $ 922 13.1 % Business Metrics (Actual Numbers) Locations at period end 24 24 New admissions * (1) 18,622 16,251 2,371 14.6 % Recertifications * (2) 13,047 9,030 4,017 44.5 Total volume * (3) 31,669 25,281 6,388 25.3 Visits * (4) 422,516 344,919 77,597 22.5 % Organic growth - Revenue * (5) (3.1 ) % (7.1 ) % (1) Represents new patients during the period.
General and administrative expenses, expressed as a percentage of net service revenues, was 8.1% and 8.6% for the years ended December 31, 2023 and 2022, respectively. 44 Table of Contents Hospice Segment For the Years Ended December 31, 2023 2022 Change Amount % of Segment Net Service Revenues Amount % of Segment Net Service Revenues Amount % (Amounts in Thousands, Except Percentages) Operating Results Net service revenues $ 207,155 100.0 % $ 201,772 100.0 % $ 5,383 2.7 % Cost of services revenues 110,219 53.2 100,956 50.0 9,263 9.2 Gross profit 96,936 46.8 100,816 50.0 (3,880 ) (3.8 ) General and administrative expenses 52,083 25.1 49,742 24.7 2,341 4.7 Segment operating income $ 44,853 21.7 % $ 51,074 25.3 % $ (6,221 ) (12.2 ) % Business Metrics (Actual Numbers) Locations at period end 39 33 Admissions * (1) 12,902 13,171 (269 ) (2.0 ) % Average daily census * (2) 3,415 3,279 136 4.1 Average length of stay * (3) 94.4 87.7 6.7 7.7 Patient days * (4) 1,203,522 1,176,193 27,329 2.3 Revenue per patient day * (5) $ 175.43 $ 171.55 $ 3.88 2.3 % Organic growth - Revenue * (6) 2.0 % 0.4 % - Average daily census * (6) 0.3 % 1.9 % (1) Represents referral process and new patients on service during the period.
Hospice Segment For the Years Ended December 31, 2024 2023 Change Amount % of Segment Net Service Revenues Amount % of Segment Net Service Revenues Amount % (Amounts in Thousands, Except Percentages) Operating Results Net service revenues $ 228,191 100.0 % $ 207,155 100.0 % $ 21,036 10.2 % Cost of services revenues 120,922 53.0 110,219 53.2 10,703 9.7 Gross profit 107,269 47.0 96,936 46.8 10,333 10.7 General and administrative expenses 55,338 24.3 52,083 25.1 3,255 6.2 Segment operating income $ 51,931 22.7 % $ 44,853 21.7 % $ 7,078 15.8 % Business Metrics (Actual Numbers) Locations at period end 38 39 Admissions * (1) 12,866 12,902 (36 ) (0.3 ) % Average daily census * (2) 3,461 3,415 46 1.3 Average length of stay * (3) 94.1 94.4 (0.3 ) (0.3 ) Patient days * (4) 1,266,701 1,203,522 63,179 5.2 Revenue per patient day * (5) $ 181.08 $ 175.43 $ 5.65 3.2 % Organic growth - Revenue * (6) 5.9 % 2.0 % - Average daily census * (6) 1.3 % 0.3 % (1) Represents referral process and new patients on service during the period.
This reflects a 3.3% market basket increase and a negative 0.2 percentage point productivity adjustment. Hospices that do not satisfy quality reporting requirements will be subject to a 4-percentage point reduction to the market basket update.
This reflects a 3.4% market basket increase and a negative 0.5 percentage point productivity adjustment. Hospices that do not satisfy quality reporting requirements are subject to a 4-percentage point reduction to the market basket update. Overall payments made by Medicare to each hospice provider number are subject to an inpatient cap and an aggregate cap.
GAAP and a reconciliation of this non-GAAP measure included within this Annual Report on Form 10-K should be carefully evaluated. We define Adjusted EBITDA as earnings before interest expense, other non-operating income, taxes, depreciation, amortization, acquisition expenses, stock-based compensation expense, restructure expenses and other non-recurring costs, loss on the sale of assets and retroactive rate increases from New York.
We define Adjusted EBITDA as earnings before interest expense, other non-operating income, taxes, depreciation, amortization, acquisition expenses, stock-based compensation expense, restructure expenses and other non-recurring costs, gain or loss on the sale of assets, impairment of operating lease assets, retroactive rate increases from New York and the retroactive impact from collective bargaining negotiations.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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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.
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, 2024, our net income would have decreased by $0.6 million, or $0.03 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, 2023, we had outstanding borrowings of approximately $126.4 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, 2024, we had outstanding borrowings of approximately $223.0 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.
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.

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