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On Monday, Addus HomeCare Corp. (Nasdaq: ADUS) introduced what could be the biggest transaction of 2024 to this point. The $350 million deal for Gentiva's private care enterprise might mirror a change of tide within the lately sluggish dwelling well being M&A market. It additionally displays Addus' spectacular skill to ship on its strategic imaginative and prescient.

Though the Medicaid Entry Rule was lately finalized – together with the 80/20 provision – private care continues to be insulated from the higher stroke dangers that exist in Medicare-certified dwelling care.

Maybe it's not stunning, then, that the biggest transactions in 2024 have been in private care. Waud Capital acquired dwelling care franchise Senior Helpers earlier this 12 months for an undisclosed quantity. HouseWorks has acquired AccordCare's private care enterprise in Connecticut. Addus has transferred its New York private care places to HCS-Girling and has now agreed to amass Gentiva's private care enterprise.

Addus' two greatest offers of the 12 months additionally mirror Addus' technique. It desires to develop its private care footprint, which is its bread and butter, however not at any price. Abandoning a New York market fraught with regulatory landmines, it’s now poised to turn out to be the biggest supplier of private care in Texas — a state the place it beforehand operated solely hospice places.

Though extremely saturated, Texas can also be a house care market the place suppliers are desirous to function. Meaning it, together with a couple of different states, might characterize one other value-based healthcare marketplace for Addus sooner or later. Addus sees value-based care alternatives in main private care markets, the place it might function its three service traces: private care, dwelling care and hospice. It now ranks first and third in that comparability in Texas.

“We’re optimistic that we are going to see extra enticing acquisition alternatives in 2024,” Addus CEO Dirk Allison mentioned in the course of the firm's fourth-quarter earnings name in February. “We’re at the moment exploring in-person care choices that may permit us to have a bigger presence in a few of our present states. We’re additionally on the lookout for alternatives the place we will enter new states in a fabric method.”

After setting out a really particular imaginative and prescient over the previous two years, Addus has put his phrases into motion. And by mid-2024, it has given life to an M&A market that it might proceed to contribute to for the foreseeable future.

That's the subject of this week's unique, members-only HHCN+ Replace.

Strategic skill

Addus leaders have by no means strayed from a really particular imaginative and prescient lately.

That imaginative and prescient was to proceed to increase its presence in private care, and to search out markets the place it might (re)layer dwelling care on prime of private care to increase its value-based care capabilities.

That view modified solely barely with the 80-20 provision, which can or is probably not applied in six years. Allison mentioned the corporate would exit markets the place the supply would make it tougher to run a worthwhile enterprise. Possibly it already received one out of the way in which when it left New York.

“It was not a steady surroundings. … We felt like we might transfer our capital to different states that have been higher fitted to our applications,” Allison mentioned earlier this month. “After we have been approached to see if we might promote it, we determined to take that step. Though we hate to depart New York, from the viewpoint of the monetary impression and the time we’ve invested, it’s a good transfer for us.”

Primarily based in Frisco, Texas, Addus offers dwelling well being care providers to greater than 49,000 shoppers by way of 214 places throughout 22 states. The non-public care enterprise at the moment represents 74% of gross sales, whereas hospice and residential care characterize roughly 20% and 6% of gross sales, respectively.

Let's take inventory of what the corporate has accomplished to execute the aforementioned strategic imaginative and prescient.

Final 12 months, it acquired Tennessee High quality Look after $106 million, including no less than 14 dwelling care and hospice places to its footprint within the state, on prime of eight current private care places. Of observe is the truth that Tennessee is a Certificates of Want state, which means Addus was in a position to each attain the three legs of the stool within the state, in addition to enter a house care market with much less competitors.

The 12 months earlier than, it acquired Chicago-based Apple Dwelling Healthcare. Whereas this isn't an enormous deal — Apple Dwelling Healthcare reportedly generated about $10 million in annual income on the time of the sale — it match the technique: extra dwelling care in strong private care markets.

Even with dwelling care making up a small portion of whole income, Addus can now create value-based care contracts that embody all three providers in a number of states. Illinois, New Mexico and Arizona already fall into that class, and now Texas will probably be subsequent.

“ADUS is pursuing strategic growth in its core private care providers (PCS) enterprise with the acquisition of Gentiva's PCS enterprise for ~$350 million,” funding banking agency Stephens wrote in an analyst observe. “The seven-state operation generates ~$280 million in annualized income and serves ~16,000 sufferers per day. The deal contains three new markets for ADUS (i.e. TX, MO and NC), with TX representing a #1 market share and accounting for ~79% of the income acquired.”

As famous Monday, Addus can even enter Missouri and North Carolina. Even after leaving New York, the Gentiva deal has already considerably expanded the corporate's footprint thus far.

Worth-based care additionally stays a small a part of Addus' enterprise. However these capabilities are a forward-looking, enjoyable consequence of current acquisitions.

Addus' skill to say what it's going to do after which do it has unsurprisingly labored for the corporate. As of Wednesday afternoon, the corporate's inventory value is up 28% 12 months over 12 months, and up greater than 100% since its 2020 low.