false FY 2020 0001468328 --12-31 true true true true true true true false P6Y 2020 P25Y P1Y P11Y P3M us-gaap:AccruedLiabilitiesCurrent us-gaap:AccruedLiabilitiesCurrent P6Y11M19D P3Y5M1D 0.0172 0.0232 0.0229 0.0284 P4Y2M12D P4Y1M6D P4Y4M24D P4Y2M12D 0001468328 2020-01-01 2020-12-31 xbrli:shares 0001468328 2021-02-19 iso4217:USD 0001468328 2020-06-30 0001468328 2020-12-31 0001468328 2019-12-31 iso4217:USD xbrli:shares 0001468328 2019-01-01 2019-12-31 0001468328 2018-01-01 2018-12-31 0001468328 us-gaap:CommonStockMember 2017-12-31 0001468328 us-gaap:AdditionalPaidInCapitalMember 2017-12-31 0001468328 us-gaap:RetainedEarningsMember 2017-12-31 0001468328 2017-12-31 0001468328 us-gaap:CommonStockMember 2018-01-01 2018-12-31 0001468328 us-gaap:AdditionalPaidInCapitalMember 2018-01-01 2018-12-31 0001468328 us-gaap:RetainedEarningsMember 2018-01-01 2018-12-31 0001468328 us-gaap:CommonStockMember 2018-12-31 0001468328 us-gaap:AdditionalPaidInCapitalMember 2018-12-31 0001468328 us-gaap:RetainedEarningsMember 2018-12-31 0001468328 2018-12-31 0001468328 us-gaap:CommonStockMember 2019-01-01 2019-12-31 0001468328 us-gaap:AdditionalPaidInCapitalMember 2019-01-01 2019-12-31 0001468328 us-gaap:RetainedEarningsMember 2019-01-01 2019-12-31 0001468328 us-gaap:CommonStockMember 2019-12-31 0001468328 us-gaap:AdditionalPaidInCapitalMember 2019-12-31 0001468328 us-gaap:RetainedEarningsMember 2019-12-31 0001468328 us-gaap:CommonStockMember 2020-01-01 2020-12-31 0001468328 us-gaap:AdditionalPaidInCapitalMember 2020-01-01 2020-12-31 0001468328 us-gaap:RetainedEarningsMember 2020-01-01 2020-12-31 0001468328 us-gaap:CommonStockMember 2020-12-31 0001468328 us-gaap:AdditionalPaidInCapitalMember 2020-12-31 0001468328 us-gaap:RetainedEarningsMember 2020-12-31 0001468328 adus:QueenCityHospiceLLCMember 2020-01-01 2020-12-31 0001468328 adus:CountyHomemakersMember 2020-01-01 2020-12-31 0001468328 adus:APlusHealthCaresIncMember 2020-01-01 2020-12-31 0001468328 adus:HospicePartnersMember 2020-01-01 2020-12-31 0001468328 adus:AllianceHomeHealthCareMember 2020-01-01 2020-12-31 0001468328 adus:VIPHealthcareServicesMember 2020-01-01 2020-12-31 0001468328 adus:AmbercareCorporationMember 2020-01-01 2020-12-31 0001468328 adus:ArcadiaHomeCareAndStaffingMember 2020-01-01 2020-12-31 0001468328 adus:LifestyleOptionsIncMember 2020-01-01 2020-12-31 adus:segment xbrli:pure 0001468328 adus:HomeHealthSegmentMember 2017-10-01 2017-10-01 0001468328 adus:HomeHealthSegmentMember 2013-02-28 2013-03-01 0001468328 adus:HomeHealthSegmentMember 2019-01-01 2019-12-31 0001468328 us-gaap:AccountingStandardsUpdate201409Member adus:SubsequentChangesMember 2019-01-01 2019-12-31 0001468328 us-gaap:AccountingStandardsUpdate201409Member adus:SubsequentChangesMember 2018-01-01 2018-12-31 0001468328 us-gaap:AccountingStandardsUpdate201409Member 2020-12-31 0001468328 us-gaap:AccountingStandardsUpdate201409Member 2019-12-31 0001468328 us-gaap:AccountingStandardsUpdate201409Member 2018-01-01 2018-12-31 0001468328 us-gaap:ComputerEquipmentMember srt:MinimumMember 2020-01-01 2020-12-31 0001468328 us-gaap:ComputerEquipmentMember srt:MaximumMember 2020-01-01 2020-12-31 0001468328 us-gaap:FurnitureAndFixturesMember srt:MinimumMember 2020-01-01 2020-12-31 0001468328 us-gaap:FurnitureAndFixturesMember srt:MaximumMember 2020-01-01 2020-12-31 0001468328 us-gaap:TransportationEquipmentMember 2020-01-01 2020-12-31 0001468328 us-gaap:SoftwareAndSoftwareDevelopmentCostsMember srt:MinimumMember 2020-01-01 2020-12-31 0001468328 us-gaap:SoftwareAndSoftwareDevelopmentCostsMember srt:MaximumMember 2020-01-01 2020-12-31 0001468328 us-gaap:LeaseholdImprovementsMember 2020-01-01 2020-12-31 0001468328 srt:MinimumMember 2020-01-01 2020-12-31 0001468328 srt:MaximumMember 2020-01-01 2020-12-31 0001468328 us-gaap:SellingGeneralAndAdministrativeExpensesMember adus:FriscoCorporateHeadquarterMember 2020-01-01 2020-12-31 0001468328 srt:MinimumMember adus:CustomerAndReferralRelationshipsMember 2020-01-01 2020-12-31 0001468328 adus:CustomerAndReferralRelationshipsMember srt:MaximumMember 2020-01-01 2020-12-31 adus:item 0001468328 us-gaap:EmployeeStockOptionMember 2020-12-31 0001468328 us-gaap:EmployeeStockOptionMember 2020-01-01 2020-12-31 0001468328 us-gaap:RestrictedStockMember 2020-01-01 2020-12-31 0001468328 us-gaap:EmployeeStockOptionMember 2019-12-31 0001468328 us-gaap:EmployeeStockOptionMember 2019-01-01 2019-12-31 0001468328 us-gaap:RestrictedStockMember 2019-01-01 2019-12-31 0001468328 us-gaap:EmployeeStockOptionMember 2018-12-31 0001468328 us-gaap:EmployeeStockOptionMember 2018-01-01 2018-12-31 0001468328 us-gaap:RestrictedStockMember 2018-01-01 2018-12-31 0001468328 us-gaap:AccountingStandardsUpdate201613Member 2020-12-31 0001468328 us-gaap:AccountingStandardsUpdate201704Member 2020-12-31 0001468328 us-gaap:AccountingStandardsUpdate201815Member 2020-12-31 0001468328 us-gaap:AccountingStandardsUpdate201912Member 2020-12-31 0001468328 adus:FriscoCorporateHeadquarterMember 2020-01-01 2020-12-31 utr:sqft 0001468328 adus:DownersGroveMember 2020-01-01 2020-12-31 0001468328 adus:FriscoCorporateHeadquarterMember adus:FriscoMember 2020-01-01 2020-12-31 0001468328 us-gaap:CommonStockMember 2019-09-08 2019-09-09 0001468328 us-gaap:OverAllotmentOptionMember us-gaap:CommonStockMember 2019-09-08 2019-09-09 0001468328 us-gaap:CommonStockMember 2019-09-09 0001468328 adus:HospicePartnersOfAmericaLLCMember 2019-10-01 2019-10-01 0001468328 us-gaap:CommonStockMember 2018-08-19 2018-08-20 0001468328 us-gaap:CommonStockMember 2018-08-20 0001468328 us-gaap:CommonStockMember adus:PrimarySharesMember 2018-08-19 2018-08-20 0001468328 us-gaap:CommonStockMember adus:SecondarySharesMember 2018-08-19 2018-08-20 0001468328 us-gaap:CommonStockMember us-gaap:OverAllotmentOptionMember 2018-08-22 2018-08-22 0001468328 adus:TermLoanMember us-gaap:RevolvingCreditFacilityMember 2018-08-22 2018-08-22 0001468328 adus:QueenCityHospiceLLCMember stpr:OH 2020-12-04 2020-12-04 0001468328 adus:QueenCityHospiceLLCMember stpr:OH 2020-01-01 2020-12-31 0001468328 adus:QueenCityHospiceLLCMember 2020-12-04 0001468328 adus:QueenCityHospiceLLCMember us-gaap:TradeNamesMember 2020-01-01 2020-12-31 0001468328 adus:QueenCityHospiceLLCMember us-gaap:TradeNamesMember 2020-12-04 2020-12-04 0001468328 adus:QueenCityHospiceLLCMember us-gaap:NoncompeteAgreementsMember 2020-12-04 2020-12-04 0001468328 adus:QueenCityHospiceLLCMember adus:StateLicensesMember 2020-12-04 2020-12-04 0001468328 adus:CountyHomemakersMember country:PA 2020-11-01 2020-11-01 0001468328 adus:CountyHomemakersMember country:PA 2020-01-01 2020-12-31 0001468328 adus:CountyHomemakersMember 2020-11-01 0001468328 adus:CountyHomemakersMember adus:StateLicensesMember 2020-11-01 2020-11-01 0001468328 adus:CountyHomemakersMember us-gaap:TradeNamesMember 2020-01-01 2020-12-31 0001468328 adus:CountyHomemakersMember us-gaap:TradeNamesMember 2020-11-01 2020-11-01 0001468328 adus:APlusHealthCaresIncMember country:MT 2020-07-01 2020-07-01 0001468328 adus:APlusHealthCaresIncMember country:MT 2020-01-01 2020-12-31 0001468328 adus:APlusHealthCaresIncMember 2020-07-01 0001468328 adus:APlusHealthCaresIncMember us-gaap:TradeNamesMember 2020-01-01 2020-12-31 0001468328 adus:APlusHealthCaresIncMember us-gaap:TradeNamesMember 2020-07-01 2020-07-01 0001468328 adus:SunLifeHospiceMember 2020-01-01 2020-12-31 0001468328 adus:SunLifeHospiceMember 2020-12-31 0001468328 adus:HospicePartnersMember 2019-10-01 2019-10-01 0001468328 adus:HospicePartnersMember us-gaap:CommonStockMember 2019-10-01 2019-10-01 0001468328 adus:HospicePartnersMember us-gaap:CommonStockMember us-gaap:OverAllotmentOptionMember 2019-10-01 2019-10-01 0001468328 adus:HospicePartnersMember us-gaap:CommonStockMember 2019-10-01 adus:location 0001468328 adus:HospicePartnersMember 2019-10-01 0001468328 adus:HospicePartnersMember 2019-01-01 2019-12-31 0001468328 adus:HospicePartnersMember us-gaap:OverAllotmentOptionMember 2020-01-01 2020-12-31 0001468328 adus:HospicePartnersMember us-gaap:TradeNamesMember 2020-01-01 2020-12-31 0001468328 adus:HospicePartnersMember us-gaap:NoncompeteAgreementsMember 2019-10-01 2019-10-01 0001468328 adus:HospicePartnersMember us-gaap:NoncompeteAgreementsMember srt:MinimumMember 2019-10-01 2019-10-01 0001468328 adus:HospicePartnersMember us-gaap:NoncompeteAgreementsMember srt:MaximumMember 2019-10-01 2019-10-01 0001468328 adus:HospicePartnersMember us-gaap:TradeNamesMember 2019-10-01 2019-10-01 0001468328 adus:HospicePartnersMember adus:StateLicensesMember 2019-10-01 2019-10-01 0001468328 adus:AllianceHomeHealthCareMember 2019-08-01 2019-08-01 0001468328 adus:AllianceHomeHealthCareMember 2019-01-01 2019-12-31 0001468328 adus:AllianceHomeHealthCareMember 2019-08-01 0001468328 adus:AllianceHomeHealthCareMember adus:StateLicensesMember 2020-01-01 2020-12-31 0001468328 adus:AllianceHomeHealthCareMember adus:StateLicensesMember 2019-08-01 2019-08-01 0001468328 adus:AllianceHomeHealthCareMember stpr:NY 2019-01-01 2019-12-31 0001468328 adus:VIPHealthcareServicesMember 2019-06-01 2019-06-01 0001468328 adus:VIPHealthcareServicesMember 2019-01-01 2019-12-31 0001468328 adus:VIPHealthcareServicesMember 2019-06-01 0001468328 adus:StateLicensesMember 2019-06-01 2019-06-01 0001468328 us-gaap:CustomerRelationshipsMember 2019-06-01 2019-06-01 0001468328 adus:VIPHealthcareServicesMember adus:StateLicensesMember 2020-01-01 2020-12-31 0001468328 adus:VIPHealthcareServicesMember us-gaap:CustomerRelationshipsMember 2020-01-01 2020-12-31 0001468328 adus:VIPHealthcareServicesMember stpr:NY 2019-01-01 2019-12-31 0001468328 adus:AmbercareCorporationMember stpr:NM 2018-04-30 2018-05-01 0001468328 adus:AmbercareCorporationMember stpr:NM 2018-01-01 2018-12-31 0001468328 adus:AmbercareCorporationMember stpr:NM 2019-01-01 2019-12-31 0001468328 adus:AmbercareCorporationMember 2018-05-01 0001468328 srt:MinimumMember adus:AmbercareCorporationMember adus:TradeNameAndCustomerRelationshipsMember 2020-01-01 2020-12-31 0001468328 adus:AmbercareCorporationMember adus:TradeNameAndCustomerRelationshipsMember srt:MaximumMember 2020-01-01 2020-12-31 0001468328 adus:ArcadiaHomeCareAndStaffingMember 2018-04-01 2018-04-01 0001468328 adus:ArcadiaHomeCareAndStaffingMember 2018-01-01 2018-12-31 0001468328 adus:ArcadiaHomeCareAndStaffingMember 2019-01-01 2019-12-31 0001468328 adus:ArcadiaHomeCareAndStaffingMember 2018-04-01 0001468328 srt:MinimumMember adus:ArcadiaHomeCareAndStaffingMember adus:TradeNamesCustomerRelationshipsAndStateLicensesMember 2020-01-01 2020-12-31 0001468328 adus:ArcadiaHomeCareAndStaffingMember adus:TradeNamesCustomerRelationshipsAndStateLicensesMember srt:MaximumMember 2020-01-01 2020-12-31 0001468328 adus:AffiliateBranchesOfArcadiaMember 2018-09-01 2018-09-30 0001468328 adus:AffiliateBranchesOfArcadiaMember 2018-09-30 0001468328 adus:LifestyleOptionsIncMember stpr:IL 2018-01-01 2018-01-01 0001468328 adus:LifestyleOptionsIncMember stpr:IL 2018-01-01 0001468328 adus:LifestyleOptionsIncMember stpr:IL 2018-01-01 2018-12-31 0001468328 adus:LifestyleOptionsIncMember 2018-01-01 0001468328 srt:MinimumMember adus:LifestyleOptionsIncMember adus:TradeNameAndCustomerRelationshipsMember 2020-01-01 2020-12-31 0001468328 adus:LifestyleOptionsIncMember adus:TradeNameAndCustomerRelationshipsMember srt:MaximumMember 2020-01-01 2020-12-31 0001468328 adus:QueenCityHospiceAPlusAndCountyHomemakersMember 2020-01-01 2020-12-31 0001468328 adus:HospicPartnersAllianceAndVIPMember 2019-01-01 2019-12-31 0001468328 adus:AmbercareArcadiaLifeStyleMember 2018-01-01 2018-12-31 0001468328 us-gaap:ComputerEquipmentMember 2020-12-31 0001468328 us-gaap:ComputerEquipmentMember 2019-12-31 0001468328 us-gaap:FurnitureAndFixturesMember 2020-12-31 0001468328 us-gaap:FurnitureAndFixturesMember 2019-12-31 0001468328 us-gaap:TransportationEquipmentMember 2020-12-31 0001468328 us-gaap:TransportationEquipmentMember 2019-12-31 0001468328 us-gaap:LeaseholdImprovementsMember 2020-12-31 0001468328 us-gaap:LeaseholdImprovementsMember 2019-12-31 0001468328 us-gaap:SoftwareAndSoftwareDevelopmentCostsMember 2020-12-31 0001468328 us-gaap:SoftwareAndSoftwareDevelopmentCostsMember 2019-12-31 0001468328 us-gaap:SoftwareDevelopmentMember 2020-12-31 0001468328 us-gaap:SoftwareDevelopmentMember 2019-12-31 0001468328 us-gaap:SoftwareDevelopmentMember 2020-01-01 2020-12-31 0001468328 us-gaap:SoftwareDevelopmentMember 2019-01-01 2019-12-31 0001468328 us-gaap:SoftwareDevelopmentMember 2018-01-01 2018-12-31 0001468328 adus:HospiceMember 2018-12-31 0001468328 adus:PersonalCareMember 2018-12-31 0001468328 adus:HomeHealthMember 2018-12-31 0001468328 adus:HospiceMember 2019-01-01 2019-12-31 0001468328 adus:PersonalCareMember 2019-01-01 2019-12-31 0001468328 adus:HomeHealthMember 2019-01-01 2019-12-31 0001468328 adus:HospiceMember 2019-12-31 0001468328 adus:PersonalCareMember 2019-12-31 0001468328 adus:HomeHealthMember 2019-12-31 0001468328 adus:HospiceMember 2020-01-01 2020-12-31 0001468328 adus:PersonalCareMember 2020-01-01 2020-12-31 0001468328 adus:HomeHealthMember 2020-01-01 2020-12-31 0001468328 adus:HospiceMember 2020-12-31 0001468328 adus:PersonalCareMember 2020-12-31 0001468328 adus:HomeHealthMember 2020-12-31 0001468328 adus:QueenCityHospiceLLCMember adus:HospiceMember 2020-12-04 0001468328 adus:CountyHomemakersAPlusHealthCareAndSunLifeMember adus:PersonalCareMember 2020-12-31 0001468328 us-gaap:GeneralAndAdministrativeExpenseMember 2020-01-01 2020-12-31 0001468328 adus:StateLicensesMember 2020-12-31 0001468328 us-gaap:CustomerRelationshipsMember 2020-12-31 0001468328 us-gaap:TrademarksAndTradeNamesMember 2020-12-31 0001468328 us-gaap:NoncompeteAgreementsMember 2020-12-31 0001468328 adus:StateLicensesMember 2019-12-31 0001468328 us-gaap:CustomerRelationshipsMember 2019-12-31 0001468328 us-gaap:TrademarksAndTradeNamesMember 2019-12-31 0001468328 us-gaap:NoncompeteAgreementsMember 2019-12-31 0001468328 adus:QueenCityHospiceLLCMember adus:StateLicensesMember 2020-01-01 2020-12-31 0001468328 adus:QueenCityHospiceLLCMember us-gaap:NoncompeteAgreementsMember 2020-01-01 2020-12-31 0001468328 adus:CountyHomemakersMember adus:StateLicensesMember 2020-01-01 2020-12-31 0001468328 adus:CoronavirusAidReliefAndEconomicSecurityActMember 2020-12-31 0001468328 adus:QueenCityHospiceLLCMember 2020-12-31 0001468328 adus:ProviderReliefFundMember adus:CoronavirusAidReliefAndEconomicSecurityActMember 2020-04-01 2020-04-30 0001468328 adus:ProviderReliefFundMember adus:CoronavirusAidReliefAndEconomicSecurityActMember 2020-06-01 2020-06-30 0001468328 adus:ProviderReliefFundMember adus:CoronavirusAidReliefAndEconomicSecurityActMember 2020-11-01 2020-11-30 0001468328 adus:ProviderReliefFundMember adus:CoronavirusAidReliefAndEconomicSecurityActMember 2020-01-01 2020-12-31 0001468328 adus:ProviderReliefFundMember adus:QueenCityHospiceLLCMember adus:CoronavirusAidReliefAndEconomicSecurityActMember 2020-04-01 2020-04-30 0001468328 adus:ProviderReliefFundMember adus:CoronavirusAidReliefAndEconomicSecurityActMember srt:MinimumMember 2020-04-01 2020-04-30 0001468328 adus:MedicareAcceleratedAndAdvancePaymentProgramMember adus:CoronavirusAidReliefAndEconomicSecurityActMember adus:HospiceAndHomeHealthMember 2020-04-01 2020-04-30 0001468328 adus:MedicareAcceleratedAndAdvancePaymentProgramMember adus:CoronavirusAidReliefAndEconomicSecurityActMember srt:MaximumMember adus:HospiceAndHomeHealthMember 2020-04-01 2020-04-30 0001468328 adus:MedicareAcceleratedAndAdvancePaymentProgramMember adus:CoronavirusAidReliefAndEconomicSecurityActMember adus:QueenCityHospiceLLCMember 2020-04-30 0001468328 adus:MedicareAcceleratedAndAdvancePaymentProgramMember adus:CoronavirusAidReliefAndEconomicSecurityActMember adus:QueenCityHospiceLLCMember 2020-04-01 2020-04-30 0001468328 adus:CoronavirusAidReliefAndEconomicSecurityActMember 2020-04-30 0001468328 adus:SeniorSecuredCreditFacilityMember us-gaap:RevolvingCreditFacilityMember 2020-12-31 0001468328 adus:SeniorSecuredCreditFacilityMember us-gaap:RevolvingCreditFacilityMember 2019-12-31 0001468328 adus:TermLoanMember adus:SeniorSecuredCreditFacilityMember 2020-12-31 0001468328 adus:TermLoanMember adus:SeniorSecuredCreditFacilityMember 2019-12-31 0001468328 adus:CreditAgreementMember adus:CapitalOneMember 2018-10-31 0001468328 adus:CreditAgreementMember adus:CapitalOneMember us-gaap:RevolvingCreditFacilityMember 2018-10-31 0001468328 adus:CreditAgreementMember adus:CapitalOneMember adus:DelayedDrawTermLoanMember 2018-10-31 0001468328 adus:CreditAgreementMember adus:CapitalOneMember 2018-10-01 2018-10-31 0001468328 adus:CreditAgreementMember adus:CapitalOneMember adus:BasedOnApplicableSeniorLeverageRatioMember srt:MinimumMember 2018-10-01 2018-10-31 0001468328 adus:CreditAgreementMember adus:CapitalOneMember adus:BasedOnApplicableSeniorLeverageRatioMember srt:MaximumMember 2018-10-01 2018-10-31 0001468328 adus:CreditAgreementMember adus:CapitalOneMember adus:FederalFundsRateMember 2018-10-01 2018-10-31 0001468328 adus:CreditAgreementMember adus:CapitalOneMember us-gaap:LondonInterbankOfferedRateLIBORMember srt:MinimumMember 2018-10-01 2018-10-31 0001468328 adus:CreditAgreementMember adus:CapitalOneMember us-gaap:LondonInterbankOfferedRateLIBORMember 2018-10-01 2018-10-31 0001468328 adus:CreditAgreementMember adus:CapitalOneMember adus:BasedOnApplicableLeverageRatioMember srt:MinimumMember 2018-10-01 2018-10-31 0001468328 adus:CreditAgreementMember adus:CapitalOneMember adus:BasedOnApplicableLeverageRatioMember srt:MaximumMember 2018-10-01 2018-10-31 0001468328 adus:CreditAgreementMember adus:CapitalOneMember srt:MaximumMember 2018-10-01 2018-10-31 0001468328 adus:CreditAgreementMember us-gaap:RevolvingCreditFacilityMember adus:CapitalOneMember srt:MinimumMember 2020-01-01 2020-12-31 0001468328 adus:CreditAgreementMember us-gaap:RevolvingCreditFacilityMember adus:CapitalOneMember srt:MaximumMember 2020-01-01 2020-12-31 0001468328 adus:RestrictionOnDividendsMember adus:CreditAgreementMember srt:MaximumMember adus:CapitalOneMember 2020-01-01 2020-12-31 0001468328 adus:CreditAgreementMember adus:CapitalOneMember us-gaap:RevolvingCreditFacilityMember 2019-09-11 2019-09-12 0001468328 adus:CreditAgreementMember adus:CapitalOneMember us-gaap:RevolvingCreditFacilityMember 2019-09-12 0001468328 adus:CreditAgreementMember us-gaap:RevolvingCreditFacilityMember adus:CapitalOneMember adus:QueenCityHospiceLLCMember 2020-01-01 2020-12-31 0001468328 adus:CreditAgreementMember adus:CapitalOneMember us-gaap:RevolvingCreditFacilityMember 2020-12-31 0001468328 adus:CreditAgreementMember adus:CapitalOneMember adus:TermLoanMember 2020-12-31 0001468328 adus:CreditAgreementMember adus:CapitalOneMember 2020-12-31 0001468328 adus:CreditAgreementMember adus:CapitalOneMember us-gaap:RevolvingCreditFacilityMember 2019-12-31 0001468328 adus:CreditAgreementMember adus:TermLoanMember adus:CapitalOneMember 2019-12-31 0001468328 adus:CreditAgreementMember adus:CapitalOneMember 2019-12-31 0001468328 adus:CreditAgreementMember adus:CapitalOneMember adus:DelayedDrawTermLoanMember adus:AllianceHomeHealthCareMember 2019-08-01 2019-08-01 0001468328 adus:CreditAgreementMember adus:CapitalOneMember us-gaap:RevolvingCreditFacilityMember adus:VIPHealthcareServicesMember 2019-06-01 2019-06-01 0001468328 us-gaap:EarliestTaxYearMember us-gaap:DomesticCountryMember 2020-01-01 2020-12-31 0001468328 us-gaap:LatestTaxYearMember us-gaap:DomesticCountryMember 2020-01-01 2020-12-31 0001468328 us-gaap:EarliestTaxYearMember us-gaap:StateAndLocalJurisdictionMember 2020-01-01 2020-12-31 0001468328 us-gaap:LatestTaxYearMember us-gaap:StateAndLocalJurisdictionMember 2020-01-01 2020-12-31 0001468328 adus:TwoThousandSeventeenStockIncentivePlanMember 2020-12-31 0001468328 adus:TwoThousandSeventeenStockIncentivePlanMember adus:StockOptionsOrStockAppreciationRightsMember 2020-12-31 0001468328 adus:TwoThousandSeventeenStockIncentivePlanMember adus:AwardsDenominatedInSharesOfCommonStockMember 2020-12-31 0001468328 adus:TwoThousandSeventeenStockIncentivePlanMember us-gaap:EmployeeStockOptionMember srt:MinimumMember 2020-01-01 2020-12-31 0001468328 adus:TwoThousandSeventeenStockIncentivePlanMember us-gaap:EmployeeStockOptionMember srt:MaximumMember 2020-01-01 2020-12-31 0001468328 adus:TwoThousandSeventeenStockIncentivePlanMember us-gaap:RestrictedStockMember srt:MinimumMember 2020-01-01 2020-12-31 0001468328 adus:TwoThousandSeventeenStockIncentivePlanMember us-gaap:RestrictedStockMember srt:MaximumMember 2020-01-01 2020-12-31 0001468328 adus:TwoThousandSeventeenStockIncentivePlanMember us-gaap:EmployeeStockOptionMember 2020-01-01 2020-12-31 0001468328 adus:TwoThousandSeventeenStockIncentivePlanMember us-gaap:RestrictedStockMember 2020-01-01 2020-12-31 0001468328 srt:MinimumMember us-gaap:EmployeeStockOptionMember 2019-01-01 2019-12-31 0001468328 srt:MinimumMember us-gaap:EmployeeStockOptionMember 2018-01-01 2018-12-31 0001468328 srt:MaximumMember us-gaap:EmployeeStockOptionMember 2019-01-01 2019-12-31 0001468328 srt:MaximumMember us-gaap:EmployeeStockOptionMember 2018-01-01 2018-12-31 0001468328 us-gaap:RestrictedStockMember 2019-12-31 0001468328 us-gaap:RestrictedStockMember 2020-12-31 0001468328 adus:FourZeroOneKRetirementPlanMember 2020-01-01 2020-12-31 0001468328 adus:FourZeroOneKRetirementPlanMember 2019-01-01 2019-12-31 0001468328 adus:FourZeroOneKRetirementPlanMember 2018-01-01 2018-12-31 0001468328 adus:PaycheckProtectionProgramAndHealthCareEnhancementActMember 2020-04-25 2020-12-27 0001468328 adus:PaycheckProtectionProgramAndHealthCareEnhancementActMember srt:ScenarioForecastMember 2020-05-01 2021-03-31 0001468328 adus:PaycheckProtectionProgramAndHealthCareEnhancementActMember adus:HomeHealthMember 2020-01-01 2020-12-31 0001468328 adus:PaycheckProtectionProgramAndHealthCareEnhancementActMember adus:HospiceMember 2020-01-01 2020-12-31 0001468328 adus:PersonalCareMember us-gaap:OperatingSegmentsMember 2020-01-01 2020-12-31 0001468328 adus:HospiceMember us-gaap:OperatingSegmentsMember 2020-01-01 2020-12-31 0001468328 adus:HomeHealthMember us-gaap:OperatingSegmentsMember 2020-01-01 2020-12-31 0001468328 us-gaap:OperatingSegmentsMember 2020-01-01 2020-12-31 0001468328 adus:PersonalCareMember us-gaap:OperatingSegmentsMember 2019-01-01 2019-12-31 0001468328 adus:HospiceMember us-gaap:OperatingSegmentsMember 2019-01-01 2019-12-31 0001468328 adus:HomeHealthMember us-gaap:OperatingSegmentsMember 2019-01-01 2019-12-31 0001468328 us-gaap:OperatingSegmentsMember 2019-01-01 2019-12-31 0001468328 adus:PersonalCareMember 2018-01-01 2018-12-31 0001468328 adus:HospiceMember 2018-01-01 2018-12-31 0001468328 adus:HomeHealthMember 2018-01-01 2018-12-31 0001468328 adus:PersonalCareMember us-gaap:OperatingSegmentsMember 2018-01-01 2018-12-31 0001468328 adus:HospiceMember us-gaap:OperatingSegmentsMember 2018-01-01 2018-12-31 0001468328 adus:HomeHealthMember us-gaap:OperatingSegmentsMember 2018-01-01 2018-12-31 0001468328 us-gaap:OperatingSegmentsMember 2018-01-01 2018-12-31 0001468328 adus:PersonalCareMember us-gaap:SalesRevenueNetMember us-gaap:CustomerConcentrationRiskMember adus:StateLocalAndOtherGovernmentalProgramsMember 2020-01-01 2020-12-31 0001468328 adus:PersonalCareMember us-gaap:SalesRevenueNetMember us-gaap:CustomerConcentrationRiskMember adus:ManagedCareOrganizationsMember 2020-01-01 2020-12-31 0001468328 adus:PersonalCareMember us-gaap:SalesRevenueNetMember us-gaap:CustomerConcentrationRiskMember adus:PrivatePayMember 2020-01-01 2020-12-31 0001468328 adus:PersonalCareMember us-gaap:SalesRevenueNetMember us-gaap:CustomerConcentrationRiskMember adus:CommercialInsuranceMember 2020-01-01 2020-12-31 0001468328 adus:PersonalCareMember us-gaap:SalesRevenueNetMember us-gaap:CustomerConcentrationRiskMember adus:OtherMember 2020-01-01 2020-12-31 0001468328 adus:PersonalCareMember us-gaap:SalesRevenueNetMember us-gaap:CustomerConcentrationRiskMember 2020-01-01 2020-12-31 0001468328 adus:PersonalCareMember us-gaap:SalesRevenueNetMember us-gaap:CustomerConcentrationRiskMember adus:StateLocalAndOtherGovernmentalProgramsMember 2019-01-01 2019-12-31 0001468328 adus:PersonalCareMember us-gaap:SalesRevenueNetMember us-gaap:CustomerConcentrationRiskMember adus:ManagedCareOrganizationsMember 2019-01-01 2019-12-31 0001468328 adus:PersonalCareMember us-gaap:SalesRevenueNetMember us-gaap:CustomerConcentrationRiskMember adus:PrivatePayMember 2019-01-01 2019-12-31 0001468328 adus:PersonalCareMember us-gaap:SalesRevenueNetMember us-gaap:CustomerConcentrationRiskMember adus:CommercialInsuranceMember 2019-01-01 2019-12-31 0001468328 adus:PersonalCareMember us-gaap:SalesRevenueNetMember us-gaap:CustomerConcentrationRiskMember adus:OtherMember 2019-01-01 2019-12-31 0001468328 adus:PersonalCareMember us-gaap:SalesRevenueNetMember us-gaap:CustomerConcentrationRiskMember 2019-01-01 2019-12-31 0001468328 adus:PersonalCareMember us-gaap:SalesRevenueNetMember us-gaap:CustomerConcentrationRiskMember adus:StateLocalAndOtherGovernmentalProgramsMember 2018-01-01 2018-12-31 0001468328 adus:PersonalCareMember us-gaap:SalesRevenueNetMember us-gaap:CustomerConcentrationRiskMember adus:ManagedCareOrganizationsMember 2018-01-01 2018-12-31 0001468328 adus:PersonalCareMember us-gaap:SalesRevenueNetMember us-gaap:CustomerConcentrationRiskMember adus:PrivatePayMember 2018-01-01 2018-12-31 0001468328 adus:PersonalCareMember us-gaap:SalesRevenueNetMember us-gaap:CustomerConcentrationRiskMember adus:CommercialInsuranceMember 2018-01-01 2018-12-31 0001468328 adus:PersonalCareMember us-gaap:SalesRevenueNetMember us-gaap:CustomerConcentrationRiskMember adus:OtherMember 2018-01-01 2018-12-31 0001468328 adus:PersonalCareMember us-gaap:SalesRevenueNetMember us-gaap:CustomerConcentrationRiskMember 2018-01-01 2018-12-31 0001468328 adus:HospiceMember us-gaap:SalesRevenueNetMember us-gaap:CustomerConcentrationRiskMember adus:MedicareMember 2020-01-01 2020-12-31 0001468328 adus:HospiceMember us-gaap:SalesRevenueNetMember us-gaap:CustomerConcentrationRiskMember adus:ManagedCareOrganizationsMember 2020-01-01 2020-12-31 0001468328 adus:HospiceMember us-gaap:SalesRevenueNetMember us-gaap:CustomerConcentrationRiskMember adus:OtherMember 2020-01-01 2020-12-31 0001468328 adus:HospiceMember us-gaap:SalesRevenueNetMember us-gaap:CustomerConcentrationRiskMember 2020-01-01 2020-12-31 0001468328 adus:HospiceMember us-gaap:SalesRevenueNetMember us-gaap:CustomerConcentrationRiskMember adus:MedicareMember 2019-01-01 2019-12-31 0001468328 adus:HospiceMember us-gaap:SalesRevenueNetMember us-gaap:CustomerConcentrationRiskMember adus:ManagedCareOrganizationsMember 2019-01-01 2019-12-31 0001468328 adus:HospiceMember us-gaap:SalesRevenueNetMember us-gaap:CustomerConcentrationRiskMember adus:OtherMember 2019-01-01 2019-12-31 0001468328 adus:HospiceMember us-gaap:SalesRevenueNetMember us-gaap:CustomerConcentrationRiskMember 2019-01-01 2019-12-31 0001468328 adus:HospiceMember us-gaap:SalesRevenueNetMember us-gaap:CustomerConcentrationRiskMember adus:MedicareMember 2018-01-01 2018-12-31 0001468328 adus:HospiceMember us-gaap:SalesRevenueNetMember us-gaap:CustomerConcentrationRiskMember adus:ManagedCareOrganizationsMember 2018-01-01 2018-12-31 0001468328 adus:HospiceMember us-gaap:SalesRevenueNetMember us-gaap:CustomerConcentrationRiskMember adus:OtherMember 2018-01-01 2018-12-31 0001468328 adus:HospiceMember us-gaap:SalesRevenueNetMember us-gaap:CustomerConcentrationRiskMember 2018-01-01 2018-12-31 0001468328 adus:MedicareMember us-gaap:SalesRevenueNetMember us-gaap:CustomerConcentrationRiskMember adus:HomeHealthMember 2020-01-01 2020-12-31 0001468328 adus:ManagedCareOrganizationsMember us-gaap:SalesRevenueNetMember us-gaap:CustomerConcentrationRiskMember adus:HomeHealthMember 2020-01-01 2020-12-31 0001468328 adus:OtherMember us-gaap:SalesRevenueNetMember us-gaap:CustomerConcentrationRiskMember adus:HomeHealthMember 2020-01-01 2020-12-31 0001468328 us-gaap:SalesRevenueNetMember us-gaap:CustomerConcentrationRiskMember adus:HomeHealthMember 2020-01-01 2020-12-31 0001468328 adus:MedicareMember us-gaap:SalesRevenueNetMember us-gaap:CustomerConcentrationRiskMember adus:HomeHealthMember 2019-01-01 2019-12-31 0001468328 adus:ManagedCareOrganizationsMember us-gaap:SalesRevenueNetMember us-gaap:CustomerConcentrationRiskMember adus:HomeHealthMember 2019-01-01 2019-12-31 0001468328 adus:OtherMember us-gaap:SalesRevenueNetMember us-gaap:CustomerConcentrationRiskMember adus:HomeHealthMember 2019-01-01 2019-12-31 0001468328 us-gaap:SalesRevenueNetMember us-gaap:CustomerConcentrationRiskMember adus:HomeHealthMember 2019-01-01 2019-12-31 0001468328 adus:MedicareMember us-gaap:SalesRevenueNetMember us-gaap:CustomerConcentrationRiskMember adus:HomeHealthMember 2018-01-01 2018-12-31 0001468328 adus:ManagedCareOrganizationsMember us-gaap:SalesRevenueNetMember us-gaap:CustomerConcentrationRiskMember adus:HomeHealthMember 2018-01-01 2018-12-31 0001468328 adus:OtherMember us-gaap:SalesRevenueNetMember us-gaap:CustomerConcentrationRiskMember adus:HomeHealthMember 2018-01-01 2018-12-31 0001468328 us-gaap:SalesRevenueNetMember us-gaap:CustomerConcentrationRiskMember adus:HomeHealthMember 2018-01-01 2018-12-31 0001468328 adus:PersonalCareMember us-gaap:SalesRevenueNetMember us-gaap:GeographicConcentrationRiskMember stpr:IL 2020-01-01 2020-12-31 0001468328 adus:PersonalCareMember us-gaap:SalesRevenueNetMember us-gaap:GeographicConcentrationRiskMember stpr:NY 2020-01-01 2020-12-31 0001468328 adus:PersonalCareMember us-gaap:SalesRevenueNetMember us-gaap:GeographicConcentrationRiskMember stpr:NM 2020-01-01 2020-12-31 0001468328 adus:PersonalCareMember us-gaap:SalesRevenueNetMember us-gaap:GeographicConcentrationRiskMember adus:AllOtherStatesMember 2020-01-01 2020-12-31 0001468328 adus:PersonalCareMember us-gaap:SalesRevenueNetMember us-gaap:GeographicConcentrationRiskMember 2020-01-01 2020-12-31 0001468328 adus:PersonalCareMember us-gaap:SalesRevenueNetMember us-gaap:GeographicConcentrationRiskMember stpr:IL 2019-01-01 2019-12-31 0001468328 adus:PersonalCareMember us-gaap:SalesRevenueNetMember us-gaap:GeographicConcentrationRiskMember stpr:NY 2019-01-01 2019-12-31 0001468328 adus:PersonalCareMember us-gaap:SalesRevenueNetMember us-gaap:GeographicConcentrationRiskMember stpr:NM 2019-01-01 2019-12-31 0001468328 adus:PersonalCareMember us-gaap:SalesRevenueNetMember us-gaap:GeographicConcentrationRiskMember adus:AllOtherStatesMember 2019-01-01 2019-12-31 0001468328 adus:PersonalCareMember us-gaap:SalesRevenueNetMember us-gaap:GeographicConcentrationRiskMember 2019-01-01 2019-12-31 0001468328 adus:PersonalCareMember us-gaap:SalesRevenueNetMember us-gaap:GeographicConcentrationRiskMember stpr:IL 2018-01-01 2018-12-31 0001468328 adus:PersonalCareMember us-gaap:SalesRevenueNetMember us-gaap:GeographicConcentrationRiskMember stpr:NY 2018-01-01 2018-12-31 0001468328 adus:PersonalCareMember us-gaap:SalesRevenueNetMember us-gaap:GeographicConcentrationRiskMember stpr:NM 2018-01-01 2018-12-31 0001468328 adus:PersonalCareMember us-gaap:SalesRevenueNetMember us-gaap:GeographicConcentrationRiskMember adus:AllOtherStatesMember 2018-01-01 2018-12-31 0001468328 adus:PersonalCareMember us-gaap:SalesRevenueNetMember us-gaap:GeographicConcentrationRiskMember 2018-01-01 2018-12-31 0001468328 adus:HospiceMember us-gaap:SalesRevenueNetMember us-gaap:GeographicConcentrationRiskMember stpr:NM 2020-01-01 2020-12-31 0001468328 adus:HospiceMember us-gaap:SalesRevenueNetMember us-gaap:GeographicConcentrationRiskMember adus:AllOtherStatesMember 2020-01-01 2020-12-31 0001468328 adus:HospiceMember us-gaap:SalesRevenueNetMember us-gaap:GeographicConcentrationRiskMember 2020-01-01 2020-12-31 0001468328 adus:HospiceMember us-gaap:SalesRevenueNetMember us-gaap:GeographicConcentrationRiskMember stpr:NM 2019-01-01 2019-12-31 0001468328 adus:HospiceMember us-gaap:SalesRevenueNetMember us-gaap:GeographicConcentrationRiskMember adus:AllOtherStatesMember 2019-01-01 2019-12-31 0001468328 adus:HospiceMember us-gaap:SalesRevenueNetMember us-gaap:GeographicConcentrationRiskMember 2019-01-01 2019-12-31 0001468328 adus:HospiceMember us-gaap:SalesRevenueNetMember us-gaap:GeographicConcentrationRiskMember stpr:NM 2018-01-01 2018-12-31 0001468328 adus:HospiceMember us-gaap:SalesRevenueNetMember us-gaap:GeographicConcentrationRiskMember 2018-01-01 2018-12-31 0001468328 adus:HomeHealthMember us-gaap:SalesRevenueNetMember us-gaap:GeographicConcentrationRiskMember stpr:NM 2020-01-01 2020-12-31 0001468328 adus:HomeHealthMember us-gaap:SalesRevenueNetMember us-gaap:GeographicConcentrationRiskMember 2020-01-01 2020-12-31 0001468328 adus:HomeHealthMember us-gaap:SalesRevenueNetMember us-gaap:GeographicConcentrationRiskMember stpr:NM 2019-01-01 2019-12-31 0001468328 adus:HomeHealthMember us-gaap:SalesRevenueNetMember us-gaap:GeographicConcentrationRiskMember 2019-01-01 2019-12-31 0001468328 adus:HomeHealthMember us-gaap:SalesRevenueNetMember us-gaap:GeographicConcentrationRiskMember stpr:NM 2018-01-01 2018-12-31 0001468328 adus:HomeHealthMember us-gaap:SalesRevenueNetMember us-gaap:GeographicConcentrationRiskMember 2018-01-01 2018-12-31 0001468328 us-gaap:SalesRevenueNetMember adus:IllinoisDepartmentOnAgingMember 2020-01-01 2020-12-31 0001468328 us-gaap:SalesRevenueNetMember adus:IllinoisDepartmentOnAgingMember 2019-01-01 2019-12-31 0001468328 us-gaap:SalesRevenueNetMember adus:IllinoisDepartmentOnAgingMember 2018-01-01 2018-12-31 0001468328 us-gaap:SalesRevenueNetMember us-gaap:GeographicConcentrationRiskMember stpr:IL 2020-01-01 2020-12-31 0001468328 us-gaap:SalesRevenueNetMember us-gaap:GeographicConcentrationRiskMember stpr:IL 2019-01-01 2019-12-31 0001468328 us-gaap:SalesRevenueNetMember us-gaap:GeographicConcentrationRiskMember stpr:IL 2018-01-01 2018-12-31 0001468328 us-gaap:AccountsReceivableMember adus:IllinoisDepartmentOnAgingMember 2020-01-01 2020-12-31 0001468328 us-gaap:AccountsReceivableMember adus:IllinoisDepartmentOnAgingMember 2019-01-01 2019-12-31 0001468328 2020-10-01 2020-12-31 0001468328 2020-07-01 2020-09-30 0001468328 2020-04-01 2020-06-30 0001468328 2020-01-01 2020-03-31 0001468328 2019-10-01 2019-12-31 0001468328 2019-07-01 2019-09-30 0001468328 2019-04-01 2019-06-30 0001468328 2019-01-01 2019-03-31 0001468328 adus:ConsumerDirectedPersonalAssistanceProgramMember srt:MinimumMember us-gaap:SubsequentEventMember 2021-02-11 2021-02-11 0001468328 adus:ConsumerDirectedPersonalAssistanceProgramMember us-gaap:SubsequentEventMember srt:MaximumMember 2021-02-11 2021-02-11 0001468328 adus:ConsumerDirectedPersonalAssistanceProgramMember us-gaap:SubsequentEventMember 2021-02-11 2021-02-11

Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K

 

 

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the fiscal year ended December 31, 2020

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from              to             

Commission file number 001-34504

 

ADDUS HOMECARE CORPORATION

(Exact name of registrant as specified in its charter)

 

Delaware

 

20-5340172

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

6303 Cowboys Way, Suite 600 Frisco, TX

 

75034

(Address of principal executive offices)

 

(Zip Code)

469-535-8200

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.001 par value

ADUS

The Nasdaq Global Market

 

Securities registered pursuant to Section 12(g) of the Act:

None

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes       No  .

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.    Yes      No  .

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  .

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large Accelerated Filer

 

Accelerated Filer

Non-Accelerated Filer

 

Smaller Reporting Company

 

 

 

Emerging Growth Company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.      

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act)    Yes      No  

The aggregate market value of the voting and non-voting common stock held by non-affiliates of the registrant, based on the last sale price on The Nasdaq Global Market on June 30, 2020 (the last business day of the registrant’s most recently completed second fiscal quarter) was approximately $1,335,406,000.

As of February 19, 2021, there were 15,826,284 shares of common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Certain portions of the registrant’s Definitive Proxy Statement for its 2021 Annual Meeting of Stockholders (which is expected to be filed with the Commission within 120 days after the end of the registrant’s 2020 fiscal year) are incorporated by reference into Part III of this Annual Report on Form 10-K.

 

 


Table of Contents

 

 

TABLE OF CONTENTS

 

PART I

 

 

 

3

Item 1.

 

Business

 

3

Item 1A.

 

Risk Factors

 

18

Item 1B.

 

Unresolved Staff Comments

 

33

Item 2.

 

Properties

 

33

Item 3.

 

Legal Proceedings

 

33

Item 4.

 

Mine Safety Disclosures

 

33

 

 

 

 

 

PART II

 

 

 

34

Item 5.

 

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

 

34

Item 6.

 

Selected Financial Data

 

35

Item 7.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

41

Item 7A.

 

Quantitative and Qualitative Disclosures about Market Risk

 

61

Item 8.

 

Financial Statements and Supplementary Data

 

61

Item 9.

 

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

 

61

Item 9A.

 

Controls and Procedures

 

61

Item 9B.

 

Other Information

 

62

 

 

 

 

 

PART III

 

 

 

63

Item 10.

 

Directors, Executive Officers and Corporate Governance

 

63

Item 11.

 

Executive Compensation

 

63

Item 12.

 

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

 

63

Item 13.

 

Certain Relationships and Related Transactions, and Director Independence

 

63

Item 14.

 

Principal Accounting Fees and Services

 

63

 

 

 

 

 

PART IV

 

 

 

64

Item 15.

 

Exhibits and Financial Statement Schedules

 

64

Item 16.

 

Form 10-K Summary

 

67

 

 

 


Table of Contents

 

 

SPECIAL CAUTION CONCERNING FORWARD-LOOKING STATEMENTS

When included in this Annual Report on Form 10-K, or in other documents that we file with the Securities and Exchange Commission (“SEC”) or in statements made by or on behalf of the Company, words like “believes,” “belief,” “expects,” “plans,” “anticipates,” “intends,” “projects,” “estimates,” “may,” “might,” “would,” “should,” and similar expressions are intended to be forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. These statements are based on the beliefs and assumptions of our management based on information currently available to management. Such forward-looking statements are subject to risks, uncertainties and other important factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements. These risks and uncertainties include, but are not limited to:

 

the anticipated impact to our business with respect to developments related to the COVID-19 pandemic, including, without limitation, those related to the length and severity of the pandemic, as well as the timing and availability of effective medical treatments and the ongoing rollout of vaccines; the pandemic’s impact on our operations, reimbursement and our consumer population; measures we are taking to respond to the pandemic; the impact of government regulation and stimulus measures, including the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), Paycheck Protection Program and Health Care Enhancement Act (“PPPHCE Act”), the Consolidated Appropriations Act, 2021 (“CAA”), the Covid-Related Tax Relief Act of 2020 and other stimulus legislation; along with the related uncertainties regarding the implementation of such stimulus measures and any future stimulus measures related to COVID-19; increased expenses related to personal protective equipment (“PPE”), labor, supply chain, or other expenditures; and workforce disruptions and supply shortages and disruptions;

 

changes in operational and reimbursement processes and payment structures at the state or federal levels;

 

changes in Medicaid, Medicare, other government program and managed care organizations policies and payment rates;

 

changes in, or our failure to comply with, existing, federal and state laws or regulations, or our failure to comply with new government laws or regulations on a timely basis;

 

competition in the healthcare industry;

 

the geographical concentration of our operations;

 

changes in the case mix of consumers and payment methodologies;

 

operational changes resulting from the assumption by managed care organizations of responsibility for managing and paying for our services to consumers;

 

the nature and success of future financial and/or delivery system reforms;

 

changes in estimates and judgments associated with critical accounting policies;

 

our ability to maintain or establish new referral sources;

 

our ability to renew significant agreements or groups of agreements;

 

our ability to attract and retain qualified personnel;

 

federal, city and state minimum wage pressure, including any failure of Illinois or any other governmental entity to enact a minimum wage offset and/or the timing of any such enactment;

 

changes in payments and covered services due to the overall economic conditions, including economic and business conditions resulting from the COVID-19 pandemic, and deficit spending by federal and state governments;

 

cost containment initiatives undertaken by state and other third-party payors;

 

our ability to access financing through the capital and credit markets;

 

our ability to meet debt service requirements and comply with covenants in debt agreements;

1


Table of Contents

 

 

 

business disruptions due to natural disasters, acts of terrorism, pandemics, riots, civil insurrection or social unrest, looting, protests, strikes or street demonstrations;

 

our ability to integrate and manage our information systems;

 

our ability to prevent cyber-attacks or security breaches to protect our computer systems and confidential consumer data;

 

our expectations regarding the size and growth of the market for our services;

 

the acceptance of privatized social services;

 

our expectations regarding changes in reimbursement rates;

 

eligibility standards and limits on services imposed by state governmental agencies;

 

the potential for litigation;

 

discretionary determinations by government officials;

 

our ability to successfully implement our business model to grow our business;

 

our ability to continue identifying, pursuing, consummating and integrating acquisition opportunities and expand into new geographic markets;

 

the impact of acquisitions and dispositions on our business, including the potential inability to realize the benefits of the acquisition of Queen City Hospice, LLC and its affiliate Miracle City Hospice, LLC (together “Queen City Hospice”);

 

the potential impact of the discontinuation or modification of LIBOR;

 

the effectiveness, quality and cost of our services;

 

our ability to successfully execute our growth strategy;

 

changes in tax rates;

 

the impact of public health emergencies, including the COVID-19 pandemic;

 

the impact of inclement weather or natural disasters; and

 

various other matters, many of which are beyond our control.

Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, you should not rely on any forward-looking statement as a prediction of future events. We expressly disclaim any obligation or undertaking and we do not intend to release publicly any updates or changes in our expectations concerning the forward-looking statements or any changes in events, conditions or circumstances upon which any forward-looking statement may be based, except as required by law. For a discussion of some of the factors discussed above as well as additional factors, see Part I, Item 1A—“Risk Factors” and Part II, Item 7—“Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates.”

Unless otherwise provided, “Addus,” “we,” “us,” “our,” and the “Company” refer to Addus HomeCare Corporation and our consolidated subsidiaries and “Holdings” refers to Addus HomeCare Corporation. When we refer to 2020, 2019 and 2018, we mean the twelve month period then ended December 31, unless otherwise provided.

A copy of this Annual Report on Form 10-K for the year ended December 31, 2020 as filed with the SEC, including all exhibits, is available on our internet website at http://www.addus.com on the “Investors” page link. Information contained on, or accessible through, our website is not a part of, and is not incorporated by reference into, this Annual Report on Form 10-K.

2


Table of Contents

 

 

PART I

ITEM 1.

BUSINESS

Overview

Addus has been providing home care services since 1979. We now operate in three segments: personal care, hospice, and home health. Our services are principally provided in-home under agreements with federal, state and local government agencies, managed care organizations, commercial insurers and private individuals. Our consumers are predominantly “dual eligible,” meaning they are eligible to receive both Medicare and Medicaid benefits.

As of December 31, 2020, we provided services in 22 states through approximately 214 offices. For the years ended December 31, 2020, 2019 and 2018, we served approximately 66,000, 61,000 and 57,000 discrete consumers, respectively.

 

In 2016, Addus refined its strategy to focus on growth in the states in which we have a current presence while adding clinical care services to our offerings. With the purchase of Queen City Hospice in the fourth quarter of 2020, and Ambercare Corporation (“Ambercare”) in the second quarter of 2018, we now have the opportunity to provide all three levels of care, personal care, home health and hospice services, in Ohio and New Mexico and strategically continue to pursue other markets.

A summary of our financial results for 2020, 2019 and 2018 is provided in the table below.

 

 

 

For the Years Ended December 31,

 

 

 

2020

 

 

2019

 

 

2018

 

 

 

(Amounts in Thousands)

 

Net service revenues – continuing operations

 

$

764,775

 

 

$

648,791

 

 

$

516,647

 

Net income from continuing operations

 

 

33,133

 

 

 

25,811

 

 

 

16,307

 

(Loss) earnings from discontinued operations

 

 

 

 

 

(574

)

 

 

126

 

Net income

 

$

33,133

 

 

$

25,237

 

 

$

16,433

 

Total assets

 

$

892,582

 

 

$

636,748

 

 

$

348,094

 

 

Our services and operating model address a number of crucial needs across the healthcare continuum. Care provided in the home generally costs less than facility-based care and is typically preferred by consumers and their families. By providing services in the home to the elderly and others who require long-term care and support with the activities of daily living, we lower the cost of chronic and acute care treatment by delaying or eliminating the need for care in more expensive settings. In addition, our caregivers observe and report changes in the condition of our consumers for the purpose of facilitating early intervention in the disease process, which often reduces the cost of medical services by preventing unnecessary emergency room visits and/or hospital admissions and re-admissions. We coordinate the services provided by our team with those of other healthcare providers and payors, as appropriate. Changes in a consumer’s conditions are evaluated by appropriately trained managers and may result in a report to the consumer’s case manager at a managed care organization or other payor. By providing care in the preferred setting of the home and by providing opportunities to improve the consumer’s conditions and allow early intervention as indicated, our model also is designed to improve consumer outcomes and satisfaction.

We believe our model provides significant value to managed care organizations. States are increasingly implementing 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. We believe that our model is well positioned to assist in meeting those goals while also improving consumer satisfaction, and, as a result, we expect increased referrals from managed care organizations.

In 2019, the Centers for Medicare & Medicaid Services (“CMS”) expanded the scope of its “primarily health-related” supplemental benefit standard, permitting Medicare Advantage plans to cover a broader array of services that increase health and improve quality of life, including coverage of non-skilled in-home care. This policy change, emphasizing improving quality and reducing costs, aligns with our overall approach to care, and has increased demand for personal care from the Medicare Advantage population.

Our Market and Opportunity

We provide home care services that primarily include personal care services to assist with activities of daily living, as well as hospice and home health services. These services allow the elderly and other infirm adults who require long-term care and assistance with activities of daily living to maintain their independence at home with their families. Personal care services are a significant component of home and community-based services (“HCBS”), which have grown in significance and demand in recent years and during the COVID-19 pandemic. We expect demand for home-based services to continue to grow due to the aging of the U.S.

3


Table of Contents

 

population, increased life expectancy, and improved opportunities for individuals to receive home-based care as an alternative to institutional care. The population over the age of 65 nationally has been consistently growing and the U.S. Census Bureau estimates that starting in 2030, when all baby boomers will be older than 65, Americans 65 years and older will make up 21% of the population, up from 15% today.

Many states use both fee-for-service and managed care delivery models for personal care services, and the number of beneficiaries served through managed care continues to grow. As of July 2019, 40 states contracted with comprehensive, risk-based managed care organizations to serve their Medicaid enrollees, with 21 of those states enrolling at least 75% of all elderly beneficiaries or those with disabilities in managed care organizations. In 23 states, some or all long-term services and support is covered through Medicaid managed care arrangements.

The demand for long-term services and supports, which include personal care services, is expected to increase, and the COVID-19 pandemic has highlighted the role of personal care services in the larger continuum of health care services. Beyond government-sponsored programs and other third party payors, we offer our private pay consumers the same personal care services.

Because our model serves an aging population in a home setting at a lower cost, we believe that we have favorable opportunities for growth. Historically, there were limited barriers to entry in the home-based services industry. As a result, the personal care, home health and hospice service industries developed in a highly fragmented manner, with few large participants and many small ones. Few companies have a significant market share across multiple regions or states. The lack of licensure or certification requirements in some states makes it difficult to estimate the number of home-based services agencies. We expect ongoing consolidation within our industry, driven by the desire of healthcare systems and managed care organizations to narrow their networks of service providers, and as a result of the industry’s increasingly complex regulatory, operating and technology requirements. We believe we are well positioned to capitalize on a consolidating industry given our reputation in the market, strong payor relationships and integration of technology into our business model.

The personal care services industry is subject to increasing regulation. At the federal level, efforts have focused on improved coordination of regulation across the various types of Medicaid programs through which personal care services are offered. For example, the 21st Century Cures Act, as amended, mandated that states implement electronic visit verification (“EVV”), which is used to collect home visit data, such as when the visit begins and ends. In several states, providers are now required to obtain state licenses or registrations and must comply with laws and regulations governing standards of practice. Providers must dedicate substantial resources to ensure continuing compliance with all applicable regulations and significant expenditures may be necessary to offer new services or to expand into new markets. We believe licensing requirements and regulations, including EVV, the increasing focus on improving health outcomes, the rising cost and complexity of operations and technology and pressure on reimbursement rates due to constrained government resources may discourage new providers and may encourage industry consolidation.

The Medicare-Medicaid Coordination Office (“MMCO”) was established within 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 MMCO works with state Medicaid agencies, other federal and state agencies, physicians and others, to make available technical assistance and educational tools to improve care coordination between Medicare and Medicaid and to reduce costs and improve beneficiary experience while reducing administrative and regulatory barriers between the programs. For example, the Financial Alignment Initiative is a demonstration project that tests capitated models and managed fee-for-service models of integrated care and payment for benefits provided to “dual eligibles.” In addition, in December 2020, CMS announced a direct contracting model opportunity that aims to allow Medicaid managed care organizations to better coordinate care for dually eligible Medicaid managed care enrollees. CMS anticipates that some arrangements under the model may include use of care coordinators or in-home aides to provide long-term services and supports. Managed care direct contracting entities may begin participating in the model in January 2022.

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 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.

Our Growth Strategy

The growth of our revenues is closely correlated with the number of consumers to whom we provide our services. Our continued growth depends on our ability to provide consistently high quality care, maintain our existing payor relationships, establish relationships with new payors and increase our referral sources. Our continued growth is also dependent upon the authorization by state agencies of new consumers to receive our services. We believe there are several market opportunities for growth. The U.S. population of persons aged 65 continues to grow, and the U.S. Census Bureau estimates that this population will nearly double in size by 2060, according to projections published in March 2018. Additionally, we believe the overwhelming majority of individuals in

4


Table of Contents

 

need of care generally prefer to receive care in their homes. We believe that the COVID-19 pandemic has heightened this preference due to health concerns that may be associated with institutional settings for long-term care, along with temporary visitor restrictions that have been imposed. Finally, we believe the provision of home-based services is more cost-effective than the provision of similar services in institutional settings for long-term care. We plan to continue our revenue growth and margin improvement and enhance our competitive positioning by executing on the following growth strategies:

Consistently Provide High-Quality Care

We schedule and require our caregivers to perform their services as defined within the individual plan of care. We monitor the performance of our caregivers through regular supervisory visits in the homes of consumers. Our caregivers are provided with pre-service training and orientation and an evaluation of their skills. In many cases, caregivers are also required to attend ongoing in-service education. In certain states, our caregivers are required to complete certified training programs and maintain a state certification. The training provided assists to identify changes in our consumers’ health and condition before acute intervention is required, which we believe lowers the overall cost of care.

Drive Organic Growth in Existing Markets

We intend to drive organic growth through several initiatives, including continuing to build and enhance our sales and marketing capabilities, enhancing our business intelligence analytic capabilities and investing in technology and operations to drive efficiencies. We also expect our organic growth will benefit from an increase in demand for our services by an aging population and our increased alignment with referral sources and payors. We continue to selectively open new offices in existing markets when an opportunity is identified and appropriate.

Market to Managed Care Organizations

As a scaled, national provider of home-based care, we are partnering with managed care organizations, taking advantage of an industry shift from traditional fee-for-service Medicaid and toward managed care models, which aim to better coordinate care. We expect this shift to lead to narrower provider networks where we can be competitive by offering a larger, more experienced partner to these organizations, as well as by providing more sophisticated technology, electronic visit records and an outcomes-driven approach to service. We believe our coordinated care model and integration of services into the broader healthcare industry are particularly attractive to managed care organizations. In particular, our expansion from primarily personal care services into hospice and home health has increased our value to our managed care partners by diversifying our home-based care offerings.

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 four acquisitions in 2020, despite the challenges and disruptions related to the COVID-19 pandemic including, A Plus Health Care, Inc. (“A Plus”) on July 1, 2020, County Homemakers, Inc. (“County Homemakers”) on November 1, 2020, SLHC, Inc., d/b/a SunLife Home Care (“SunLife Home Care”) on December 1, 2020 and Queen City Hospice on December 4, 2020. During 2019, we completed four acquisitions, one of which, VIP Healthcare Services (“VIP”), was completed on June 1, 2019, two of which, Alliance Home Health Care (“Alliance”) and Foremost Home Care (“Foremost”), were completed on August 1, 2019 and one of which, Hospice Partners of America, LLC (“Hospice Partners”), was completed on October 1, 2019. Acquisitions completed in 2020 accounted for $12.1 million in net service revenues for the year ended December 31, 2020. Acquisitions completed in 2019 accounted for $108.2 million and $55.8 million in net service revenues for the years ended December 31, 2020 and 2019, respectively. Acquisitions completed in 2018 accounted for $158.1 million, $113.2 million and $75.2 million in net service revenues for the years ended December 31, 2020, 2019 and 2018, respectively.

Our active pipeline and strong financial position support additional acquisitions. With rising consolidation pressures in the industry, our focus is on identifying growing markets with favorable demographics in states that are fiscally well managed and have a reasonable minimum wage environment and where we have the potential to become one of the leading providers in the state in order to support our managed care organization strategy. We believe our experience identifying and executing on opportunities generated by our acquisition pipeline, as well as our history of integrating acquisitions, will lead to additional consolidation.


5


Table of Contents

 

 

Our Services

We operate in three business segments: (i) personal care (ii) hospice and (iii) home health. 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. The services we provide include assistance with bathing, grooming, oral care, feeding and dressing, medication reminders, meal planning and preparation, housekeeping and transportation services. Many consumers need such services on a long-term basis to address chronic or acute conditions. Our personal care segment also includes staffing services, with clients including assisted living facilities, nursing homes and hospice facilities. Each payor client establishes its own eligibility standards, determines the type, amount, duration and scope of services, and establishes the applicable reimbursement rate in accordance with applicable law, regulations or contracts.

Hospice

Our hospice segment provides physical, emotional and spiritual care for people who are terminally ill as well as related services for their families. The hospice services we provide include palliative nursing care, social work, spiritual counseling, homemaker services and bereavement counseling. Generally, patients receiving hospice services have a life expectancy of six months or less.

Home Health

Our home health segment provides services that are primarily medical in nature to individuals who may require assistance during an illness or after hospitalization and include skilled nursing and physical, occupational and speech therapy. We generally provide home health services on a short-term, intermittent or episodic basis to individuals, typically to assist patients recovering from an illness or injury.

We measure the performance of each segment using a number of different metrics. For the personal care segment, these include average billable census, billable hours, average billable hours per census per month, billable hours per business day, revenues per billable hour and same store growth revenue by percent. For the hospice segment, these include new admissions, average daily census, average length of stay and revenue per patient day. For the home health segment, these include admissions, recertifications, total volume and number of visits. See Part II, Item 6—“Selected Financial Data” for more information on the Company’s metrics.

Our Payors

Our payor clients include federal, state and local governmental agencies, managed care organizations, commercial insurers and private individuals. The federal, state and local programs under which these organizations operate are subject to legislative, budgetary and other risks that can influence reimbursement rates. Managed care organizations that operate as an extension of our government payors are subject to similar economic pressures. Our commercial insurance payor clients are typically for profit companies and are continuously seeking opportunities to control costs.

Most of our services are provided pursuant to agreements with state and local governmental social and aging service agencies. These agreements generally have an initial term of one to two years and may be terminated with 60 days’ notice. They are typically renewed for one to five-year terms, provided that we have complied with licensing, certification and program standards, and other regulatory requirements. Reimbursement rates and methods vary by state and service type, but are typically based on an hourly or unit-of-service basis. 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. In our personal care segment during 2020, approximately 50.2% of our net service revenues were derived from state and local government programs, with 44.3% derived from managed care organizations, while approximately 3.2% and 1.5% of net service revenues were derived from private pay consumers and commercial insurance programs, respectively.

6


Table of Contents

 

For 2020, 2019 and 2018, our revenue mix by payor type was as follows:

 

 

 

Years Ended December 31,

 

 

 

 

2020

 

 

2019

 

 

2018

 

 

Personal Care

 

 

 

 

 

 

 

 

 

 

 

 

 

State, local and other governmental programs

 

 

50.2

 

%

 

52.2

 

%

 

58.2

 

%

Managed care organizations

 

 

44.3

 

 

 

41.3

 

 

 

35.3

 

 

Private pay

 

 

3.2

 

 

 

3.7

 

 

 

4.1

 

 

Commercial insurance

 

 

1.5

 

 

 

1.6

 

 

 

1.3

 

 

Other

 

 

0.8

 

 

 

1.2

 

 

 

1.1

 

 

Hospice

 

 

 

 

 

 

 

 

 

 

 

 

 

Medicare

 

 

92.9

 

%

 

92.6

 

%

 

93.6

 

%

Managed care organizations

 

 

4.9

 

 

 

5.2

 

 

 

5.6

 

 

Other

 

 

2.2

 

 

 

2.2

 

 

 

0.8

 

 

Home Health

 

 

 

 

 

 

 

 

 

 

 

 

 

Medicare

 

 

78.6

 

%

 

77.6

 

%

 

88.0

 

%

Managed care organizations

 

 

19.6

 

 

 

20.3

 

 

 

11.0

 

 

Other

 

 

1.8

 

 

 

2.1

 

 

 

1.0

 

 

 

We derive a significant amount of our revenues from our operations in Illinois, New York and New Mexico. The percentages of total revenue for each of these significant states for 2020, 2019 and 2018 were as follows:

 

 

 

Years Ended December 31,

 

 

 

 

2020

 

 

2019

 

 

2018

 

 

Personal Care

 

 

 

 

 

 

 

 

 

 

 

 

 

Illinois

 

 

44.6

 

%

 

42.6

 

%

 

47.3

 

%

New York

 

 

17.8

 

 

 

18.7

 

 

 

13.3

 

 

New Mexico

 

 

13.4

 

 

 

13.0

 

 

 

12.0

 

 

All other states

 

 

24.2

 

 

 

25.7

 

 

 

27.4

 

 

Hospice

 

 

 

 

 

 

 

 

 

 

 

 

 

New Mexico

 

 

42.1

 

%

 

72.4

 

%

 

100.0

 

%

All other states

 

 

57.9

 

 

 

27.6

 

 

 

 

 

Home Health

 

 

 

 

 

 

 

 

 

 

 

 

 

New Mexico

 

 

100.0

 

%

 

100.0

 

%

 

100.0

 

%

 

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 23.0%, 25.3% and 31.7% of our net service revenues for 2020, 2019 and 2018, respectively.

The state of Illinois finalized its fiscal year 2020 budget with the inclusion of an appropriation to raise in-home care rates to offset the costs of previous minimum wage increases in Chicago and other areas of the state that were imposed beginning on July 1, 2018. These rates were originally set to be effective July 1, 2019, with in-home care rates to be initially increased by 10.9% to $20.28 from $18.29 to partially offset the costs of the minimum wage hikes. Rates were then further increased on January 1, 2020 by an additional 7.7% to $21.84, providing full funding for both the Chicago minimum wage increases and a statewide raise for all current in-home caregivers.

The Illinois Department on Aging, in conjunction with Illinois’ Health Care and Family Services, announced that the new rates would become effective retroactive to July 1, 2019 for services covered by managed care organizations. On January 15, 2020, the Department on Aging announced confirmation that a one-time bonus payment would be paid to providers who have provided services to clients not enrolled in a managed care organization, for the time period of July 1, 2019 through November 30, 2019 using an updated hourly rate of $20.28. The bonus payment of $6.8 million was recognized as net service revenues as of December 31, 2019.

 

On November 26, 2019, the Chicago City Council voted to approve additional increases in the Chicago minimum wage to $14 per hour beginning July 1, 2020 to $15 per hour beginning July 1, 2021. The Company and its trade association will be looking for additional funding in the state of Illinois fiscal year 2022 budget to offset the cost of the July 1, 2021 additional minimum wage increases.

The state of Illinois finalized its fiscal year 2021 budget, with in-home care rates to be increased by 7.1% to $23.40 from $21.84, effective January 1, 2021, contingent upon federal CMS approval. Although federal CMS approval was obtained by the state,

7


Table of Contents

 

as a result of on-going state revenue declines due to COVID-19 and the failure of the November 2020 referendum to revise the Illinois income tax code, on December 15, 2020, the Governor of Illinois announced a delay in the implementation of the scheduled rate increase to April 1, 2021.

Our business will benefit from the rate increases noted above, but there is no assurance that additional offsetting rate increases will be adopted in Illinois for fiscal years beyond fiscal year 2021, and our financial performance will be adversely impacted for any periods in which an additional offsetting reimbursement rate increase is not in effect.

Competition

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. Our competition consists of personal care service providers, home health providers, hospice providers, private caregivers, larger publicly held companies, privately held companies, privately held single-site agencies, hospital-based agencies, not-for-profit organizations, community-based organizations, managed care organizations and self-directed care programs. In addition, certain governmental payors contract for services with independent providers such that our relationships with these payors are not exclusive. We have experienced, and expect to continue to experience, competition from new entrants into our markets. It is unclear how increased use of telecommunications technology across our service lines, which was accelerated by the COVID-19 pandemic, will affect competition, as it presents both challenges and opportunities. 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. In addition, some of our competitors may have greater financial, technical, political and marketing resources, and 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. 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 system of governmental entities and attempt to work with and provide input to the responsible government personnel, provider associations and consumer advocacy groups.

We establish new referral relationships with various managed care organizations that contract with the states for the servicing of the state 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 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. 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.

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.

With respect to our hospice and home health patients, we receive substantially all of our referrals through other health care providers, such as hospitals, physicians, nursing homes and assisted living facilities. We have a team of community liaisons in our hospice and home health operations that educate and develop relationships with other health care providers and the community at large.

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. 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. 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 23.0%, 25.3% and 31.7% of our net service revenues for 2020, 2019 and 2018, respectively.

8


Table of Contents

 

Illinois Department on Aging

We provide personal care services pursuant to agreements with the Illinois Department on Aging, which 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 and general revenue funds of the state of Illinois, and also receives funding available under the federal Older Americans Act (“OAA”). The Department on Aging’s Community Care Program (“CCP”) provides adult day service, emergency home response and in-home services, including some 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.

Consumers are identified by case managers contracted independently with the Illinois Department on Aging. Once a consumer has been evaluated and determined to be eligible for a program, an assigned case manager refers the consumer to a list of authorized providers, from which the consumer selects the provider. We provide our services in accordance with a care plan developed by the case manager and under administrative directives from the Illinois Department on Aging. We are reimbursed on an hourly fee-for-service basis.

Other Federal, State and Local Payors

Medicare

Medicare is a federal program that provides medical services to persons aged 65 or older and other qualified persons with disabilities or end-stage renal disease. 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.

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. 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. Hospice payment rates increased by 2.4% for federal fiscal year 2021, which reflects a 2.4% market basket update; reduced by the multifactor productivity adjustment of 0.04 percentage points. CMS requires various providers, including hospice providers, to submit quality reporting data each year. Hospices that do not satisfy quality reporting requirements are subject to a 2 percentage point reduction to the market basket percentage update. Additionally, hospice companies are subject to two specific payment limit caps under the Medicare program each federal fiscal year: the inpatient cap and the aggregate cap. The inpatient cap limits the number of inpatient care days provided to no more than 20% of the total days of hospice care provided to Medicare patients for the year. If a hospice exceeds the number of allowable inpatient care days, the hospice must refund any amounts received for inpatient care that exceed the total of: (i) the product of the total reimbursement paid to the hospice for inpatient care multiplied by the ratio of the maximum number of allowable inpatient days to the actual number of inpatient care days furnished by the hospice to Medicare patients; and (ii) the product of the number of actual inpatient days in excess of the limitation multiplied by the routine home care rate. The aggregate cap, which is calculated each federal fiscal year, limits the amount of Medicare reimbursement a hospice may receive, based on the number of Medicare patients served. If a hospice’s Medicare payments exceed its aggregate cap, it must repay Medicare for the excess amount. In federal fiscal year 2021, the aggregate cap is $30,683.93.

Home Health

Effective January 1, 2020, CMS transitioned to 30-day periods of care within each 60-day certification of patient eligibility period and implemented the Patient-Driven Groupings Model (“PDGM”) as the payment model for services provided to Medicare patients with dates of service on or after January 1, 2020. The PDGM replaced the case-mix system, which used the number of visits to determine payment, and classified patients based on clinical characteristics.

The intent of the PDGM is to shift toward a value-based payment system and remove the incentive to overprovide care. CMS updates the HHPPS payment rates each calendar year. For calendar year 2021, HHPPS rates increased by 2.0%, which reflects a 2.3% market basket update, reduced by a multifactor productivity adjustment of 0.3 percentage points. CMS expects Medicare payments to home health agencies in 2021 to increase in the aggregate by 1.9% after accounting for the 0.1 percentage point decrease in payments to home health agencies due to changes in the rural add-on percentages also mandated by the Bipartisan Budget Act of 2018. Home health providers that do not comply with quality data reporting requirements are subject to a 2 percentage point reduction to their market basket update.

Historically, CMS paid home health providers 50% to 60% of anticipated payment at the beginning of a patient’s care episode through a request for anticipated payment (“RAP”). However, to address potential program integrity risks, CMS has phased out RAP payments. In calendar year 2021, CMS will not provide any up-front payments in response to a RAP but will continue to require home

9


Table of Contents

 

health providers to submit streamlined RAPs as notice that a beneficiary is under a home health period of care. In calendar year 2022, CMS will replace the RAP with a “Notice of Admission.”

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. Rates are subject to adjustment based on statutory and regulatory changes, administrative rulings, government funding limitations and interpretations of policy by individual state agencies. Within guidelines established by federal statutes and regulations, and subject to federal oversight, each state establishes its own eligibility standards, determines the type, amount, duration and scope of services, sets the rate of payment for services and administers its own program. States typically cover Medicaid beneficiaries for intermittent home health services as well as continuous services for children and young adults with complicated medical conditions and cover home and community-based services for seniors and people with disabilities.

Many states are moving the administration of their Medicaid personal care programs to managed care organizations. This transition is due to an overall desire to better manage the costs of the Medicaid long-term care programs. In addition, hospice and home health services are also reimbursed by managed care organizations in many states. 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.

Currently, personal care services and other HCBS are largely reimbursed on a fee-for-service basis. States receive permission from CMS to provide personal care services 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 health care services. Medicaid beneficiaries in Illinois are a part of the Health Choice Illinois statewide managed care program, which is serviced by various managed care organizations. The Illinois Department of Healthcare and Family Services has entered into managed care contracts that will expand managed care through the Health Choice Illinois program to reach approximately 80% of Medicaid enrollees. Effective July 1, 2019, the Health Choice Illinois program began coverage for home health and personal care services for certain dual-eligible beneficiaries with HCBS waivers after previously delaying such coverage and enrollment.

Veterans Health Administration

The Veterans Health Administration operates the nation’s largest integrated healthcare system, with more than 1,200 healthcare facilities, and provides healthcare benefits, including personal care, hospice and home health services, to eligible military veterans. The Veterans Health Administration provides funding to regional and local offices and facilities that support the in-home care needs of eligible aged and disabled veterans. Services are funded by local Veterans Medical Centers and the aid and attendance pension, which reimburses veterans for their otherwise unreimbursed health and long-term care expenses. We currently have relationships and agreements with the Veterans Health Administration to provide personal care services in several states, principally in California, New Mexico and Illinois.

Other

Other sources of funding are available to support personal care, hospice and home health services in different states and localities. In addition, many states appropriate general funds or special use funds through targeted taxes or lotteries to finance personal care services for senior citizens and individuals with disabilities. Depending on the state, these funds may be used to supplement existing Medicaid programs or for distinct programs that serve non-Medicaid eligible consumers.

COVID-19 Relief

On January 31, 2020, the Secretary of the U.S. Department of Health and Human Services (“HHS”) declared a national public health emergency due to a novel coronavirus. In March 2020, the World Health Organization declared the outbreak of COVID-19, the disease caused by this novel coronavirus, a pandemic. This disease continues to spread throughout the United States and other parts of the world.

As a result of the COVID-19 pandemic, federal and state governments have passed legislation, promulgated regulations, and taken other administrative actions intended to assist healthcare providers in providing care to COVID-19 patients and other patients during the public health emergency. These temporary measures include relief from Medicare conditions of participation requirements for healthcare providers, relaxation of licensure requirements for healthcare professionals, relaxation of privacy restrictions for telehealth remote communications, promoting use of telehealth by expanding the scope of services for which Medicare reimbursement is available, and limited waivers of fraud and abuse laws for activities related to COVID-19 during the emergency period. The current federal public health emergency declaration expires April 21, 2021, but HHS has indicated it will likely extend through 2021. The

10


Table of Contents

 

HHS Secretary may renew the declaration for successive 90-day periods for as long as the emergency continues to exist and may terminate the declaration whenever he determines that the emergency no longer exists.

One of the primary sources of relief for healthcare providers is the CARES Act, which was expanded by the PPPHCE Act, and the CAA. In total, the CARES Act, the PPPHCE Act and the CAA include $178 billion in funding to be distributed through the Public Health and Social Services Emergency Fund (the “Provider Relief Fund”) to eligible providers, including public entities and Medicare- and/or Medicaid-enrolled providers. Provider Relief Fund payments are intended to compensate healthcare providers for lost revenues and health care related expenses incurred in response to the COVID-19 pandemic and are not required to be repaid, provided that recipients attest to and comply with certain terms and conditions, including limitations on balance billing and not using funds received from the Provider Relief Fund to reimburse expenses or losses that other sources are obligated to reimburse.

In April 2020, the Company received grants in an aggregate principal amount of $6.9 million, for which it did not apply, from the Provider Relief Fund as part of the automatic general distributions by HHS. The Company returned these funds in June 2020. In November 2020, the Company received grants in an aggregate principal amount of $13.7 million from the Provider Relief Fund, for which we applied. The Company utilized $1.4 million of these funds for healthcare related expenses attributable to COVID-19 that were unreimbursed by other sources in the period ended December 31, 2020 and, in accordance with the current guidance issued by HHS, expects to utilize additional funds through June 30, 2021, at which point any unused funds will be returned. We are required to properly and fully document the use of such funds in reports to HHS. The Company’s ability to utilize and retain some or all of such funds will depend on the magnitude, timing and nature of the impact of the COVID-19 pandemic, as well as the terms and conditions of the funds received. In April 2020, Queen City Hospice received grants in an aggregate principal amount of approximately $2.5 million, for which it did not apply, from the Provider Relief Fund as part of the automatic general distributions by HHS. Queen City Hospice utilized approximately $0.6 million of the funds for healthcare related expenses attributable to COVID-19 that were unreimbursed by other sources. Queen City Hospice intends to repay $1.9 million, which represents the remainder of the grants received but not utilized, in 2021. Commercial organizations that receive annual total awards of $750,000 or more in federal funding, including payments received through the Provider Relief Fund, are subject to federal audit requirements.

In addition, the CARES Act expands the Medicare Accelerated and Advance Payment Program to increase cash flow to providers impacted by the COVID-19 pandemic. Hospice and home health providers were able to request an advance or accelerated payment of up to 100% of the Medicare payment amount for a three-month period (not including Medicare Advantage payments). The Medicare Accelerated and Advance Payment Program payments are a loan that providers must pay back. Recoupment of these payments was due to begin in August, but CMS has delayed the recoupment process for these payments, based on amended repayment terms imposed by the CAA, until one year after payment was issued. In April 2020, Queen City Hospice received an amount equal to $10.8 million pursuant to the Medicare Accelerated and Advance Payment Program. Queen City Hospice did not repay the funds prior to the completion of our acquisition of Queen City Hospice, however, Queen City Hospice intends to repay such funds in March 2021, prior to any CMS recoupment and before any interest accrues.

The CARES Act and related legislation also include other provisions offering financial relief, for example temporarily lifting the Medicare sequester, which would have otherwise reduced payments to Medicare providers by 2%, from May 1, 2020, through March 31, 2021 (but also extending sequestration through 2030). The Medicare sequester relief resulted in an increase of $0.2 million to home health net service revenues and $1.3 million to hospice net service revenues for the year ended December 31, 2020. Additional financial relief under the CARES Act includes a temporary 6.2% increase in the federal share of Medicaid spending (also known as Federal Medical Assistance Percentages or FMAP) intended to broadly support the solvency of state Medicaid programs.

The CARES Act also provides for certain federal income and other tax changes, including the deferral of the employer portion of Social Security payroll taxes. The Company received a cash benefit of approximately $7.1 million related to the deferral of employer payroll taxes for 2020 under the CARES Act, for the period April 2, 2020 through June 30, 2020. Effective July 1, 2020, the Company began paying its deferred portion of employer Social Security payroll taxes and expects to repay the $7.1 million in 2021.

As the COVID-19 pandemic has progressed, the federal government is considering additional stimulus measures, federal agencies continue to issue related regulations and guidance, and the public health emergency continues to evolve. We continue to assess the potential impact of COVID-19 and government responses to the pandemic, including the enactment and implementation of the CARES Act, the PPPHCE Act, the CAA and other stimulus legislation, on our business, results of operations, financial condition and cash flows.

Commercial Insurance

Most long-term care insurance policies contain benefits for in-home services. Policies are generally subject to dollar limitations on the amount of daily, weekly or monthly coverage provided.

11


Table of Contents

 

Private Pay

Our private pay services are provided on an hourly or type of services basis. Our rates are established to achieve a pre-determined gross margin, and are competitive with those of other local providers. We bill our private pay consumers for services rendered weekly, bi-monthly or monthly. Other private payors include workers’ compensation programs/insurance, preferred provider organizations and employers.

Insurance Programs and Costs

We maintain workers’ compensation, general and professional liability, cyber, automobile, directors’ and officers’ liability, fiduciary liability and excess liability insurance. We offer various health insurance plans to eligible full-time and part-time employees. We believe our insurance coverage and self-insurance reserves are adequate for our current operations. However, we cannot be certain that any potential losses or asserted claims will not exceed such insurance coverage and self-insurance reserves.

Human Capital

We value our employees and believe they are the reason for our success. We believe that to be a great home care company, we must have great employees. We believe our staff is a group of engaged, energized and compassionate employees whose work allows our consumers and patients the freedom to stay in their homes.

 

Our caregivers, excluding agency staff, provide substantially all of our services and comprise approximately 95.6% of our total workforce. They undergo a criminal background check and are provided with pre-service training and orientation and an evaluation of their skills. In many cases, caregivers are also required to attend ongoing in-service education. In certain states, our caregivers are required to complete certified training programs and maintain a state certification. Approximately 47.3% of our total employees are represented by labor unions. We maintain strong working relationships with these labor unions. We have numerous collective bargaining agreements with the Service Employees International Union (“SEIU”), which are renegotiated from time to time.

The following is a breakdown of our part- and full-time employees, including the employees in our national support center, as of December 31, 2020:

 

 

 

Full-time

 

 

Part-time

 

 

Total

 

Caregivers and agency staff

 

 

5,632

 

 

 

29,101

 

 

 

34,733

 

National support centers

 

 

395

 

 

 

11

 

 

 

406

 

 

 

 

6,027

 

 

 

29,112

 

 

 

35,139

 

 

We strive to provide the following, among other things.

Employee Safety in Light of COVID-19

Senior management meets frequently to discuss the latest events surrounding COVID-19 and remains vigilant as to the safety of our consumers, patients, caregivers and employees. We have utilized our best commercial efforts to comply with health and safety standards, regulations and guidance provided by regulatory organizations such as the Occupational Safety and Health Administration, the United States Department of Labor and others that focus on the safety of employees. Addus has implemented several steps focused on employee safety and in accordance with CDC guidelines, including but not limited to the following;

 

Issued guidance for clinical and field staff with respect to exposure to COVID-19 and return to service;

 

Providing PPE to caregivers on a regular basis;

 

Established various communication methods in order to communicate up-to-date real-time information relative to COVID-19, including on the Addus Intranet and a texting method to provide caregivers direct information;

 

Completed branch and corporate office retro fitting where needed to maintain proper social distancing, implemented prescreen questionnaires and temperature checks; and

 

Prepared to provide safe passage letters to caregivers in the case of lockdowns, to prove essential worker status.

Recruiting and Development

Employee recruiting and retention remains a top priority each year for Addus, as we are committed to hiring and retaining excellent employees. We believe that a strong workplace culture focused on employee engagement enables ongoing learning and promotes the development of individual career growth, necessary to successfully retain and develop diverse talent. Addus recognizes

12


Table of Contents

 

the importance of employee engagement and we have implemented programs focused on new hire experiences and integration, ongoing learning opportunities though the Addus Learning Academy and Addus Institute of Skilled Care Education (“AISCE”), and mentoring through leadership training. The Addus Learning Academy allows employees to access training and resources necessary to build the skills specifically related to their respective positions at Addus. AISCE provides continuing education courses to support licensing and re-certification for our clinical employees.

Communication and Recognition

We remain focused on the wellness of our employees, through programs, communications and services. We have developed two primary communication tools to distribute information to our branches and administrative employees, the SC Connect and Addus Ink newsletters. Addus Ink is a quarterly newsletter that features local branch content from around the country that is focused on fulfilling our Addus Mission and Values. SC Connect is a biweekly newsletter that features important Company updates, information and resources. We have also implemented the Addus Elite Program, which has three levels of recognition; peer to peer, quarterly recognition and Addus Elite Hall of Fame, designed to celebrate the amazing work our employees do on a daily basis. We believe it is important to acknowledge our colleagues, managers, and direct reports who are living our Addus Mission and Values every day.

Technology

We currently utilize multiple applications to support our various lines of business and locations for patient accounting. Each application supports its respective line of business and locations with administrative, office, clinical and operating information system needs, including assisting with the compliance of our operating systems with the Health Insurance Portability and Accountability Act of 1996, or HIPAA, requirements. Each assists our staff in gathering information to improve the quality of consumer care, optimize financial performance, promote regulatory compliance and enhance staff efficiency. Each application is hosted by the vendor in a secure data center, which provides multiple redundancies for storage, power, bandwidth and security.

In order to comply with current and future state and federal regulations around EVV use, we utilize several different vendors. In states with an “open” model, we are able to choose our vendor and have standardized CellTrak as our preferred EVV vendor. In states mandating the EVV vendor, a “closed” system, we utilize whichever vendor the state has mandated. In both cases, we have built interfaces between the EVV vendor and the patient accounting system utilized in the respective branch location. Our caregivers use a mix of Interactive Voice Response (“IVR”) and mobile applications for EVV. Through these technologies, caregivers are able to report changes in health conditions to a manager for triage and evaluation. In addition, we use these technologies to record basic information about each visit, record start and end times for a scheduled shift, track mileage reimbursement, send text messages to the caregivers and communicate basic payroll information.

We license the Qlik Business Intelligence (“Qlik”) platform to provide historical, current, and forward-looking operational performance analysis. We currently have our personal care business integrated into Qlik to provide a comprehensive view of the business regardless of the application used. Qlik provides high-level historical and current analytical views to measure performance against budget and deliver insight into the various factors driving our execution against our financial, operational, and compliance goals. This analysis is available in summary and detailed views to accommodate user needs from senior management down to operators in the field.

We utilize the ADPVantage Suite as our base human resources and payroll processing system and use their services and products to manage our leave of absence processes, benefits, 401(k) and flexible spending account administration, garnishment services, payroll tax filings, ACA compliance and filings, and time and attendance. 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. Changes in the laws and regulations, including as a result of governmental responses to the COVID-19 pandemic, or new interpretations of existing laws and regulations may have a material impact on the definition of permissible activities, the relative cost of doing business, and the methods and amounts of payment for care by both governmental and other payors. 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 the loss of our licenses to operate and our ability to participate in federal or state programs. In addition, the healthcare industry has experienced, and is expected to continue to experience, extensive and dynamic change. It is difficult to predict the effect of these changes on budgetary allocations for our services. See also “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Overview.”

13


Table of Contents

 

Medicare and Medicaid Participation

To participate in and qualify for reimbursement under Medicare, our home health agencies and hospices must comply with extensive conditions of participation. Likewise, to participate in Medicaid programs, our personal care services, home health agencies and hospices are subject to various requirements imposed by federal and state authorities. If we were to violate the applicable federal and state regulations governing Medicare or Medicaid participation, we could be excluded from participation in federal and state healthcare programs and be subject to substantial administrative, civil and criminal penalties.

Health Reform

The U.S. Congress and certain state legislatures have passed many laws and regulations in recent years intended to effect major change within the national healthcare system, the most prominent of which is the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (collectively, “ACA”). As currently structured, the ACA affects how healthcare services are delivered and reimbursed through the expansion of public and private health insurance coverage, reduction of growth in Medicare and Medicaid program spending, and the establishment and expansion of programs that tie reimbursement to quality and integration. However, the future of the ACA is unclear. The law has been subject to legislative and regulatory changes and court challenges, and although the current presidential administration has indicated its intent to protect the ACA, it is possible that there may be continued changes to the ACA, its implementation or interpretation.

Effective January 1, 2019, Congress eliminated the penalty associated with the individual mandate to maintain health insurance. As a result of this change, a federal judge in Texas ruled in December 2018 that the individual mandate was unconstitutional and determined the rest of the ACA was therefore invalid. In December 2019, the Fifth Circuit Court of Appeals upheld this decision with respect to the individual mandate, but remanded the case for further consideration of how this decision affects the rest of the law. On November 10, 2020, the Supreme Court of the United States heard oral arguments regarding the case. The law remains in place pending the appeals process. The elimination of the individual mandate penalty and other changes may impact the number of individuals that elect to obtain public or private health insurance or the scope of such coverage, if purchased.

The ACA, as enacted, requires states to expand Medicaid coverage to all individuals under age 65 with incomes effectively at or below 138% of the federal poverty level. However, states may opt out of the expansion without losing existing federal Medicaid funding. Some of the states use or have applied to use Medicaid waivers granted by CMS to implement expansion provisions, impose different eligibility or enrollment restrictions, or otherwise implement programs that vary from federal standards. CMS administrators have indicated that they intend to increase state flexibility in the administration of Medicaid programs, and states continue to explore payment and delivery reform initiatives, including beneficiary work requirements, and quality of care incentives. Enrollment in managed Medicaid plans has also 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.

The Center for Medicare and Medicaid Innovation, or CMMI, tests innovative payment and service delivery systems to reduce program expenditures while maintaining or enhancing quality. For example, the CMMI 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. The Improving Medicare Post-Acute Care Transformation Act of 2014 (“IMPACT Act”) requires HHS, in conjunction with the Medicare Payment Advisory Commission, to propose a unified post-acute care payment model by 2023. A unified post-acute care payment system would pay post-acute care providers, such as long-term care facilities, skilled nursing facilities, and home health agencies, under a single framework according to a patient’s characteristics, rather than the post-acute care setting where the patient receives treatment. These systems could have a material impact on our business. It is difficult to predict the nature and success of future financial or delivery system reforms implemented by HHS, CMMI and other industry participants.

14


Table of Contents

 

Permits, Licensure and Certificate of Need

Our hospice, home health and personal care services are authorized and/or licensed under various state and county requirements, which cover a variety of topics including standards regarding the provision of medical or care services, clinical records, personnel, infection control and care plans. Additionally, health care professionals at our agencies are required to be individually licensed or certified under state law. Although our personal care service caregivers are generally not subject to licensure requirements, certain states require them to complete pre- and post-employment training programs, background checks, and, in certain instances, maintain state certification. We believe we are currently licensed appropriately as required by the laws of the states in which we operate in all material respects, but additional licensing requirements may be imposed upon us in existing markets or markets that we enter in the future.

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. In order to obtain a CON, a state health planning agency must determine that a need exists for the project, with the intent to avoid unnecessary duplication of services.

Fraud and Abuse Laws

Anti-Kickback Laws: The federal Anti-Kickback Statute prohibits the offering, payment, solicitation or receipt of any remuneration to induce referrals or orders for items or services covered by federal healthcare programs such as Medicare and Medicaid. Courts have interpreted this statute broadly and held that there is a violation if just one purpose of the remuneration is to generate referrals. Knowledge of the law or intent to violate the law is not required. Violations of the federal Anti-Kickback Statute may be punished by criminal fines, imprisonment, significant civil monetary penalties plus damages of up to three times the total amount of remuneration involved and exclusion from participation in federal healthcare programs. In addition, the submission of a claim for services or items generated in violation of the federal Anti-Kickback Statute may be subject to additional penalties under the federal False Claims Act. Many states have similar laws proscribing kickbacks, some of which apply regardless of the source of payment for items or services.

The Stark Law and other Prohibitions on Physician Self-Referral: The federal law commonly known as the “Stark Law” prohibits physicians from referring to an entity that provides certain “designated health services” covered by the Medicare and Medicaid program, including home health services, if they, or their family members, have a financial relationship with the entity receiving the referral, unless an exception applies. The Stark Law also prohibits entities that provide designated health services reimbursable by Medicare or Medicaid from billing these programs for any items or services that result from a prohibited referral and requires the entities to refund amounts received for items or services provided pursuant to a prohibited referral. Violations of the Stark Law may result in denial of payment, civil monetary penalties and exclusion from federal healthcare programs. Failure to refund amounts received as a result of a prohibited referral on a timely basis may constitute a false or fraudulent claim, which may result in additional penalties imposed under the federal False Claims Act. The statute and regulations also provide for a penalty for a circumvention scheme. We attempt to structure our relationships, including compensation agreements with physicians who serve as medical directors in our home health agencies, to meet an exception to the Stark Law, but we cannot provide assurance that every relationship fully complies. Many states have also enacted statutes similar in scope and purpose to the Stark Law, although these laws may apply to all payors or a greater range of services.

The False Claims Act: Numerous state and federal laws govern the submission of claims for reimbursement and prohibit false claims or statements. For example, the federal False Claims Act prohibits any person, company or corporation from knowingly presenting, or causing to be presented, claims for payment to the federal government that are false or fraudulent, or which contain false or misleading information. “Knowingly” is defined broadly, and includes submission of a claim with reckless disregard to its truth or falsity. The federal False Claims Act can be used to prosecute fraud involving issues such as coding errors and billing for services not provided. Violations of other statutes, such as the federal Anti-Kickback Statute, can also serve as a basis for liability under the federal False Claims Act. Among other potential bases for liability is the knowing and improper failure to report and return overpayments received from Medicare or Medicaid in a timely manner following identification of the overpayment. An overpayment is deemed to be “identified” when a person has, or should have through reasonable diligence, determined that an overpayment was received and quantified the overpayment.

Every entity that receives at least $5.0 million in Medicaid payments annually must have written policies regarding certain federal and state laws for all employees, contractors and agents. These policies must provide detailed information about false claims, false statements and whistleblower protections.

A provider determined to be liable under the False Claims Act may be required to pay three times the amount of actual damages sustained by the federal government, in addition to mandatory civil monetary penalties that may amount to over $20,000 for each false or fraudulent claim. These penalties will be updated annually based on changes to the consumer price index. Private parties may initiate whistleblower lawsuits alleging the defrauding of the federal government by a provider and may receive a share of any

15


Table of Contents

 

settlement or judgment. When a private party brings an action under the federal False Claims Act, the defendant generally is not made aware of the lawsuit under the federal government commences its own investigation or determines whether it will intervene.

Many states have similar false claims statutes that impose additional liability for the types of acts prohibited by the False Claims Act.

Other Fraud and Abuse Provisions: Criminal and civil penalties may be imposed under various other federal and state statutes that prohibit various forms of fraud and abuse, such as anti-kickback laws, prohibitions on self-referral, fee-splitting restrictions, insurance fraud laws, and false claims acts, which may extend to services reimbursable by any payer, including private insurers. For example, criminal penalties may be imposed upon any person or entity that knowingly and willfully defrauds a health care benefit plan, willfully obstructing a criminal investigation of a healthcare offense or makes a materially false statement in connection with delivery of or payment for health care services by a health care benefit plan. Further, the federal Civil Monetary Penalties Law (“CMPL”) imposes substantial penalties for offering remuneration or other inducements to influence federal healthcare beneficiaries’ decisions to seek specific governmentally reimbursable items or services or to choose particular providers. It also imposes penalties for contracting with an individual or entity known to be excluded from a federal healthcare program. The CMPL requires a lower burden of proof than some other fraud and abuse laws, including the federal Anti-Kickback Statute. Civil monetary penalties are updated annually based on changes to the consumer price index. In addition to the financial penalties, federal enforcement officials are able to exclude from Medicare or Medicaid any individuals or entities convicted of Medicare or Medicaid fraud or other offenses related to the delivery of items or services under those programs. Persons who have been excluded from the Medicare or Medicaid program may not retain ownership in a participating entity. Participating entities that permit continued ownership by excluded individuals, that contract with excluded individuals, and the excluded individuals themselves, may be penalized.

Payment Integrity

We are subject to routine and periodic surveys and audits by various governmental agencies and other payors. From time to time, we receive and respond to survey reports containing statements of deficiencies. Periodic and random audits conducted or directed by these agencies could result in a delay in receipt or an adjustment to the amount of reimbursements due or received under federal or state programs.

Under the Recovery Audit Contractor (“RAC”) program, CMS contracts with third parties to identify improper Medicare and Medicaid payments. By statute, states are required to enter into contracts with RACs to audit payments to Medicaid providers, although states are allowed to request waivers of aspects of this requirement. Further, under the Medicaid Integrity Program, CMS employs private contractors to perform post-payment audits of Medicaid claims and identify overpayments. CMS has transitioned several functions previously performed through other integrity programs (for example, Medicare Zone Program Integrity Contractors or ZPICs) to a consolidated model by engaging Unified Program Integrity Contractors (“UPICs”) to perform integrity activities such as investigation and audits of claims billed by Medicare providers, including home health and hospice providers.

From time to time, various federal and state agencies, such as HHS, issue pronouncements that identify practices that may be subject to heightened scrutiny, as well as practices that may violate fraud and abuse laws. For example, the Office of the Inspector General issued an Investigative Advisory in 2012 that identified a number of program integrity vulnerabilities in the delivery of personal care services and recommending corrective actions by CMS. In December 2016, CMS issued a bulletin highlighting safeguards that state Medicaid agencies can put in place around personal care services. It has also issued guidance to personal care services agencies and attendants on avoiding improper payments. We believe, but cannot assure you, that our operations comply with the principles expressed by HHS in these reports, advisories and guidance.

HIPAA, Other Privacy and Security and Data Exchange Requirements

The HIPAA Administrative Simplification provisions and 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. These provisions are intended to encourage electronic commerce in the U.S. healthcare industry.

HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act (“HITECH”), and its implementing regulations extensively regulate the use, disclosure, confidentiality, availability and integrity of individually identifiable health information, known as “protected health information,” and provide for a number of individual rights with respect to such information. These requirements apply to most healthcare providers, which are known as “covered entities,” including our Company. Vendors, known as “business associates,” that handle protected health information, on behalf of covered entities must also comply with most HIPAA requirements. A covered entity may be subject to penalties as a result of a business associate violating HIPAA, if the business associate is found to be an agent of the covered entity.

16


Table of Contents

 

Covered entities must, among other things, maintain privacy and security policies, train workforce members, maintain physical, administrative, and technical safeguards, enter into confidentiality agreements with business associates, and permit individuals to access and amend their protected health information. In addition, covered entities must report breaches of unsecured (unencrypted) protected health information to affected individuals without unreasonable delay, but not to exceed 60 calendar days from the discovery date of the breach. Notification must also be made to HHS and, in certain cases involving large breaches, to the media.

HIPAA violations may result in criminal penalties and significant civil penalties. Our Company is also subject to other applicable federal or state laws that are more restrictive than HIPAA, which could result in additional penalties. For example, the Federal Trade Commission uses its consumer protection authority to initiate enforcement actions against entities whose inadequate data security programs may expose consumers to fraud, identity theft and privacy intrusions. Various state laws and regulations require entities that maintain individually identifiable information (even if not health-related) to report data breaches to affected individuals and, in some cases, state regulators.

Health care providers and industry participants are also subject to a growing number of requirements intended to promote the interoperability and exchange of patient health information. For example, beginning April 5, 2021, health care providers and certain other entities will be subject to information blocking restrictions pursuant to the 21st Century Cures Act that prohibit practices that are likely to interfere with the access, exchange or use of electronic health information, except as required by law or specified by HHS as a reasonable and necessary activity. Violations may result in penalties or other disincentives.

Although we believe that we are in material compliance with the HIPAA regulations and other federal and state laws and regulations related to privacy and security, inadvertent violations may occur in the course of our business. For this and other reasons, we expect compliance with HIPAA, other privacy and security standards, and other laws and regulations impacting the exchange of health information to continue to impose significant costs on our business lines.

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. In the event of an accident involving such hazardous materials, we could be held liable for any damages that result, and any liability could exceed the limits or fall outside the coverage of our insurance. We may not be able to maintain insurance on acceptable terms, or at all.

Access to Public Filings

Through our website, www.addus.com, we make available, free of charge, our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and all amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. In addition to our website, the SEC maintains an internet site that contains our reports, proxy and information statements, and other information that we file electronically with the SEC at www.sec.gov. The references to our website address in this Form 10-K do not constitute incorporation by reference of the information contained on the website and should not be considered part of this document.


17


Table of Contents

 

ITEM 1A.

RISK FACTORS

Any of the risks described below, and the risks described elsewhere in this Form 10-K, could have a material adverse effect on our business and consolidated financial condition, results of operations and cash flows, cause the trading price of our common stock to decline and cause the actual outcome of matters to differ materially from our current expectations as reflected in forward-looking statements made in this Form 10-K. The risk factors described below and elsewhere in this Form 10-K are not the only risks we face. Our business and consolidated financial condition, results of operations and cash flows may also be materially adversely affected by factors that are not currently known to us, by factors that we currently consider immaterial or by factors that are not specific to us, such as general economic conditions.

You should refer to the explanation of the qualifications and limitations on forward-looking statements under “Special Caution Concerning Forward-Looking Statements.” All forward-looking statements made by us are qualified by the risk factors described below.

Risks Related to the COVID-19 Pandemic and External Factors

The COVID-19 pandemic could negatively affect our operations, business and financial condition, and our liquidity could also be negatively impacted, particularly if the U.S. economy remains unstable for a significant amount of time.

On January 31, 2020, the Secretary of HHS declared a national public health emergency due to a novel coronavirus. In March 2020, the World Health Organization declared the outbreak of COVID-19, the disease caused by this novel coronavirus, a pandemic. The disease continues to spread throughout the United States and other parts of the world. The spread of COVID-19 has caused many states and cities to declare states of emergency or disaster proclamations, including the state of Texas and the city of Frisco, where we are headquartered. State and local governments, together with public health officials, have recommended and mandated precautions to mitigate the spread of the virus, including the closure of public facilities and parks, schools, restaurants, many businesses and other locations of public assembly. As a result, COVID-19 continues to affect the overall economic conditions in the United States. Although many of the restrictions have eased across the country, some areas are re-imposing closures and other restrictions, as a result of increasing rates of COVID-19 infection. There are no reliable estimates of how long the pandemic will last, how many people are likely to be affected by it or the duration or types of restrictions that will be imposed or re-imposed. For these and other reasons, we are unable to predict the long-term impact of the pandemic on our business at this time.

 

Relevant authorities have universally designated our services as “essential,” exempting our services and providers from many of the restrictions of the orders described above. However, our home health and hospice providers have experienced difficulty in accessing facility-based patients because of concerns about the spread of COVID-19, and we expect that this difficulty will continue. As front-line providers of healthcare services and personal care services, our employees that contract COVID-19 could be unable to continue to perform their duties, and we could face litigation if our employees or customers contract COVID-19 while our employees perform their duties. In addition, we have incurred and will continue to incur additional costs related to protecting the health and well-being, and meeting the needs, of our patients, employees, and contractors as we implement operational changes in response to the pandemic. Staffing, equipment, pharmaceutical and medical supplies shortages may impact our ability to schedule and treat patients. While the COVID-19 pandemic has not had a material effect on our business, financial condition and results of operations, the extent of future impact will depend on future developments that cannot be accurately predicted at this time, including the severity and transmission rate of COVID-19, the extent and effectiveness of containment actions taken, the rollout and availability of effective medical treatments and vaccines, and the impact of any mutations of the virus.

If general economic conditions deteriorate or remain uncertain for an extended period of time, our liquidity and ability to repay our outstanding debt may be harmed. Furthermore, the COVID-19 pandemic has previously caused disruption in the financial markets and the businesses of financial institutions and may do so again, potentially causing a slowdown in the decision-making of these institutions. 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. Additionally, the economic slowdown caused by the COVID-19 pandemic poses significant risks to states’ budgets for the 2021 fiscal year, which began July 1 in most states. Depending on the severity and length of a downturn, sales tax collections and income tax withholdings could continue to be depressed in fiscal 2021 and, potentially, future fiscal years. States could face significant fiscal challenges and may have no choice but to revise their revenue forecasts and adjust their budgets for fiscal 2021 and, potentially, future fiscal years, accordingly. For example, in New York, which started its fiscal year April 1, the state comptroller recently estimated that the state would collect at least $10 billion less than originally forecasted, the first year-to-year cut since 2011. The current New York fiscal plan authorizes the state of New York to issue up to $8 billion in short-term bonds to provide funds in case of reduced revenues during the fiscal year. The state issued $1.1 billion of bonds on October 28, 2020. The New York fiscal plan also allows two state authorities to provide the state with a $3 billion line of credit in the new fiscal year. Congress could provide additional relief with additional stimulus and relief legislation, including extension of unemployment benefits and relief for states. We cannot determine the impact that COVID-19 may have on states budgets for 2021 or beyond, however, such impacts could have a material adverse effect on our financial condition, results of operations and cash flows.

18


Table of Contents

 

The foregoing and other continued disruptions to our business as a result of the COVID-19 pandemic could result in an adverse effect on our business, result of operations, financial condition, liquidity, cash flows and our ability to service our indebtedness. Furthermore, the COVID-19 pandemic could heighten the risks in certain of the other risk factors described in this Annual Report on Form 10-K.

There can be no assurance as to the total amount of financial assistance we may receive from future stimulus legislation, if any, or that we will be able to benefit from provisions intended to increase access to resources and ease regulatory burdens for healthcare providers or that additional stimulus legislation will be enacted.

In response to the COVID-19 pandemic, the CARES Act, the PPPHCE Act and the CAA authorize a total of $178 billion in funding to be distributed to health care providers through the Provider Relief Fund. These funds are intended to reimburse eligible providers, including public entities and Medicare and/or Medicaid-enrolled providers and suppliers, for healthcare-related expenses or lost revenues attributable to COVID-19. The Company has acquired and may in the future acquire companies that have received funds from the Provider Relief Fund. HHS has not yet allocated or distributed all funds from the Provider Relief Fund, so the potential future impact to the Company is unclear. The Company has also received amounts from the Provider Relief Fund and utilized a portion of those funds to offset increased healthcare related expenses attributable to COVID-19 that were unreimbursed by other sources, but our ability to utilize and retain some or all of these remaining funds will depend on the magnitude, timing and nature of the impact of the COVID-19 pandemic and that the terms and conditions related to the funds received will not change or be interpreted in ways that impact our ability to comply with such terms and conditions in the future. We continue to evaluate the terms and conditions and the financial impact of funds received under the CARES Act, the Provider Relief Fund and other government relief programs. We expect that recipients of these funds will be subject to significant scrutiny by the federal government, and note that recipients of Provider Relief Fund payments are subject to audit requirements. We have structured and will continue to structure our use of these funds in accordance with the terms and conditions, but federal regulators may disagree with our interpretation of these terms and conditions and require that we repay some or all amounts received at our facilities and pay or impose other penalties.

The CARES Act also makes other forms of financial assistance available to healthcare providers, including through Medicare and Medicaid payment adjustments and an expansion of the Medicare Accelerated and Advance Payment Program, which makes available advance payments of Medicare funds in order to increase cash flow to providers. Hospice and home health providers were able to request an advance or accelerated payment of up to 100% of the Medicare payment amount for a three-month period (not including Medicare Advantage payments). In addition to financial assistance, the CARES Act and related legislation include provisions intended to increase access to medical supplies and equipment and ease legal and regulatory burdens on healthcare providers, as well as certain federal income and other tax changes, including the deferral of the employer portion of Social Security payroll taxes.

Many of these measures, such as flexibilities related to the provision of telehealth services, are effective only for the duration of the public health emergency. The current public health emergency determination expires April 21, 2021, but HHS has indicated it will likely extend through 2021. The HHS Secretary may choose to renew the declaration for successive 90-day periods for as long as the emergency continues to exist and may terminate the declaration whenever he determines that the public health emergency no longer exists. It is unclear for how long the public health emergency declaration will be extended. The CARES Act also includes numerous income tax provisions including changes to the net operating loss rules and business interest expense deduction rules.

Due to the enactment of the CARES Act, the PPPHCE Act, the CAA and other stimulus legislation, there is still a high degree of uncertainty surrounding their implementation, and the COVID-19 pandemic continues to evolve. The federal government is considering additional stimulus efforts, but we are unable to predict whether additional stimulus measures will be enacted or their impact. There can be no assurance as to the total amount of financial and other types of assistance we will receive under existing or future legislation, if any, and it is difficult to predict the impact of such legislation on our operations or how it will affect operations of our competitors. Further, there can be no assurance that the terms of the Provider Relief Fund or other programs will not change in ways that affect funding we may receive or our eligibility to participate. We continue to assess the potential impact of COVID-19 and government responses to the pandemic, including the enactment and implementation of the CARES Act, the PPPHCE Act, the CAA and other stimulus legislation, on our business, financial condition, results of operations and cash flows.

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.

The majority of our consumers and patients are older individuals, many of whom may be more vulnerable than the general public during a pandemic or in a public health emergency due to complex medical conditions or other socioeconomic factors. Our employees are also at greater risk of contracting contagious diseases due to their increased exposure to vulnerable consumers. Our employees could also have difficulty attending to our consumers if a program of social distancing or quarantine is instituted in response to a public health emergency. In addition, the Company may expand existing internal policies in a manner that may have a similar effect. If another pandemic were to occur, or the existing COVID-19 pandemic does not abate or worsens, we could suffer significant losses to our consumer population or a reduction in the availability of our employees and, at a high cost, be required to hire

19


Table of Contents

 

replacements for affected workers. Since December 2019, as noted above, the COVID-19 pandemic, a disease caused by a novel coronavirus, has resulted in travel disruption and affected business operations across the world, among other significant effects. According to the Centers for Disease Control and Prevention, older adults and people with certain underlying medical conditions are at a higher risk for serious illness from COVID-19. Although the impact of COVID-19 on our results of operations has been minimal, the extent to which the COVID-19 pandemic may impact our results in the longer term is uncertain. Accordingly, certain public health emergencies could have a material adverse effect on our financial condition and results of operations.

Risks Related to our Growth Strategy

Our growth strategy depends on our ability to manage growing and effectively integrating operations and we may not be successful in managing this growth.

Our business plan calls for significant growth in business over the next several years through the expansion of our services in existing markets and the establishment of a presence in new markets. This growth has placed and continues to place significant demands on our management team, systems, internal controls and financial and professional resources. In addition, we will need to further develop our financial controls and reporting systems to accommodate our growth. This could require us to incur expenses for hiring additional qualified personnel, retaining professionals to assist in developing the appropriate control systems and expanding our information technology infrastructure. Our inability to effectively manage growth could have a material adverse effect on our financial results.

Previously completed or future acquisitions, or growth initiatives, may be unsuccessful and could expose us to unforeseen liabilities.

Our growth strategy includes geographical expansion into new markets and the addition of new services in existing markets through the acquisition of local service providers. These acquisitions involve significant risks and uncertainties, including difficulties assimilating acquired personnel and other corporate cultures into our business, the potential loss of key employees or consumers of acquired providers, regulatory risks, the assumption of liabilities, exposure to unforeseen liabilities of acquired providers, and the diversion of the management team’s attention. In the past, we have made acquisitions that have not performed as expected or that we have been unable to successfully integrate with our existing operations. In addition, our due diligence review of acquired businesses may not successfully identify all potential issues. Further, following completion of an acquisition, we may not be able to maintain the growth rate, levels of revenue, earnings or operating efficiency that we and the acquired business have achieved or might achieve separately. While we continue to seek out and pursue acquisition opportunities, we are doing so with additional caution and diligence due to COVID-19 considerations. The failure to effectively integrate future acquisitions could have a material adverse impact on our operations.

We have grown our business through de novo offices and we may in the future selectively open new offices in existing and new states. De novo offices involve risks, including those relating to licensing, accreditation, and payor program enrollment, hiring new personnel, establishing relationships with referral sources and delays or difficulty in installing our operating and information systems. We may not be successful in generating sufficient business activity to sustain the operating costs of such de novo operations.

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, 2020 and 2019, we had cash balances of $145.1 million and $111.7 million, respectively. As of December 31, 2020 and 2019, we had $196.6 million and $43.4 million outstanding debt on our credit facility, respectively. After giving effect to the amount drawn on our credit facility, approximately $9.0 million and $10.0 million of outstanding letters of credit at December 31, 2020 and 2019 and borrowing limits based on an advanced multiple of adjusted EBITDA, we had $112.6 million and $137.4 million available for borrowing under our credit facility as of December 31, 2020 and 2019, respectively. Since our credit facility provides for borrowings based on a multiple of an EBITDA ratio, any declines in our 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. If we do not have sufficient cash resources or availability under our credit facility, our growth could be limited unless we obtain additional equity or debt financing. In the future, we may elect to issue additional equity securities in conjunction with raising capital, completing an acquisition or expanding into a new geographic region. For example, on September 9, 2019, we completed a public offering of an aggregate 2,300,000 shares of common stock, par value $0.001 per share, including 300,000 shares of common stock sold pursuant to the exercise in full by the underwriters of their option to purchase additional shares at a public offering price of $79.50 per share (the “Public Offering”). We used approximately $130.0 million from the net proceeds of the Public Offering to fund the purchase price for our acquisition of Hospice Partners on October 1, 2019 and used the remaining net proceeds of the offering for general corporate purposes and to fund, in part, 2020 acquisitions. Such issuances could be dilutive to existing shareholders. In addition, our ability under our credit facility to consummate acquisitions is restricted if we exceed certain

20


Table of Contents

 

Total Net Leverage Ratio (as defined in the Credit Agreement, and subject to adjustments as provided therein) thresholds, without the consent of the lenders; provided, however, in certain circumstances, in connection with a Material Acquisition (as defined in the Credit Agreement), we can elect to increase our Total Net Leverage Ratio compliance covenant for the then current fiscal quarter and the three succeeding fiscal quarters. Further, our credit facility requires, among other things, that we are in pro forma compliance with the financial covenants set forth therein and that no event of default exists before and after giving effect to any proposed acquisition. 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

Timing differences in reimbursement may cause liquidity problems.

We fund operations primarily through the collection of accounts receivable, but there is a delay between the time that we provide services and the time that we receive reimbursement or payment for these services. 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, which may adversely impact our working capital. Working capital management, including prompt and diligent billing and collection, is an important factor in our results of operations and liquidity. Our working capital management procedures may not successfully negate this risk. Delays in receiving reimbursement or payments from Medicare, Medicaid and other payors may adversely impact our working capital. Further, many of the states in which we operate are operating with budget deficits for their current fiscal year and the economic impact of the COVID-19 pandemic likely will increase state deficits. These and other states may in the future delay reimbursement, which would adversely affect our liquidity. In addition, from time to time, procedural issues require us to resubmit claims before payment is remitted, which contributes to our aged receivables. Additionally, unanticipated delays in receiving reimbursement from state programs due to changes in their policies or billing or audit procedures may adversely impact our liquidity and working capital. 

We are and have been subject to routine and periodic surveys, audits and investigations by various governmental agencies. In addition to surveys to determine compliance with the conditions of participation, CMS has engaged a number of contractors (including Medicare Administrative Contractors ("MACs"), RACs and UPICs) to conduct audits to evaluate billing practices and identify overpayments. These audits can result in recoupments by Medicare and other payors of amounts previously paid to us. In addition to audits by CMS contractors, individual states are implementing similar integrity programs using Medicaid RACs. We are unable to predict what additional government regulations, if any, affecting our business may be enacted in the future, how existing or future laws and regulations might be interpreted or whether we will be able to comply with such laws and regulations either in the markets in which we presently conduct, or wish to commence, business. In June 2019, CMS began the Review Choice Demonstration for Home Health Services in Illinois to identify and prevent fraud, reduce the number of Medicare appeals, and improve provider compliance with Medicare program requirements. The demonstration expanded to Ohio in September 2019 and to Texas in March 2020. Home health agencies may initially select from the following claims review and approval processes: pre-claim review, post-payment review, or a minimal post-payment review with a 25% payment reduction. Home health agencies that maintain high compliance levels will be eligible for additional, less burdensome options. Beginning in March 2020, CMS temporarily paused certain claims processing for the Review Choice Demonstration due to the COVID-19 pandemic, but the agency resumed its activities under the demonstration in August 2020. CMS is in the process of expanding the Review Choice Demonstration to North Carolina and Florida, but is phasing in participation due to the COVID-19 pandemic. We are currently unable to predict what impact, if any, this program may have on our result of operations or financial position.

Our revenues are concentrated in a small number of states which makes us particularly sensitive to regulatory and economic changes in those states.

Our revenues are particularly sensitive to regulatory and economic changes in states in which we generate a significant portion of our revenues including Illinois, New York and New Mexico. 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. Additionally, New York and Illinois have been some of the most significantly impacted areas to date by the COVID-19 pandemic, which could also have a disproportionately adverse effect on our business, financial condition, results of operations or cash flows.

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, 2020 and 2019, we derived approximately 23.0% and 25.3%, respectively, of our revenue from the Illinois Department on Aging programs. In the past, state government officials have attempted to reduce government spending by proposing changes aimed at reducing expenditures by this department. The current governor, who took office in January

21


Table of Contents

 

2019, has continued the pursuit of cost reduction initiatives. The nature and extent of any proposed future cost reduction initiatives is unknown. If future reforms impact the eligibility of consumers for services, the number of hours authorized or otherwise restrict services provided to existing consumers, our service revenues, results of operations, financial position and growth may be adversely affected.

Failure to renew a significant payor agreement or group of related payor agreements may materially impact our revenue.

Each of our agreements is generally in effect for a specific term, but they are also generally terminable with 60 days’ notice. Our ability to renew or retain our agreements depends on our quality of service and reputation, as well as other factors over which we have little or no control, such as state appropriations and changes in provider eligibility requirements. 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. We can give no assurance these agreements will be renewed on commercially reasonable terms or at all.

Negative publicity or changes in public perception of our services may adversely affect our ability to receive referrals, obtain new agreements and renew existing agreements.

Our success in receiving referrals, obtaining new agreements and renewing our existing agreements depends upon maintaining our reputation as a quality service provider among governmental authorities, physicians, hospitals, discharge planning departments, case managers, nursing homes, rehabilitation centers, advocacy groups, consumers and their families, other referral sources and the public. While we believe that the services that we provide are of high quality, if our quality measures, which are published online by CMS, are deemed to be not of the highest value, our reputation could be negatively affected. 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. 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. As of December 31, 2020, approximately 47.3% of our workforce was represented by the SEIU. 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. Upon expiration of these collective bargaining agreements, we may not be able to negotiate labor agreements on satisfactory terms with these labor unions. A strike, work stoppage or other slowdown could result in a disruption of our operations and/or higher ongoing labor costs, which could adversely affect our business. Labor costs are the most significant component of our total expenditures and, therefore, an increase in the cost of labor could significantly harm our business.

If we were required to write down all or part of our goodwill and/or our intangible assets, our net earnings and net worth could be materially adversely affected.

Goodwill and intangible assets with finite lives represent a significant portion of our assets. Goodwill represents the excess of cost over the fair market value of net assets acquired in business combinations. For example, if our market capitalization drops significantly below the amount of net equity recorded on our balance sheet, it might indicate a decline in our fair value and would require us to further evaluate whether our goodwill has been impaired. If as part of our annual review of goodwill and intangibles, we were required to write down all or a significant part of our goodwill and/or intangible assets, our net earnings and net worth could be materially adversely affected, which could affect our flexibility to obtain additional financing. In addition, if our assumptions used in preparing our valuations for purposes of impairment testing differ materially from actual future results, we may record impairment charges in the future and our financial results may be materially adversely affected. We had $469.1 million and $275.4 million of goodwill and $71.5 million and $57.1 million of intangible assets recorded on our Consolidated Balance Sheets at December 31, 2020 and 2019, 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 will continue to review our goodwill and other intangible assets for possible impairment. We cannot be certain that a downturn in our business or changes in market conditions will not result in an impairment of goodwill or other intangible assets and the recognition of resulting expenses in future periods, which could adversely affect our results of operations for those periods.

If we fail to maintain an effective system of internal control over financial reporting, such failure could adversely impact our business and stock price.

Section 404 of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, requires our management to report on, and requires our independent registered public accounting firm to attest to, the effectiveness of our internal control over financial reporting.

22


Table of Contents

 

Compliance with SEC regulations adopted pursuant to Section 404 of the Sarbanes Oxley Act requires annual management assessments of the effectiveness of our internal control over financial reporting. 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.

Accordingly, we are required to have an audit of our internal control over financial reporting. Our management previously determined that a material weakness in our internal control existed as of December 31, 2018, and that two additional material weaknesses existed as of December 31, 2019. Although each of these material weaknesses was remediated as of December 31, 2020 and management determined that our internal control over financial reporting was effective as of that date, as discussed in Item 9A of Part II of this Form 10-K, we cannot assure you that we will not identify another material weakness in the future

To the extent that we now or in the future have deficiencies in our internal control over financial reporting that are not remediated, our ability to accurately and timely report our financial position, results of operations, cash flows or key operating metrics could be impaired, which could result in a material misstatement in our financial statements, late filings of our annual and quarterly reports under the Exchange Act, restatements of our consolidated financial statements or other corrective disclosures, or other material adverse effects on our business, reputation, results of operations, financial condition or liquidity and could create a perception that our financial results do not fairly state our financial condition or results of operations, any of which could have an adverse effect on the value of our stock.

Compliance with changing regulations including specific program compliance, corporate governance and public disclosure will result in additional expenses and pose challenges for our management team.

The state agencies that contract for our services require our compliance with various rules and regulations affecting the services we provide. We have a compliance officer who monitors and reports on our efforts for achieving the desired results. State agencies are recommending increased rules and regulations in an effort to control the growth of these programs and their overall costs. The implementation of these changes may require us to increase our efforts to remain compliant, may reduce the authorizations for services to be provided, and may result in certain consumers no longer being eligible for our services all of which may result in lower revenues and increased costs, reducing our operating performance and profitability. If we continue to serve our consumers without addressing these increased regulations we are at risk for non-compliance with program requirements and potential penalties.

Changing laws, regulations and standards relating to corporate governance and public disclosure, including the Dodd-Frank Wall Street Reform and Consumer Protection Act and the rules and regulations promulgated thereunder, the Sarbanes-Oxley Act and SEC regulations, have created uncertainty for public companies and significantly increased the costs and risks associated with accessing the U.S. public markets. We are committed to maintaining high standards of internal control over financial reporting, corporate governance and public disclosure. As a result, we intend to continue to invest appropriate resources to comply with evolving standards, and this investment has resulted and will likely continue to result in increased general and administrative expenses and a diversion of management time and attention from revenue-generating activities to compliance activities.

Regulatory and Regulatory Risks

Our hospice operations are subject to annual Medicare caps. If we exceed the caps, our business and consolidated financial condition, results of operations and cash flows could be materially adversely affected.

Overall payments made by Medicare to each hospice provider number (generally corresponding to each of our hospice agencies) are subject to an inpatient cap and an aggregate cap, which are set each federal fiscal year. 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. If a hospice’s Medicare payments exceed its inpatient or aggregate caps, it must repay Medicare for the excess amount. If payments received under any of our hospice provider numbers exceed these caps, we may be required to reimburse Medicare such excess amounts, which could have a material adverse effect on our business and consolidated financial condition, results of operations and cash flows.

Reductions in reimbursement and other changes to Medicare, Medicaid, and other federal, state and local medical and social programs could adversely affect our consumer caseload, units of service, revenues, gross profit and profitability.

A significant portion of our caseload and revenues are derived from government healthcare programs, primarily Medicare and Medicaid. For the year ended December 31, 2020, we derived approximately 56.4% of our net service revenues from state and local governmental agencies, primarily through Medicaid state programs. However, changes in government healthcare programs may decrease the reimbursement we receive or limit access to, or utilization of, our services. As federal healthcare expenditures continue to increase and state governments face budgetary shortfalls, including as a result of the COVID-19 pandemic, federal and state governments have made, and may continue to make, significant changes to the Medicare and Medicaid programs and reimbursement

23


Table of Contents

 

received for services rendered to beneficiaries of such programs. For example, the Budget Control Act of 2011 requires automatic spending reductions to reduce the federal deficit, including Medicare spending reductions of up to 2% per fiscal year, with a uniform percentage reduction across all Medicare programs. CMS began imposing a 2% reduction on Medicare claims in April 2013, and these reductions have been extended through 2030, although the CARES Act and related stimulus legislation temporarily suspends this 2% reduction from May 1, 2020, through March 31, 2021.

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. Almost all of the states in which we operate have experienced periodic financial pressures and budgetary shortfalls due to challenging economic conditions, including as a result of COVID-19, and the rising costs of healthcare. Reductions to federal support for state Medicaid or other programs could also result in budgetary shortfalls. As a result, many states have made, are considering or may consider making changes in their Medicaid or other state and local medical and social programs, including enacting legislation designed to reduce Medicaid expenditures.

Changes that may occur at the federal or state level to address budget deficits or otherwise contain costs include:

 

limiting increases in, or decreasing, reimbursement rates;

 

redefining eligibility standards or coverage criteria for social and medical programs or the receipt of services under those programs;

 

increasing consumer responsibility, including through increased co-payment requirements;

 

decreasing benefits, such as limiting the number of hours of personal care services that will be covered;

 

changing reimbursement methodology and program participation eligibility;

 

slowing payments to providers;

 

increasing utilization of self-directed care alternatives or “all inclusive” programs;

 

shifting beneficiaries to managed care organizations; and

 

implementing demonstration projects and alternative payment models.

Certain of these measures have been implemented by, or are proposed in, states in which we operate. For example, we provide support services as a fiscal intermediary to the New York Consumer Directed Personal Assistance Program (“CDPAP”), a self-directed care alternative program that allows eligible individuals who need help with activities of daily living or skilled nursing services to choose their caregivers. New York recently finalized regulations to change the reimbursement methodology for fiscal intermediaries and initiated a new Request For Offer (“RFO”) process to competitively procure CDPAP fiscal intermediaries in which we were not selected. These changes could impact our financial performance and ability to continue providing fiscal intermediary services.

Additionally, New York has identified significant expenses in excess of its Medicaid budget and exceeded a cap on the state’s Medicaid growth rate that was established by New York statute. In his January 21, 2020, budget address, Governor Cuomo stated his plans to address the Medicaid shortfall with a new Medicaid Redesign Team II (“MRT”), which is tasked with restoring financial sustainability to the state’s Medicaid program, among other objectives. The MRT produced recommendations, a significant portion of which relate to long-term care services, to achieve $1.6 billion in savings for fiscal year 2021, short of its $2.5 billion target. Many of the recommended measures were enacted in the state budget, although some were deferred as a result of the COVID-19 pandemic. The New York Department of Health has proposed regulatory amendments based on the recommendations that would, among other things, limit eligibility for and access to home care services. The implementation of the MRT recommendations could affect our operations and financial performance.

In 2020, we derived approximately 37.7% of our net service revenues from services provided in Illinois, 15.1% of our net service revenues in New York (including CDPAP services) and 19.0% of our net service revenues in New Mexico. Because a substantial portion of our business is concentrated in these states, any significant reduction in expenditures that pay for our services or other significant changes in these states may have a disproportionately negative impact on our future operating results. Illinois, in particular, operated without a state budget for fiscal years 2016 and 2017. The Illinois legislature has enacted comprehensive state budgets for fiscal years 2018 through 2021. However, we cannot predict whether Illinois or other states material to our operating results will timely pass budgets in subsequent years or experience changes or other challenges that negatively impact our ability to be reimbursed for our services in a timely manner.

24


Table of Contents

 

The ACA made significant changes to Medicare and Medicaid policy and funding, among other broad changes across the healthcare industry, promoting a shift toward value-based care, including implementation of alternative payment models. The ACA also resulted in expanded Medicaid eligibility in many states and the establishment of various demonstration projects and Medicaid programs under which states may apply to test new or existing approaches to payment and delivery of Medicaid benefits. CMS has indicated that it will look to states to drive innovation and value through such waivers and has taken steps to update program management, the waiver and state plan amendment approval process, and quality reporting, but the extent and effect of these changes remain uncertain. Future health reform efforts or efforts to repeal or make additional significant changes to the ACA will likely impact both federal and state programs.

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 or 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. Our profitability depends principally on the levels of government-mandated payment rates and our ability to manage the cost of providing services. In some cases, commercial insurance companies and other private payors rely on government payment systems to determine payment rates. As a result, changes to government healthcare programs that reduce Medicare, Medicaid or other payments may negatively impact payments from private payors, as well. Any reduction in reimbursements or imposition of copayments that dissuade the use of our services, or any reduction in reimbursement from private payors, could also materially adversely affect our profitability.

Federal and state regulation may impair our ability to consummate acquisitions or open new agencies.

Federal laws or regulations may adversely impact our ability to acquire home health agencies or open new start-up home health agencies. For example, a Medicare regulation known as the “36 Month Rule” prohibits buyers of Medicare-certified home health agencies from assuming the Medicare billing privileges of an acquired agency if the acquired agency either enrolled in Medicare or underwent a change in majority ownership fewer than 36 months prior to the acquisition, subject to certain exceptions. Instead, the buyer must enroll the acquired home health agencies as new providers with Medicare. The 36 Month Rule can increase competition for acquisition targets that are not subject to the rule and may cause significant Medicare billing delays for the purchases of home health agencies that are subject to the rule. Further, in the past, CMS has limited enrollment of new home health agencies. If another moratorium is imposed on enrollment of new providers in a geographic area we desire to service, our ability to expand operations may be impacted.

Our ability to expand operations in a state will depend on our ability to obtain a state license to operate, and where required, CON approval. States may limit the number of licenses they issue. The failure to obtain any required CON or license could impair our ability to operate or expand our business.

The implementation of alternative payment models and the transition of Medicaid and Medicare beneficiaries to managed care organizations may limit our market share and could adversely affect our revenues.

Many government and commercial payors are transitioning providers to alternative payment models that are designed to promote cost-efficiency, quality and coordination of care. 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. If we are not included in these programs, or if ACOs establish programs that overlap with our services, we are at risk for losing market share and for a loss of our current business.

We may be similarly impacted by increased enrollment of Medicare and Medicaid beneficiaries in managed care plans, resulting in a shift 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. Insurers may choose to offer supplemental benefits and impose higher plan costs on beneficiaries. Approximately one-third of Medicare beneficiaries were enrolled in a Medicare Advantage plan in 2019, a figure that continues to grow. While hospice services are currently reimbursed as a traditional fee-for-service program under Medicare Part A, hospice services may eventually be offered under Medicare Advantage plans, which could result in reduced reimbursement, limited utilization, and increased competition for managed care contracts.

Enrollment in managed Medicaid plans is also growing, as states are increasingly relying on managed care organizations to deliver Medicaid program services as a strategy to control costs and manage resources. We may experience increased competition for managed care contracts due to state regulation and limitations. For instance, effective October 2018, New York limited the number of home care providers with which a managed Medicaid long-term care plan can contract. We cannot assure you that we will be successful in our efforts to be included in plan networks, that we will be able to secure favorable contracts with all or some of the managed care organizations, that our reimbursement under these programs will remain at current levels, that the authorizations for services will remain at current levels or that our profitability will remain at levels consistent with past performance. In addition, operational processes may not be well defined as a state transitions beneficiaries to managed care. For example, membership, new referrals and the related authorization for services to be provided may be delayed, which may result in delays in service delivery to

25


Table of Contents

 

consumers or in payment for services rendered. Difficulties with operational processes may negatively affect our revenue growth rates, cash flow and profitability for services provided.Other alternative payment models may be presented by the government and commercial payors to control costs that subject our Company to financial risk. We cannot predict at this time what effect alternative payment models may have on our Company.

Our industry is highly competitive, fragmented and market-specific.

We compete with personal care service providers, hospice providers, home health providers, private caregivers, larger publicly held companies, privately held companies, privately held single-site agencies, hospital-based agencies, not-for-profit organizations, community-based organizations and self-directed care programs. Some of our competitors may have greater financial, technical, political and marketing resources, name recognition or a larger number of consumers and payors than we do. In addition, some of these organizations offer more services than we do in the markets in which we operate. These competitive advantages may limit our ability to attract and retain referrals in local markets and to increase our overall market share.

In many states, there are limited barriers to entry in providing personal care services. However, some states require entities to obtain a license before providing home care services. 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. In addition, economic changes such as increases in minimum wage and changes in Department of Labor rules can also impact the ease of entry into a market. These factors may affect competition in the states in which we operate.

Often our contracts with payors are not exclusive. Local competitors may develop strategic relationships with referral sources and payors. This could 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. 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. The introduction of new and enhanced service offerings, in combination with the development of strategic relationships by our competitors, could cause a decline in revenue, a loss of market acceptance of our services and a negative impact on our results of operations.

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. 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. These requirements include matters related to:

 

licensure and certification and enrollment with government programs;

 

eligibility for services;

 

appropriateness and necessity of services provided;

 

adequacy and quality of services;

 

qualifications and training of personnel;

 

confidentiality, maintenance, data breach, identity theft, security, inoperability and refraining from information blocking, access and exchange of health-related and personal information and medical records;

 

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;

26


Table of Contents

 

 

 

timely and proper handling of overpayments; and

 

debt collection and communications with consumers.

These laws include, but are not limited to the federal Anti-Kickback Statute, the federal Stark law, the federal False Claims Act, the federal Civil Monetary Penalties Law, other federal and state fraud and abuse, insurance fraud, and fee-splitting laws, which may extend to services reimbursable by any payer, including private insurers, and federal and state laws governing the security and privacy of health information.

We currently have contractual relationships with current and potential referral sources and recipients, including hospitals and health systems, skilled nursing facilities and certain physicians who provide medical director and clinical services to our Company. We attempt to structure our relationships to meet applicable regulatory requirements, but we cannot provide assurance that every relationship is fully compliant.

Federal and state government agencies have heightened and coordinated civil and criminal enforcement efforts throughout the healthcare industry. While we endeavor to comply with applicable laws and regulations, we cannot assure 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. We may also fail to discover instances of noncompliance by businesses we acquire, which could subject us to adverse consequences. 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. Failure to comply with applicable laws and regulations could lead to civil sanctions and criminal 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 nonpayment or 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.

In addition, as a result of our participation in Medicaid, Medicare and Veterans Health Administration programs and other state and local governmental programs, and pursuant to certain of our contractual relationships, we are subject to various reviews, compliance audits and investigations by governmental authorities and other third parties to verify our compliance with these programs and agreements as well as applicable laws, regulations and conditions of participation. Each of our home care and hospice agencies must comply with the extensive conditions of participation in the Medicare program. If any of our agencies fail to meet any of the conditions of participation or coverage with respect to state licensure or our participation in Medicaid, Medicare programs, Veterans Health Administration programs and other state and local governmental programs, we may receive a notice of deficiency from the applicable surveyor or authority. Failure to implement a plan of action to correct the deficiency within the period provided by the surveyor or authority could result in civil or criminal penalties, damage to our reputation, cancellation of our agreements, suspension or revocation of our licenses, requirements to repay amounts received, disqualification from federal and state healthcare programs, deactivation or revocation of billing privileges, bars on re-enrollment and other negative consequences. These actions may adversely affect our ability to provide certain services, to receive payments from other payors and to continue to operate which could adversely affect our revenues and profitability. Additionally, we could face liability under the False Claims Act if we submit claims to Medicare or Medicaid while not in compliance with certain conditions of participation. Further, actions taken against one of our offices may subject our other offices to adverse consequences.

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. Failure to comply with these laws and regulations, or changes to these laws and regulations that increase our employment-related expenses, could adversely impact our operations.

We are required to comply with all applicable federal, state and local laws and regulations relating to employment, including occupational safety and health requirements, wage and hour and other compensation requirements, employee benefits, providing leave and sick pay, employment insurance, proper classification of workers as employees or independent contractors, immigration and equal employment opportunity laws. These laws and regulations can vary significantly among jurisdictions and can be highly technical. Costs and expenses related to these requirements are a significant operating expense and may increase as a result of, among other things, changes in federal, state or local laws or regulations, or the interpretation thereof, requiring employers to provide specified benefits or rights to employees, increases in the minimum wage and local living wage ordinances, increases in the level of existing benefits or the lengthening of periods for which unemployment benefits are available. 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. Furthermore, any failure to comply with these laws, including even a seemingly minor infraction, can result in significant penalties which could harm our reputation and have a material adverse effect on our business. The COVID-19 pandemic has increased some of these risks, with certain states modifying occupational health and safety guidelines in a manner that increases scrutiny and complexity of operations with respect to appropriate training and use in the workplace of PPE and the possibility of corresponding regulatory audit activity with respect to the adequacy of our practices and procedures. The COVID-19 pandemic has also resulted in states modifying standards associated with payment amounts and required justifications to qualify for sick leave and unemployment benefits. These modifications may result in increased operational costs to us.

27


Table of Contents

 

Since our operations are concentrated in Illinois, New York and New Mexico, we are particularly sensitive to changes in laws and regulations in these states. The state of Illinois finalized its fiscal year 2020 budget with the inclusion of an appropriation to raise in-home care rates to offset the costs of previous minimum wage increases in Chicago and other areas of the state that were imposed beginning on July 1, 2018. These rates were originally set to be effective July 1, 2019, with in-home care rates to be initially increased by 10.9% to $20.28 from $18.29 to partially offset the costs of the minimum wage hikes. Rates were then further increased on January 1, 2020 by an additional 7.7% to $21.84, providing full funding for both the Chicago minimum wage increases and a statewide raise for all current in-home caregivers. On November 26, 2019, the Chicago City Council voted to approve additional increases in the Chicago minimum wage to $14 per hour beginning July 1, 2020 and to $15 per hour beginning July 1, 2021. The Company and its trade association will be looking for additional funding in the state of Illinois fiscal year 2022 budget to offset the cost of the July 1, 2021 additional minimum wage increases. The state of Illinois finalized its fiscal year 2021 budget, with in-home care rates to be increased by 7.1% to $23.40 from $21.84, effective January 1, 2021, contingent upon federal CMS approval. Although federal CMS approval was obtained by the state, as a result of on-going state revenue declines due to COVID-19 and the failure of the November 2020 referendum to revise the Illinois income tax code, on December 15, 2020, the Governor of Illinois announced a delay in the implementation of the scheduled rate increase to April 1, 2021.

Our business will benefit from the rate increases noted above, but there is no assurance that additional offsetting rate increases will be adopted in Illinois for fiscal years beyond fiscal year 2021, and our financial performance will be adversely impacted for any periods in which an additional offsetting reimbursement rate increase is not in effect.

In addition, certain individuals and entities, known as excluded persons, are prohibited from receiving payment for their services rendered to Medicaid, Medicare and other federal and state healthcare program beneficiaries. 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.

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 2020 or be subject to an annual penalty.

Our business may be adversely impacted by healthcare reform efforts, including repeal of or significant modifications to the ACA.

In recent years, the U.S. Congress and certain state legislatures have considered and passed a large number of laws intended to result in significant changes to the healthcare industry, including the ACA. The ACA affects how healthcare services are delivered and reimbursed through the expansion of public and private health insurance coverage, reduction of growth in Medicare and Medicaid program spending, and the establishment and expansion of programs that tie reimbursement to quality and integration. However, there is significant uncertainty regarding the future of the ACA. The law has been subject to legislative and regulatory changes and court challenges, and although the current presidential administration has indicated its intent to protect the ACA, it is possible that there may be continued changes to the ACA, its implementation or its interpretation.

There is uncertainty regarding whether, when, and how the ACA will be further changed, what alternative provisions, if any, will be enacted, the timing and implementation of alternative provisions, and the impact of alternative provisions on providers as well as other healthcare industry participants. Further, the impact of the outcome of the 2020 federal election on health reform is unknown. Members of Congress have proposed expanding government-funded coverage, including proposals to expand coverage of federally-funded insurance programs as an alternative to private insurance or to establish a single payor system (such reforms are often referred to as "Medicare for All"), and some states have pursued or proposed similar measures.

In addition, CMS has indicated that it intends to increase flexibility in state Medicaid programs, including by expanding the scope of waivers under which states may implement Medicaid expansion provisions, impose different eligibility or enrollment restrictions, or otherwise implement programs that vary from federal standards. CMS administrators have also signaled interest in changing Medicaid payment models. Other industry participants, such as private payors, may also introduce financial or delivery system reforms. We are unable to predict the nature and success of such initiatives. Healthcare reform initiatives, including changes to or repeal or invalidation of the ACA, 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.

The trend in the healthcare industry toward value-based purchasing of healthcare services is growing among both government and commercial payors. Value-based purchasing programs emphasize quality of outcome and efficiency of care provided, rather than quantity of care provided. For example, Medicare requires hospices and home health agencies to report certain quality data in order to receive full reimbursement. Failure to report quality data or poor performance may negatively impact the amount of reimbursement received. In addition, CMS publishes home health and hospice quality measure data online, through its Care Compare website, to

28


Table of Contents

 

allow consumers and others to search and compare data for Medicare-certified providers. Alongside this quality and public reporting effort, CMS currently has a value-based purchasing program affecting home health providers in a number of pilot states, whereby providers receive payment bonuses or penalties based on their achievement of specified performance measures. In January 2021, CMS announced its intent to expand this program. In the future, CMS may establish new value-based purchasing programs affecting a broader range of providers. Other initiatives aimed at improving quality and cost of care include alternative payment models, including ACOs and bundled payment arrangements. It is unclear whether alternative models will successfully coordinate care and reduce costs or whether they will decrease overall reimbursement. Additionally, commercial payors have expressed intent to shift toward value-based reimbursement arrangements.

We expect value-based purchasing programs, including programs that condition reimbursement on patient outcome measures, to become more common and to involve a higher percentage of reimbursement amounts. While we believe we are adapting our business strategies to compete in a value-based reimbursement environment, we are unable at this time to predict how this trend will affect our results of operations. If we perform at a level below the outcomes demonstrated by our competitors, fail to satisfy quality data reporting requirements, are unable to meet or exceed quality performance standards under any applicable value-based purchasing program, or otherwise fail to effectively provide or coordinate the efficient delivery of quality healthcare services, our reputation in the industry may be negatively impacted, we may receive reduced reimbursement amounts and we may owe repayments to payors, causing our revenues, financial position, results of operations and cash flows to decline.

Liability Risks

Our operations subject us to risk of litigation.

Operating in the personal care services industry exposes us to an inherent risk of wrongful death, personal injury, professional malpractice and other potential claims or litigation brought by our consumers and employees. From time to time, we are subject to claims alleging that we did not properly treat or care for a consumer that we failed to follow internal or external procedures that resulted in death or harm to a consumer or that our employees mistreated our consumers, resulting in death or harm. 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 may also be subject to lawsuits from patients, employees and others exposed to COVID-19 at our facilities or in connection with the services provided by our workforce in client residences and third party facilities. Our professional and general liability insurance may not cover all claims against us.

In addition, regulatory agencies may initiate administrative proceedings alleging violations of statutes and regulations arising from our services and seek to impose monetary penalties on us. We could be required to pay substantial amounts to respond to regulatory investigations or, if we do not prevail, damages or penalties arising from these legal proceedings. We also are subject to potential lawsuits under the federal False Claims Act or other federal and state whistleblower statutes designed to combat fraud and abuse in our industry. This and other similar lawsuits can involve significant monetary awards or penalties which may not be covered by our insurance. If our third-party insurance coverage and self-insurance coverage reserves are not adequate to cover these claims, it could have a material adverse effect on our business, results of operations and financial condition. Even if we are successful in our defense, civil lawsuits or regulatory proceedings could distract us from running our business or irreparably damage our reputation.

Our insurance liability coverage may not be sufficient for our business needs.

Although we maintain insurance consistent with industry practice, the insurance we maintain may not be sufficient to satisfy all claims made against us. We cannot assure you that claims will not be made in the future in excess of the limits of our insurance, and any such claims, if successful and in excess of such limits, may have a material adverse effect on our business or assets. We utilize historical data to estimate our reserves for our insurance programs. If losses on asserted claims exceed the current insurance coverage and accrued reserves, our business, results of operations and financial condition could be adversely affected. Changes in our annual insurance costs and self-insured retention limits depend in large part on the insurance market, and insurance coverage may not continue to be available to us at commercially reasonable rates, in adequate amounts or on satisfactory terms.

Data Security and Privacy Risks

Our business depends on our information systems. Our operations may be disrupted if we are unable to effectively integrate, manage and maintain the security of our information systems.

Our business depends on effective and secure information systems that assist us in, among other things, gathering information to improve the quality of consumer care, optimizing financial performance, adjusting consumer mix, monitoring regulatory compliance and enhancing staff efficiency. We rely on external service providers to provide continual maintenance, upgrading, and enhancement of our primary information systems used for our operational needs. The software we license for our various patient information systems supports intake, personnel scheduling, office clinical and centralized billing and receivables management in an integrated database, enabling us to standardize the care delivered across our network of offices and monitor our performance and consumer

29


Table of Contents

 

outcomes. To the extent providers fail to support the software or systems, or if we lose our licenses, our operations could be negatively affected. Our business also depends on a comprehensive payroll and human resources system for basic payroll functions and reporting, payroll tax reporting, managing wage assignments and garnishments. We rely on an external service provider, ADP, to provide continual maintenance, upgrading and enhancement of our primary human resource and payroll systems. To the extent that ADP fails to support the software or systems, or any of the related support services provided by them, our internal operations could be negatively affected.

Our business also supports the use of EVV to collect visit submission information through our delivery of home care services. Our solution uses a combination of IVR and GPS enabled smartphones to capture time in and time out, mileage and travel time, as well as the completed care plan tasks. We license this software through CellTrak along with partnering with states who utilize other software. We rely on these providers to provide continual maintenance, enhancements, as well as security of any protected data. To the extent that our EVV vendors fail to support these processes, our internal operations could be negatively affected. Under the 21st Century Cures Act, as amended, states had until January 1, 2020 to establish standards for EVV for Medicaid-funded personal care services. States that failed to meet this deadline could potentially lose, without an application for a good cause extension, an escalating amount of their funding. To the extent that the states fail to properly implement EVV and lose an amount of their funding or to the extent states adopt standards for EVV that are not compatible with our operations, our internal operations could be negatively affected.

The COVID-19 pandemic also has led to a substantial increase in administrative employees working remotely and, consequently, accessing our system remotely. As a result, we are more dependent on our systems that facilitate remote access and potentially could experience increased risks.

If we experience a reduction in the performance, reliability, or availability of our information systems, our operations and ability to process transactions and produce timely and accurate reports could be adversely affected. If we experience difficulties with the transition and integration of information systems or are unable to implement, maintain, or expand our systems properly, we could suffer from, among other things, operational disruptions, regulatory problems, and increases in administrative expenses.

We have full backup of our key information systems. Should our main datacenter become inoperable because of a natural disaster or terrorist acts, our operations would failover to our geographically separate disaster recovery datacenter with a quick return to operations for all sites and systems. All of our sites and branch offices have redundant connections to our primary and backup datacenters using data lines and cellular connections through VPN or MPLS.

The key business functions for our main sites also have redundancies with key functions geographically split between our two main facilities, should one not be available due to the above mentioned scenarios.

While we believe these measures are reasonable, no system of information security is able to eliminate the risk of business disruptions.

A cyber-attack or security breach could cause a loss of confidential consumer data, give rise to remediation and other expenses, expose us to liability under HIPAA, consumer protection laws, common law and other legal theories, subject us to litigation and federal and state governmental inquiries, damage our reputation, and otherwise be disruptive to our business.

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 are required to comply with the federal and state privacy and security laws and requirements, including HIPAA. In spite of our policies, procedures and other security measures used to protect our computer systems and data, occasionally, we have experienced breaches that have required us to notify affected consumers and the government, and we have worked with consumers and the government to resolve such issues. While these past breaches have not had a significant adverse impact on our business or results of operations, there can be no assurance that we will not be subject to additional and/or more severe cyber-attacks or security breaches in the future. Such attacks or breaches could result in loss of protected patient medical data or other information subject to privacy laws or disrupt our information technology systems or business. In addition, various states, including California, Illinois, Nevada, New York and Massachusetts, have enacted and other states are expected to enact new laws and regulations concerning privacy, data protection and information security. To the extent we are subject to such legislation, the potential effects of new legislation are often far-reaching and may require us to modify our data processing practices and policies and to incur substantial costs and expenses in an effort to comply. The recently enacted laws often provide for civil penalties for violations, as well as a private right of action for data breaches that may increase data breach litigation. In addition, COVID-19 may have an adverse impact on our information technology systems and our ability to securely preserve confidential information, including risks associated with telecommuting issues associated with our employees working remotely. If our privacy and security practices fail to comply with HIPAA and other applicable privacy and security laws and/or if we fail to satisfy applicable breach notification requirements in the event of a security breach, we could be subject to significant fines, penalties, lawsuits and reputational harm. In addition, we may be at increased risk because we outsource certain services or functions to, or have systems that interface with, third parties. Some of these third parties may store or have access

30


Table of Contents

 

to our data and may not have effective controls, processes, or practices to protect our information from attack, damage, or unauthorized access. A breach or attack, including those caused by updates and other releases, affecting any of these third parties could harm our business.

Human Capital Risks

We may not be able to attract and retain qualified personnel or we may incur increased costs in doing so.

We must attract and retain qualified non-executive personnel in the markets in which we operate in order to provide our services. We compete for personnel with other providers of social and medical services as well as companies in other service-based industries. Increased competition for trained personnel or general inflationary pressures may require that we enhance our pay and benefits packages to compete effectively for such personnel. We may not be able to offset such added costs by increasing the rates we charge for our services. An increase in personnel costs could negatively impact our business. In addition, if we fail to attract and retain qualified and skilled personnel, our ability to conduct our business operations effectively would be harmed.

Competition may be greater for managers, such as regional and agency directors. 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. The loss of one or more of the members of the executive management team or the inability of a new management team to successfully execute our strategies may adversely affect our business. 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.

With the widespread adverse impacts of the COVID-19 pandemic on the hospitality and other labor-intensive industries, we continue to believe we will have an opportunity to increase our hiring of new caregivers in the long term. However, in the near term, the enhanced unemployment benefits offered by several states have suppressed the opportunity to attract this new pool of potential caregivers in these states. For example in September 2020, the state of New York announced the Lost Wages Assistance (“LWA”) program, which provides an additional $300 in weekly benefits to unemployed individuals.

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.

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;

31


Table of Contents

 

 

 

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.

In addition, our credit facility contains restrictive covenants and requires us to maintain specified financial ratios and satisfy other financial condition tests. 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.

A breach of any of these covenants could result in a default under our credit facility. Upon the occurrence of an event of default under our credit facility, all amounts outstanding under our credit facility may become immediately due and payable and all commitments under our credit facility to extend further credit may be terminated. The acceleration of any such indebtedness will result in an event of default under all of our other long-term indebtedness.

The potential cessation or modification of LIBOR may increase our interest expense or otherwise adversely affect us.

A substantial portion of our indebtedness under the credit facility bears interest at variable interest rates that use the London Inter-Bank Offered Rate (“LIBOR”) as a benchmark rate. On July 27, 2017, the United Kingdom’s Financial Conduct Authority, which regulates LIBOR, announced that it intends to stop persuading or compelling banks to submit LIBOR quotations after 2021 (the “FCA Announcement”). The FCA Announcement indicates that the continuation of LIBOR on the current basis cannot and will not be assured after 2021, and LIBOR may cease to exist or otherwise be unsuitable for use as a benchmark. Recent proposals for LIBOR reforms may result in the establishment of new methods of calculating LIBOR or the establishment of one or more alternative benchmark rates. Although our credit facility provides for alternative base rates, some of those alternative base rates are related to LIBOR, and the consequences of any potential cessation, modification or other reform of LIBOR cannot be predicted at this time. When LIBOR ceases to exist, we most likely will need to amend the credit facility, and we cannot predict what alternative interest rate(s) will be negotiated with our counterparties. As a result, our interest expense may increase, our ability to refinance some or all of our existing indebtedness may be impacted and our available cash flow may be adversely affected.

General Risks

Inclement weather, natural disasters, acts of terrorism, pandemics, riots, civil insurrection or social unrest, looting, protests, strikes or street demonstrations may impact our ability to provide services.

Inclement weather, natural disasters, acts of terrorism, pandemics, riots, civil insurrection or social unrest, looting, protests, strikes or street demonstrations may prevent our employees from providing authorized services. We are not paid for authorized services that are not delivered due to these events. Furthermore, prolonged disruptions as a result of such events in the markets in which we operate could disrupt our relationships with consumers, patients, caregivers and employees and referral sources located in affected areas and, in the case of our corporate office, our ability to provide administrative support services, including billing and collection services. For example, one of our support centers and a number of our agencies are located in the Midwestern United States, New York and California, increasing our exposure to blizzards and other major snowstorms, ice storms, tornadoes, flooding, wildfires and earthquakes. The impact of disasters and similar events is inherently uncertain. Future inclement weather, natural disasters, acts of terrorism, pandemics, riots, civil insurrection or social unrest, looting, protests, strikes or street demonstrations may adversely affect our reputation, business and consolidated financial condition, results of operations and cash flows.

32


Table of Contents

 

 

ITEM 1B.

UNRESOLVED STAFF COMMENTS

None.

ITEM 2.

PROPERTIES

We do not own any real property. We lease administrative offices for our local branches, none of which are individually material. We lease approximately 59,000 and 106,000 square feet of office space in Downers Grove, Illinois and Frisco, Texas, respectively, which serve as our support centers. We sublease approximately 21,000 and 12,000 square feet of our office space in Downers Grove and Frisco, respectively, to a third party.

ITEM 3.

From time to time, we are subject to legal and/or administrative proceedings incidental to our business. It is the opinion of management that the outcome of pending legal and/or administrative proceedings will not have a material effect on our financial position and results of operations.

Further information with respect to this item may be found in Note 12 to the Consolidated Financial Statements in Part II, Item 8—“Financial Statements and Supplementary Data,” which is incorporated herein by reference.

ITEM 4.

MINE SAFETY DISCLOSURES

Not applicable.

33


Table of Contents

 

 

PART II

ITEM 5.

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER 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, 2020, 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 296 institutional investors. As of February 19, 2021, Addus HomeCare Corporation had approximately 12,450 shareholders of its common stock, including 72 shareholders of record.

Dividends

We have never paid dividends on our common stock, including in the two most recent fiscal years, and we do not intend to pay any dividends on our common stock in the foreseeable future. We currently plan to retain any earnings to support the operation, and to finance the growth, of our business rather than to pay cash dividends. Payments of any cash dividends in the future will depend on our financial condition, capital requirements, credit facility limitations, earnings, as well as other factors deemed relevant by our Board. 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.

34


Table of Contents

 

ITEM 6.

SELECTED FINANCIAL DATA

The following table sets forth selected financial information derived from our Consolidated Financial Statements for the periods and at the dates indicated. The information is qualified in its entirety by and should be read in conjunction with the Consolidated Financial Statements and related notes included elsewhere in this Annual Report on Form 10-K.

 

 

 

For the Years Ended December 31,

 

 

 

 

2020

 

 

2019(2)

 

 

2018(2)

 

 

2017(2)

 

 

2016(2)

 

 

 

 

(Amounts In Thousands, Except Per Share Data)

 

 

Consolidated Statements of Income Data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net service revenues (1)

 

$

764,775

 

 

$

648,791

 

 

$

516,647

 

 

$

425,994

 

 

$

400,929

 

 

Cost of service revenues

 

 

538,538

 

 

 

469,553

 

 

 

379,843

 

 

 

310,119

 

 

 

294,593

 

 

Gross profit

 

 

226,237

 

 

 

179,238

 

 

 

136,804

 

 

 

115,875

 

 

 

106,336

 

 

General and administrative expenses

 

 

169,679

 

 

 

133,912

 

 

 

105,335

 

 

 

83,959

 

 

 

86,039

 

 

Depreciation and amortization

 

 

12,051

 

 

 

10,574

 

 

 

8,642

 

 

 

6,663

 

 

 

6,647

 

 

Total operating expenses

 

 

181,730

 

 

 

144,486

 

 

 

113,977

 

 

 

90,622

 

 

 

92,686

 

 

Operating income from continuing operations

 

 

44,507

 

 

 

34,752

 

 

 

22,827

 

 

 

25,253

 

 

 

13,650

 

 

Interest income (3)

 

 

(624

)

 

 

(1,523

)

 

 

(2,592

)

 

 

(66

)

 

 

(2,812

)

 

Interest expense

 

 

3,189

 

 

 

3,105

 

 

 

5,016

 

 

 

4,472

 

 

 

2,332

 

 

Total interest expense (income), net

 

 

2,565

 

 

 

1,582

 

 

 

2,424

 

 

 

4,406

 

 

 

(480

)

 

Other income