Addus HomeCare - Earnings Call - Q1 2025

Executive Summary

• Q1 2025 delivered strong profitability with adjusted EPS of $1.42, a clear beat vs S&P Global consensus $1.33, while revenue of $337.7M was a modest miss vs $339.9M; adjusted EBITDA rose 25% to $40.6M and margin was 12%.*
• Growth was led by Personal Care (76.5% of revenue) with 7.4% organic revenue growth; Hospice improved with 9.9% organic growth and revenue per patient day up to $194.23; Home Health showed 1.3% organic growth.
• Management reiterated full-year adjusted EBITDA margin “above 12%” and mid-20% tax rate; Q2–Q4 margin cadence expected to follow historical seasonality (Q2 step-up 40–50 bps, Q4 step-up with hospice rate), implying continued margin expansion through year-end.
• Near-term catalysts: Gentiva PCS integration outperformance on bottom line, state rate support (confirmed post-quarter by Illinois and Texas FY26 budgets), and ongoing acquisition pipeline; watch Texas rate implementation timing and additional synergies realization.

What Went Well and What Went Wrong

What Went Well

• Personal Care organic growth of 7.4% on improving volume and rate support (Illinois +5.5% Jan 1), with strong caregiver hiring (79 per day) and enhanced scheduling tools raising service fill rates. “We benefited from higher volumes as well as additional rate support, including a 5.5% increase…for Illinois”.
• Hospice momentum: ADC +4.6% y/y, patient days and revenue per day higher; leadership changes stabilizing execution. “We achieved 9.9% organic revenue growth…higher average daily census, patient days and revenue per patient day”.
• Adjusted EBITDA margin held 12% despite mix shift and seasonal headwinds; management expects >12% for 2025, with normal seasonal cadence improvements through Q2/Q4.

What Went Wrong

• Top-line fell slightly short of consensus as revenue per billable hour in personal care decreased sequentially ($25.32 vs $26.40 in Q4 and $27.66 in Q3), reflecting mix effects and January weather events before rebound.*
• Home Health volumes/visits remain below prior quarters (94,593 vs 99,803 in Q4 and 104,730 in Q3) while leadership gaps in one market constrain improvement, though mix vs MA/FFS stabilized.
• Illinois DSOs lengthened to 47.6 days on payment timing (vs 40 days in Q4), requiring monitoring of cash conversion; though collections improved early Q2.

Transcript

Operator (participant)

Good day and welcome to the Addus HomeCare First Quarter 2025 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your touch-tone phone. To withdraw your question, please press star, then two. Please note this event is being recorded. I would now like to turn the conference over to Dru Anderson. Please go ahead.

Dru Anderson (Senior Partners)

Thank you. Good morning and welcome to the Addus HomeCare Corporation First Quarter 2025 earnings conference call. Today's call is being recorded. To the extent any non-GAAP financial measure is discussed in today's call, you will also find a reconciliation of that measure to the most directly comparable financial measure calculated according to GAAP by going to the company's website and reviewing yesterday's news release. This conference call may also contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements, among others, regarding Addus' expected quarterly and annual financial performance for 2025 or beyond. For this purpose, any statements made during this call that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, discussions of forecasts, estimates, targets, plans, beliefs, expectations, and the like are intended to identify forward-looking statements.

You are hereby cautioned that these statements may be affected by important factors, among others, set forth in Addus' filings with the Securities and Exchange Commission and in its First Quarter 2025 news release. Consequently, actual operations and results may differ materially from the results discussed in the forward-looking statements. The company undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events, or otherwise. I would now like to turn the call over to the company's Chairman and Chief Executive Officer, Mr. Dirk Allison. Please go ahead, sir.

Dirk Allison (Chairman and CEO)

Thank you, Dru. Good morning and welcome to our 2025 First Quarter earnings call. With me today are Brian Poff, our Chief Financial Officer, and Brad Bickham, our President and Chief Operating Officer. As we do on each of our quarterly earnings calls, I will begin with a few overall comments, and then Brian will discuss the first quarter results in more detail. Following our comments, the three of us would be happy to respond to any questions. As we announced yesterday afternoon, our total revenue for the first quarter of 2025 was $337.7 million, an increase of 20.3% as compared to the $280.7 million for the first quarter of 2024. This revenue growth resulted in adjusted earnings per share of $1.42 as compared to adjusted earnings per share for the first quarter of 2024 of $1.21, an increase of 17.4%.

Our adjusted EBITDA was $40.6 million compared to $32.4 million for the first quarter of 2024, an increase of 25.1%. During the first quarter of 2025, we continued to experience consistent cash flows. As of March 31, 2025, we had cash on hand of approximately $97 million. During the first quarter, we reduced our bank debt by $20 million, leaving a balance of $203 million at the end of the quarter. This gives us a conservative net leverage position at under one times of adjusted EBITDA, allowing us the flexibility to continue to evaluate and pursue strategic acquisition opportunities. Now let me discuss certain areas of our operation. During the first quarter of 2025, we continued to experience solid caregiver hiring success, especially in our personal care segment.

During the first quarter of 2025, we saw personal care hiring at 79 hires per day, up one hire per business day compared to the first quarter of 2024, and up three hires per day sequentially. Please note that the hiring numbers exclude our divested New York operations, as well as the recently acquired Gentiva PCS operations, which had its first full quarter of operation as a part of Addus. In addition to our strong hiring numbers, we continued our momentum in starts per business day, which we have seen over the past few quarters. With respect to our clinical service lines, as has been consistent over the past few quarters, we continue to see improvements in the overall clinical labor environment, although we do believe that for the foreseeable future, clinical hiring will remain more challenging and geographically variable than what we see in our PCS segment.

As we have over the past few quarters, we continue to utilize the funding we received from the American Rescue Plan Act, or ARPA. During the first quarter of 2025, we utilized over $2.5 million, leaving approximately $8.8 million remaining in accessible funds. These funds are continuing to be used to help with caregiver recruitment and retention efforts, as well as other opportunities to enhance our caregivers' experience and training, primarily in our New Mexico market. In our personal care segment, our services continue to receive favorable reimbursement support from many of the states in which we operate.

We are confident that personal care services continue to deliver real value to state Medicare programs, as well as our managed care partners, through a reduction in the overall cost of care and put us in a favorable position as changes to the funding and other aspects of various Medicaid programs are considered. As we previously disclosed, effective January 1st, 2025, Illinois, our largest state for personal care services, enacted a 5.5% rate increase for personal care services, bringing the rate per hour to $29.63. We continue to appreciate the strong support that home and community-based care services receive from the leadership of that state. Now let me discuss our same-store revenue growth for the first quarter of 2025. For our personal care segment, our same-store revenue growth was 7.4% compared to the first quarter of 2024.

During the first quarter of 2025, we also saw personal care same-store hours increase by 2% as compared to the same period in 2024, our largest year-over-year volume growth over the past few quarters. As we have stated over the past several quarters, we expect volume growth to comprise a greater percentage of our personal care same-store revenue growth going forward. It is also encouraging that we continue to see improvement in our percentage of hours served compared to authorized hours, as we showed nice improvement over the first quarter of 2024. This continued improvement, along with the completion of the state-led Medicaid redetermination process, should help us achieve and maintain our goal of same-store personal care hour growth of at least 2% per year. Turning to our clinical operations, our hospice same-store revenue increased 9.9% when compared to the first quarter of 2024.

Our total average daily census increased to 3,515 for the first quarter, up from 3,359 for the same period last year, an increase of 4.6%. Our first quarter 2025 same-store admissions were up slightly year-over-year and were up 12.5% sequentially. For the first quarter of 2025, our hospice median length of stay was 25 days as compared to 26 days for the fourth quarter of 2024. Our stated target for this metric is mid to high 20s. Overall, we are pleased by the continued improvement in our hospice segment over the past several quarters. Our home health segment same-store revenue increased 1.3% when compared to the same quarter of 2024. We are pleased to see this segment of our business return to positive same-store revenue growth.

As we have previously discussed, our home health operation provides an important clinical partner to our hospice and personal care segments in the markets where we have these overlapping services, which allow us to provide our patients with access to the right care at the right time. As demonstrated by the Gentiva PCS transaction, acquisitions continue to be an important part of our growth strategy at Addus. Our targeted minimum annual revenue growth of 10% remains our goal, even with the larger size of our revenue base. Specifically for home health opportunities, we are primarily seeing small transactions coming to market at this point in time. We don't believe this dynamic will change until the industry sees how the new CMS administration will handle both annual home health rate setting and the potential revenue clawback.

Despite this uncertainty, we will continue to source and evaluate potential accretive home health transactions that fit our strategy of selectively adding clinical services in our existing personal care markets. Now that we have a strong presence in Texas following our Gentiva PCS personal care acquisition, our team has started looking for both clinical and non-clinical acquisition opportunities to increase both the density and geographic scope of our personal care service offerings in Texas and to add complementary clinical services to achieve our goal of broad coverage across the state for all three levels of home care. We are currently looking at certain smaller transactions which fit well with this strategy.

While there are indications that a number of larger clinical service acquisition opportunities may be coming to market later in 2025, we remain committed to maintaining a conservative approach to valuation and overall due diligence, which we feel has proven to be strategically advantageous over the past several years. Before I turn the call over to Brian, I want to thank the Addus team for the care they are providing to our elderly and disabled consumers and patients. We all have come to understand that the majority of the elderly and disabled clients and patients want to receive care at home, which remains one of the safest and most cost-effective places to receive this care. We believe that the heightened awareness of the value of home-based care is favorable for our industry and will continue to be a growth opportunity for our company.

We understand and appreciate that our operations and growth are dependent on both our dedicated caregivers and our other employees who work so hard providing outstanding care and support to our clients, patients, and their families. With that, let me turn the call over to Brian.

Brian Poff (CFO)

Thank you, Dirk, and good morning to everyone. Our first quarter financial results marked a strong start to 2025 as we continue to achieve consistent organic growth and derive additional value from our recent acquisitions. We achieved 20.3% top-line growth and a 25.1% increase in adjusted EBITDA compared with the first quarter last year. These results include the first full quarter of the Gentiva personal care operations, our largest acquisition to date, which we completed on December 2nd, 2024.

Our personal care services segment was the key driver of our business, with a solid 7.4% organic revenue growth rate over the same period last year, above our normal expected range of 3%-5%. Strong hiring trends and favorable rate support for personal care services in certain of our larger markets were both important to creating this organic growth. Rate support included a statewide reimbursement increase in Illinois, our largest market, which was effective January 1st, 2025. We also saw a 2% increase in same-store volume in our personal care division, in line with our long-term expectation. We saw steady improvement in our hospice segment in the first quarter, supported by the 2025 hospice reimbursement update that was effective October 1, 2024, and a 4.6% increase in our average daily census compared with the first quarter of 2024.

We achieved 9.9% organic revenue growth and higher average daily census, patient days, and revenue per patient day compared with the first quarter last year. Hospice care accounted for 18.2% of our revenue. For our home health services, which accounted for 5.3% of our business, we achieved organic revenue growth of 1.3% over the first quarter of last year. While this is our smallest segment, we believe home health is complementary to our personal care and hospice services, and we continue to look for opportunities to support and expand this service line. In addition to organic growth, we have benefited from our recently acquired operations, and we remain focused on identifying acquisitions that will be accretive and support our ability to expand our market reach. The Gentiva acquisition was the largest in our history, adding approximately $280 million in annualized revenues and significantly expanding our market coverage.

For 2025, we continue to actively look for additional acquisition opportunities, with our primary objective to add density in our existing personal care markets and add clinical services where we have a strong personal care presence. We will also look for opportunities to add select new personal care markets where we can enter at scale. With our size and scale and the support of a strong balance sheet, we are well-positioned to execute our acquisition strategy. As Dirk noted, total net service revenues for the first quarter were $337.7 million. The revenue breakdown is as follows. Personal care revenues were $258.3 million, or 76.5% of revenue. Hospice care revenues were $61.4 million, or 18.2% of revenue, and home health revenues were $18 million, or 5.3% of revenue. Other financial results for the first quarter of 2025 include the following.

Our gross margin percentage was 31.9%, compared with 31.4% for the first quarter of 2024. As expected, our gross margin was affected in the first quarter by our annual merit increases and the annual reset of payroll taxes, as well as the mix shift toward personal care from our first full quarter of the Gentiva operations. Looking forward, we expect our gross margin to remain relatively stable and consistent with our historical annual pattern. G&A expense was 21.7% of revenue, compared with 21.8% of revenue for the first quarter a year ago, and it declined sequentially from 24% of revenue in the fourth quarter of 2024. Adjusted G&A expenses for the first quarter were 19.9%, a slight increase from 19.8% in the comparable prior year quarter, but it declined sequentially from 20.5% in the fourth quarter of 2024.

The company's adjusted EBITDA increased to $40.6 million, compared with $32.4 million a year ago. Adjusted EBITDA margin was 12%, compared with 11.6% for the first quarter of 2024. For the solid start to 2025, we continue to expect our adjusted EBITDA margin percentage for the full year to remain above 12%. Adjusted net income per diluted share was $1.42, compared with $1.21 for the first quarter of 2024. The adjusted per-share results for the first quarter of 2025 exclude the following: acquisition expenses of $0.13 and non-cash stock-based compensation expense of $0.13. The adjusted per-share results for the first quarter of 2024 exclude the following: acquisition expenses of $0.12 and non-cash stock-based compensation expense of $0.12. Our effective tax rate for the first quarter of 2025 was 21.4% and benefited from the excess tax benefit related to our stock compensation.

For calendar 2025, we expect our tax rate to be in the mid-20% range. DSOs were 36.9 days at the end of the first quarter of 2025, compared with 38.8 days at the end of the fourth quarter of 2024, or 34.9 days when excluding Gentiva. We continue to experience consistent cash collections from the majority of our payers. Our DSOs for the Illinois Department of Aging for the first quarter were 47.6 days, compared with 40 days at the end of the fourth quarter last year, primarily as a result of payment timing. To date, in the second quarter of 2025, we have already received $31.3 million in payments from the IDOA. Our net cash flow from operations was $18.9 million for the first quarter of 2025.

As expected, we saw some negative working capital changes impact our cash flow in the first quarter, primarily due to the normal timing of our annual bonus payments. For the full year 2025, we continue to expect consistent cash flow conversion in line with our historical average. We utilized approximately $2.5 million in ARPA funding during the first quarter, and we have approximately $8.8 million in ARPA funds remaining to be utilized. As of March 31st, 2025, the company had cash of $97 million, with capacity and availability under our revolving credit facility of $632.9 million and $421.9 million, respectively. We finished the quarter with $203 million in bank debt, a reduction of $20 million from the end of the fourth quarter of 2024, and have subsequently reduced our revolver balance by an additional $20 million to date in the second quarter.

We have a capital structure that supports our ability to continue to invest in our business and pursue our strategic growth initiatives, including acquisitions. As mentioned, we will continue to selectively pursue acquisitions in 2025 that complement our organic growth and align with our strategy. At the same time, we will maintain our disciplined capital allocation strategy and continue to diligently manage our net leverage ratio through ongoing debt reduction. This concludes our prepared comments this morning, and thank you for being with us. I'll now ask the operator to please open the line for your questions.

Operator (participant)

We will now begin the question and answer session. To ask a question, you may press star, then one on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then two. At this time, we will pause momentarily to assemble our roster. The first question comes from Ben Hendrix with RBC Capital Markets. Please go ahead.

Ben Hendrix (Equity Research)

Great. Thank you very much. Just wanted to start off this morning, actually, on the hospice side, given all the attention around cap cushions and Medicare cap limitations this quarter with some of your peers. I just wondered if you could just start us off with just a little bit of commentary about what you're seeing from a cap limitation perspective in hospice.

Brad Bickham (President and COO)

Yeah, Ben, this is Brad. We really haven't seen—this really hasn't been very material for us. We had a little bit of cap last year. This year going forward, just very immaterial amount. I mean, it really boils down to making sure you've got a balanced referral mix in each of your markets. One of the things I think that's really benefited us is we brought in new sales leadership late last year. We've really done some targeted assessments of markets to make sure that we've got that balanced mix. We're actually managing cap pretty well.

Ben Hendrix (Equity Research)

Great. Yeah, the next was going to be my next question. Also, just along those same lines, wage index regions, just if you could maybe talk about, are there any particular regions that you guys have to manage particularly carefully due to higher wage index levels? Thanks.

Brad Bickham (President and COO)

Yeah. I mean, I think really not from a cap standpoint. We match up pretty well there, just with our kind of length of stay in those regions. So really, it has not impacted us in those markets.

Ben Hendrix (Equity Research)

Great. Thank you very much.

Operator (participant)

The next question is from Joanna Gajuk with Bank of America. Please go ahead.

Joanna Gajuk (Equity Research Analyst)

Oh, hi. Good morning. Thanks so much for taking the question. Maybe on the main business line, personal care services. You said that the hours actually grew nicely, 2%. That was same store. I want to say that three months ago, on the Q4 call, you talked about some weather headwinds early in the quarter. I guess, was that actually the case? Was there some material impact from that? It sounds like if that was the case, then the core actually is growing faster than that. My actual question is, how should we think about the growth for the rest of this year? It sounds like you're starting on a pretty strong growth in Q1.

Brad Bickham (President and COO)

Yeah, Joanna, we did have some weather events that hit us in early part of January. We rebounded nicely in February and March. I still expect kind of the hours to be in that 2-2.5% range going forward.

Joanna Gajuk (Equity Research Analyst)

All right. That's great. Also, staying on volumes, but different segment, on hospice, right? Census grew very nicely there, accelerated regarding growth, almost 5%. Is this a good runway going forward? Also, it sounds like maybe you do things there differently because the last few quarters, the growth continues to accelerate. Kind of walk us through some of the efforts and the results of that, and how we should think about the rest of the year.

Brad Bickham (President and COO)

Yeah. When we think about hospice, I mean, we look for kind of a revenue, on a revenue basis, a 5-7% range. I think we'll be kind of at that higher end, if maybe slightly above it. We have had good ADC growth. So really pleased with how the first quarter shaped up for us. And we'll see how the rest of the year goes. But 5-7% on the revenue side, with probably towards the upper end of that range.

Joanna Gajuk (Equity Research Analyst)

Any update on—sounds like you were making some changes in your hospice region, you just said in the prior question around just going through the markets. Is there any additional changes you're making there in the hospice segment?

Brad Bickham (President and COO)

No, I think on the hospice side, we're actually in pretty good shape. We made some leadership changes on the sales side and then also on the ops side at the regional level. I think we're in a really good place. We've got a strong leadership team, and they've been doing a very good job.

Joanna Gajuk (Equity Research Analyst)

Thank you so much for taking the questions.

The next question is from Tao Qiu with Macquarie. Please go ahead.

Tao Qiu (Analyst)

Hey, thank you. Good morning. Congrats, Brad, on the retirement announcement. I wanted to ask about margin. I think adjusted EBITDA margin was 12% in the first quarter. Under normal seasonality, that will be the low point of the year. I think you mentioned in previous quarters that the Gentiva-related expenses were more front-loaded than a typical transaction. I'm wondering if you could comment on the level and cadence of margin expansion we should expect through the rest of the year. Now that you have a full quarter of Gentiva under the belt, any additional insight you could share as to the cost synergies relative to your expectation? Thanks.

Brian Poff (CFO)

Yeah, so this is Brian. I think what we expect to see this year is kind of in line with what we've seen historically. You're right. Usually, Q1 is our low watermark from a margin percentage perspective. We usually see 40-50 basis points of expansion in the Q2, primarily from just hitting some of those payroll tax caps. Usually, Q2-Q3 is pretty level. No events issue. We don't have any kind of Illinois impacts like mid-year. Their fiscal starts in July 1. It should be pretty level Q2-Q3. We will see another step up in Q4, both from, again, we usually get a little bit of additional benefit from the payroll tax thresholds being hit, but we also get our hospice rate increase October 1 that kicks in and helps us as well. That normal cadence should continue through this year.

Tao Qiu (Analyst)

Okay. My second question is on the Medicaid front. I think, Dirk, you mentioned the pre-capital caps and the FMAP floor work requirements, all these things in past calls. I think the latest discussion has been on rolling back ACA expansion. I think there's some Medicaid trigger rule in Illinois and New Mexico. I think I read somewhere that the states are revisiting those trigger rules as well. I mean, could you just comment in general about the impact of potential ACA expansion rolling back and your exposure there? Thanks.

Dirk Allison (Chairman and CEO)

You know, when the ACA was expanded, we really did not benefit as a company from that. If you think about the type of patient we serve, it is an elderly patient. It is a disabled patient. Those are the folks that have qualified for Medicaid for years. It was not an expansion population that we just added at that point in time. Now, when you look at even some of the things going on, if some of the matching of that population base is reduced, it really has no direct effect on us. I would say that about most of the Medicaid changes that they are talking about. If you run through most of those, you see that from a standpoint of our patient base, again, remember, they are elderly, they are disabled.

We're not going to see much direct effect from the changes, if any of those changes actually get through. By the fact that we talked about before, why we think we're in such a good position is because we're a low-cost provider of Medicaid services to this very expensive patient base. Anything we can do to help the states keep folks out of longer-term facilities, keep them out of hospitals, emergency rooms, we think those play very well into the fact that if states are looking to try to make sure that their Medicaid programs are very efficient, we can be a player with that. From this standpoint in time, the ACA expansion, most of the others, we don't believe will be a direct impact to us.

Tao Qiu (Analyst)

Appreciate it. Thank you.

Operator (participant)

The next question is from Andrew Mak with Barclays. Please go ahead.

Ivan Bokhmat (Analyst)

Hi. Good morning. This is Ivan on for Andrew. Can you help us understand the components of the 7.4% same store revenue growth in the context of same store average global census being down 4.5% year-over-year? Is there anything driving what looks to be a particularly strong rate in the quarter? Thanks.

Brad Bickham (President and COO)

Yeah. I think when you look at just we're doing a better job of scheduling and assigning caregivers. Fundamentally, a lot of the things that we've done, some initiatives that we had in place, providing additional tools to our schedulers, giving them greater insight, also providing more visibility, frankly, to our caregivers where they might be underserving somebody, I think has paid dividends. We've seen we're doing a better job of increasing our service percentage or fill rate against the authorization. When you look at the census piece, I think we've mentioned this on a couple of previous calls. We went through the states went through the redetermination process last year. What we have found is that it takes almost six months for states to kind of rebound after they've gone through that process.

I mean, some of the early states that have gone through it, if I'm thinking about a New Mexico, which was probably about mid-year last year, we're starting to see admission trends outpace discharges in Q1 in that market. Illinois, by kind of on the opposite end of the spectrum, it was late in the year that they went through the redetermination process, really kind of November, December. We started to see kind of discharge numbers have steadily come down, and they're at kind of a more manageable rate. We're still looking for admission volume. It's picking up. It hasn't quite crossed that threshold, whereas outpacing discharges. But I'm optimistic as we get further through the year, the state of Illinois and their case managers are kind of complete their pivot to kind of normal operations, that we'll see those numbers pick up.

That's really the kind of driver on the census side, is really recovering from the redetermination process, which you can see in the states that went through it earlier. Just on the F service percentage, the hours, it's really about some of the things that we've done from an operational perspective.

Ivan Bokhmat (Analyst)

Thanks. If I could just do a quick follow-up. On the same store basis, excluding the operations of New York and Gentiva, how did gross margins compare?

Brian Poff (CFO)

I mean, as we talked about before, the Texas market is going to be a little bit lower on gross margin, but taking New York out, it was actually probably fairly equal. I think to our expectation, we're probably slightly ahead of our expectation for this year from a gross margin perspective in PCS.

Ivan Bokhmat (Analyst)

Great. Thanks for the color.

Operator (participant)

The next question is from Jared Haase with William Blair. Please go ahead.

Jared Haase (Equity Research Associate)

Yeah. Good morning. Thanks for taking the questions. Appreciate all the color thus far. Maybe I'll take a step back, and I'm just curious. Obviously, Addus has experienced some improvement on the workforce retention and hiring over the last couple of years, sort of benefiting from the states. If you take a step back and think about the data you're looking at across the industry, do you see that improvement sort of industry-wide from a retention perspective? Just curious to hear any color you'd share there.

Brad Bickham (President and COO)

Yeah. I think when you look at industry-wide, I think certainly from COVID timeframe, we have seen improvement, I think, industry-wide as well as ourselves internally on the personal care front. I think you're also seeing it on the skilled side. I mean, it certainly is a, the environment has improved. There are pockets still that are challenging, and I think it's going to be, as Dirk mentioned in his comments, the clinical side is going to be where we'll see the most kind of headwinds, if you will. That being said, it's much better than it was a year and a half, two years ago. I think that's what I'm reading kind of in industry publications is very similar. I think most people have said the clinical side still challenging, but it certainly has improved and continues to improve.

Jared Haase (Equity Research Associate)

Got it. That's helpful. Maybe just as a quick follow-up, obviously, on the home health side, a small portion of the overall mix here. Just curious, there's been a lot of focus on sort of the broader churn with Medicare Advantage plans at the start of this year, given the disruption they've experienced the last couple of years. Did that churn and patients kind of moving between products, did that have any impact at all on the volume trends in the quarter?

Brad Bickham (President and COO)

No, not really. I mean, one thing that we have been tracking, of course, is just our episodic versus non-episodic volume. And it's been very consistent. We're sitting at kind of 55-45, and I think we might have been at 56-44 a year ago. So really haven't seen much movement there. I think our challenges on the home health side, honestly, we have one market that we're struggling with leadership to find the right leader in. The other kind of two big states that we're in, New Mexico and Tennessee, I think have stabilized, and I'm optimistic that we'll see some nice improvement there. We just have one market that we're still focused on to try to find the right leader and I think turn that one around.

Jared Haase (Equity Research Associate)

Perfect. That's very helpful. Thank you.

Operator (participant)

The next question is from Matthew Gillmor with KeyBank. Please go ahead.

Matthew Gillmor (Director and Equity Research Analyst)

Hey, guys. Thanks for the question. I thought I might ask how the Gentiva business has been performing against your expectations. Obviously, great to see the same-store metrics strong on the Addus side, but if you had any comments, either kind of qualitative or quantitative, on how the Gentiva business has been performing the last couple of months.

Brad Bickham (President and COO)

Yeah. I mean, it's interesting on the Gentiva side. I mean, I can't say enough about the leadership team that we inherited on Gentiva from the branch level on up, just through the integration process. They've done a phenomenal job of staying focused, really making it, or I think our corporate teams have done an excellent job, but I think they've been very pleased with their interactions with the team on the ground. They've been very welcoming to move to our systems and our processes. We're still rolling things out to them. We just recently started implementing kind of our paperless onboarding process for new employees, and I think that's gone very well. From a financial performance, bottom line has actually been a little stronger than we thought it would be. Top line maybe a little bit lighter than we thought it would be.

Texas was coming out of the redetermination process. Again, that's one of the states that I'd highlight that if you look at kind of where we are, admissions and discharges, recently they've kind of crossed the threshold and you're starting to see some growth there.

Matthew Gillmor (Director and Equity Research Analyst)

Got it. That's helpful. I thought I might ask on the outlook on state budgets and potential rate increases in the future. I know you probably have a couple of states that are towards the tail end of their legislative sessions, but any comments there in terms of how rates may look in terms of what's coming out of these legislative sessions?

Brian Poff (CFO)

Yeah, man. This is Brian. I think state budgets for the moment, I think we still feel are in really good shape. We do not have any markets that we are in that we have any large concerns today. I think still expect to see that going forward. We will see how things shake out the rest of this year. I think on the rate side, we have gotten nice rate support over the last couple of years from Illinois and New Mexico, two of our largest markets. I think the one we are probably watching most closely this year is Texas. I think we have talked about that they have been looking at a rate increase through their most recent legislative session. I believe that is slated to come to a conclusion by, I think, June 2nd.

Sometime in the next 30 days, I think we should have an indication, obviously, some finality if there's going to be some additional rate support coming from there. That is probably the largest one we're watching for this year.

Matthew Gillmor (Director and Equity Research Analyst)

Got it. Thanks a lot.

Operator (participant)

The next question is from Brian Tanquilut with Jefferies. Please go ahead.

Megan Holtz (VP of Healthcare Services Equity Research)

Good morning. This is Megan Holtz on for Brian. Congrats on the quarter and thanks for taking the question. Just one quick follow-up. It looked like your hospice revenue per day was up pretty nicely and certainly above the Medicare fee for service rate. Is there anything to call out there?

Brian Poff (CFO)

Yeah. I think a couple of things. Obviously, the rate increase we got last year is part of that. I think if you look year-over-year on a comp basis, Q1 of last year to Q1 of this year, I think we had kind of an inverse situation when it comes to implicit price concession. I think last year we actually saw some negative or some headwinds with that in Q1 of last year. You did not see that impact this year. I think year-over-year that definitely played into a portion of that year-over-year increase.

Megan Holtz (VP of Healthcare Services Equity Research)

Thank you.

Operator (participant)

The next question is from Constantine Davides with Citizens Bank. Please go ahead.

Constantine Davides (Managing Director)

Quick housekeeping one from me. Just saw you added three locations in personal care from fourth quarter to the first quarter. What was that exactly? Are those de novos or something else?

Brad Bickham (President and COO)

Yeah. We did a small acquisition, tuck-in acquisition in Michigan, added those sites.

Constantine Davides (Managing Director)

Got it. And then just on the technology front, you mentioned some of the tools you're giving the caregivers and the schedulers. Where are you with that technology initiative? What are you kind of learning from some of the early pilot locations in terms of impact on how that's being used and what some of the benefits have been today?

Brad Bickham (President and COO)

Yeah. We rolled it out fully in our largest market, Illinois. This is a caregiver application that we've developed in-house. What we have found is, surprisingly, when we were thinking about the application and developing it, we're trying to address a couple of things. One is just greater communication with our caregivers, making sure it's kind of hard in a decentralized environment to make them feel part of the team. Part of it was to address some questions that we had on an internal survey, but also to try to get caregivers to provide us with their availability and how many hours they want to work. Because one of the things that we struggle with is increasing our service percentage, staffing new cases. One of the challenges is understanding with our current workforce, what is their availability and desire?

That was kind of the premises that we started with. Of course, one of the things that you're always thinking is, if we build it, will they come? What we did find is really, really good adoption in that market, people downloading the app and consistently utilizing it, updating their availability. What's really, I think, a benefit is once we found that adoption, we started tweaking the app and adding additional service features. One of which I alluded to is that they have visibility now as to whether they're going to be underserving a particular client, and they can work with that client and adjust the schedule to pick up those additional hours. They can do it through the application. What's really nice is without any intervention or involvement of our schedulers.

Actually, the app will adjust their schedule, which will feed over into our system, will feed over into the timekeeping system. It has been really nice to see that pick up. I think one area that we actually saw a nice benefit from is when we had some weather events that caused some underserving, that we saw people adjust their schedules at a pretty high rate, reschedule those hours. Really pleased with that. We are in the process of rolling that out in our, I guess, our third largest market since we have Texas, which is New Mexico. Again, seeing good adoption there. It took us a little while to get it rolled out there. One, we wanted to get a Spanish translation, which we have completed.

Then also kind of the unique feature of being in a Medicaid business is when you've seen one state plan, you've seen one state plan. You have to tweak the application and some of the rules around that every time you look to roll it out. We're in the process of one completing the rollout in New Mexico, and then we'll look at what other states we are good targets for that technology.

Constantine Davides (Managing Director)

Great. I guess just one follow-up. Any update on the Home Care Home Base rollout in PCS? Thank you.

Brad Bickham (President and COO)

Yeah. Continues to move forward. We're still, I'd say, in the development/pilot phase. We're steadily adding states to it. Part of it is just discovery of things for the system. We're still working very closely with Homecare Homebase on the development of it. We're not quite to where we're ready to push go on the enterprise-wide rollout, but I think with some of the development features they have they're working on currently, we'll be kind of closer to really working to maybe launch an enterprise-wide rollout maybe in later this year, latter part of this year, early next year.

Operator (participant)

The next question is from Ryan Langston with TD Cowen. Please go ahead.

Ryan Langston (Director and Senior Analyst)

Hey, thanks. Dirk, I appreciate the updates on the hiring trends, but can you give us a sense on the turnover between the three service lines and maybe the turnover metric at Gentiva before the acquisition closed?

Brad Bickham (President and COO)

Yeah. I don't have the Gentiva number in front of me, but if you look at our personal care, the largest segment, we're running around at between a 50-55% turnover rate on the personal care aides. We were kind of giving you kind of an idea of where we were and where the industry was. I think during COVID, we were probably at 70-75%, and the industry was at close to 90%. On the skilled side, we haven't given those numbers out in the past. I mean, we're doing better than we were. It kind of varies by geographies where you may have some challenges with a little more challenging labor market, but we have seen improvement in the turnover numbers on the skilled side. Really where the skilled side has come in is really the hiring has improved significantly.

Ryan Langston (Director and Senior Analyst)

Got it. I know obviously the focus has been on Gentiva, but can you give us any updates on how Tennessee Quality Care and JourneyCare are progressing? Thanks.

Brad Bickham (President and COO)

Yeah, happy to. Very pleased with that. We'll start with the one that we acquired first was JourneyCare. Really, it has performed very well. I think better than expectations, honestly, with that turnaround. Because it was a challenging one from the standpoint that you're acquiring a nonprofit that kind of took that seriously. They literally were nonprofit. But instituting some of our processes and really working with the team there, they've done a very good job of building census and really kind of broadening out their referral mix. So very pleased with how JourneyCare has performed. Tennessee Quality Care, the interesting thing there is we recently put in our bridge program from home health to hospice this year, and we've really seen some really nice traction there. The numbers have picked up.

Kind of the percentage of admissions coming from our home health into hospice there has improved significantly and is now tracking almost where we are at New Mexico, where 25%-30% of the admission volume is coming from our home health.

Operator (participant)

Again, if you have a question, please press star, then one. The next question is from John Ransom with Raymond James. Please go ahead.

John Ransom (Managing Director)

Hey, good morning, everybody. A couple for me. If we step back and look at hospice over the last five years or so, it was a little slower to come out of the COVID slump than maybe some of us thought. Can you just kind of go back in time and help us understand why that business was challenged for maybe a bit longer than it should have been and what has happened specifically recently to signal a turnaround?

Brad Bickham (President and COO)

Yeah, John, that's an interesting question. I think a lot of it had to do with during COVID, there was this dynamic. I mean, the elderly population is the population that gets hit the hardest. I think you had what some people would consider or call excess deaths for that demographic that would have either been current hospice patients or, more importantly, ones that would have transitioned into hospice in that kind of five-year period. I think that dynamic's over with. Now you're looking at just kind of the demographics of an aging population is really providing, I think, the tailwind there. I think you're also seeing you're back up to as far as the percentage of Medicare beneficiaries that are electing and dying on hospice has actually started getting back to pre-COVID numbers because that had actually dropped as well.

I think you're seeing kind of adoption get back to normal, and then you've just got the tailwind of just an aging population.

John Ransom (Managing Director)

I seem to remember too there was an issue with referrals from, I think, the SNF channel due to some COVID rules that finally got changed. Is that part of the referral?

Brad Bickham (President and COO)

Yeah. Yeah. That certainly is. I mean, that was probably about a year and a half ago, two years ago that when the PHE ended, there were rules that allowed SNF to basically skill patients longer and skill some patients that otherwise were unqualified.

John Ransom (Managing Director)

I gotcha. And then just going to home health, two questions there. Number one, kind of where are we with the challenge of that industry? One of them has obviously been the Medicare Advantage. So I'm just curious. I know this isn't a huge amount of business for you, but just in your contracting with MA plans, what's the gap now between an MA rate and a Medicare fee-for-service rate if we just look at it on a per-visit basis? And then secondly, I mean, do we think the regulatory backdrop now is stable enough to index a little harder on M&A there, or is it still going to be something that's less of a priority?

Brad Bickham (President and COO)

Yeah. I'll answer the first part of that. When you look at the kind of progress, I think one element, the mix shift, I think it's stabilized a little bit. We're not seeing the movement that we did two, three years ago. At least in our book of business, it's fairly stable Medicare or episodic rates versus non-episodic volume. With respect to rates in general, I think Medicare Advantage plans have started over the past year, year and a half, have started coming to the table in increasing rates, even if it's on a per-visit basis. I think you're now where you were at probably almost like a 40% discount is probably more in that 15%-20% discount rate Medicare fee-for-service. There's still room to go there, but it has improved pretty significantly.

Brian Poff (CFO)

Yeah. I think just on the M&A side, I think, as Dirk kind of alluded to in his comments, we're seeing probably more on the smaller side things coming to market. Feels like there's probably still a little bit of overhang until we get some clarity on kind of where things are headed. I think maybe we'll get a good indication of that here in a month or two when the proposed rule come out. I think that'll be maybe telling a little bit to see which way maybe this administration is viewing home health. We'll wait and see how that shakes out.

John Ransom (Managing Director)

I mean, is the clawback still a big consideration when you're looking at M&A, or can you structure transactions to wall that off?

Brian Poff (CFO)

Yeah. I mean, I think from our end, I think obviously with our business, we're not too concerned about the clawback. We're not as big as some others. I think we think we have ways that we could deal with that if there were willing participants, something that could be boxed in.

John Ransom (Managing Director)

Okay. Thank you.

Operator (participant)

This concludes our question and answer session. I would like to turn the conference back over to Dirk Allison for any closing remarks.

Dirk Allison (Chairman and CEO)

Thank you, operator. We want to again thank each of you for taking the time to join with us today on our earnings call. We hope that you have a great week.

Operator (participant)

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.