Addus HomeCare Corp

Previous wording

You should read the following discussion together with our unaudited condensed consolidated financial statements and the related notes included elsewhere in this quarterly report on Form 10-Q. This discussion contains forward-looking statements about our business and operations. Statements that are predictive in nature, that depend upon or refer to future events or conditions or that include 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 impact of macroeconomic conditions, including significant global inflation and elevated interest rates, legislative and political developments, trade disruptions and the potential adverse effects of current geopolitical conditions; business disruptions due to inclement weather, natural disasters, acts of terrorism, pandemics, riots, civil insurrection or social unrest, looting, protests, strikes or street demonstrations; 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, and the timeliness of reimbursements received under government programs; 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, state and city minimum wage pressure, including any failure of any 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 and deficit reduction measures by federal and state governments, and our expectati…

Excerpt shortened here; the source contains the full paragraph.

Current wording

You should read the following discussion together with our unaudited condensed consolidated financial statements and the related notes included elsewhere in this quarterly report on Form 10-Q. This discussion contains forward-looking statements about our business and operations. Statements that are predictive in nature, that depend upon or refer to future events or conditions or that include 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 impact of macroeconomic conditions, including inflation and elevated interest rates, legislative and political developments, trade disruptions and the potential adverse effects of current geopolitical conditions; business disruptions due to inclement weather, natural disasters, acts of terrorism, pandemics, riots, civil insurrection or social unrest, looting, protests, strikes or street demonstrations; changes in operational and reimbursement processes and payment structures at the state or federal levels; changes in Medicaid, Medicare, other government programs and managed care organizations policies and payment rates, and the timeliness of reimbursements received under government programs; 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, state and city minimum wage pressure, including any failure of any 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 and deficit reduction measures by federal and state governments, and our expectations regarding thes…

Excerpt shortened here; the source contains the full paragraph.

Previous wording

We are a home care services provider operating 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. Managed care organizations accounted for 35.1% and 36.6% of our net service revenues during the three months ended June 30, 2024 and 2023, respectively, and 35.4% and 36.6% of our net service revenues during the six months ended June 30, 2024 and 2023, respectively.

Current wording

We are a home care services provider operating 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. Managed care organizations accounted for 34.3% and 36.5% of our net service revenues during the three months ended September 30, 2024 and 2023, respectively, and 35.1% and 36.6% of our net service revenues during the nine months ended September 30, 2024 and 2023, respectively.

Previous wording

As of June 30, 2024, we provided our services in 22 states through 214 offices. We served approximately 70,000 and 62,000 discrete individuals, respectively, during the six months ended June 30, 2024 and 2023. Our personal care segment also includes staffing services, with clients including assisted living facilities, nursing homes and hospice facilities.

Current wording

As of September 30, 2024, we provided our services in 22 states through 214 offices. We served approximately 80,000 and 62,000 discrete individuals, respectively, during the nine months ended September 30, 2024 and 2023. Our personal care segment also includes staffing services, with clients including assisted living facilities, nursing homes and hospice facilities.

Previous wording

On August 1, 2023, we completed the acquisition of Tennessee Quality Care for approximately $111.2 million, with funding primarily provided by drawing on the Company’s revolving credit facility. The purchase price is subject to the completion of working capital and related adjustments. With the purchase of Tennessee Quality Care, the Company expanded its services within its hospice and home health segment to Tennessee.

Current wording

On August 1, 2023, we completed the acquisition of Tennessee Quality Care for approximately $111.2 million, with funding primarily provided by drawing on the Company’s revolving credit facility. With the purchase of Tennessee Quality Care, the Company expanded its services within its hospice and home health segments to Tennessee.

Previous wording

On June 8, 2024, we entered into the Gentiva Purchase Agreement to acquire the personal care operations of Gentiva, consisting of equity interests and certain assets and liabilities, for a purchase price of approximately $350.0 million, payable in full in cash at the closing, subject to typical adjustments for working capital and other customary items. The acquired business operates in Arizona, Arkansas, California, Missouri, North Carolina, Tennessee and Texas, and serve approximately 16,000 patients. The Company expects to close this acquisition following completion of regulatory approvals and subject to customary closing conditions and will fund this acquisition through the Company’s existing revolving credit facility and a portion of the net proceeds from the Public Offering.

Current wording

On June 8, 2024, we entered into the Gentiva Purchase Agreement to acquire the personal care operations of Gentiva, consisting of equity interests and certain assets and liabilities, for a purchase price of approximately $350.0 million, payable in full in cash at the closing, subject to typical adjustments for working capital and other customary items. The acquired business operates in Arizona, Arkansas, California, Missouri, North Carolina, Tennessee and Texas, and serves approximately 16,000 patients. The Company expects to close this acquisition following completion of regulatory approvals and subject to customary closing conditions and will fund this acquisition through the Company’s existing revolving credit facility and a portion of the net proceeds from the Public Offering.

Previous wording

On May 21, 2024, we entered into the New York Asset Sale. The Company entered into a consulting agreement as the transfer of clients and caregivers and payment for assets pursuant to the New York Asset Sale is occurring over time as regulatory approvals are received, coordination of the transfer of clients and caregivers occurs, and the change of control takes place. In connection with this transaction, the Company will cease operations in New York.

Current wording

On May 21, 2024, we entered into the New York Asset Sale. The Company entered into a consulting agreement as the transfer of clients and caregivers and payment for assets pursuant to the New York Asset Sale is occurring over time as regulatory approvals are received, coordination of the transfer of clients and caregivers occurs, and the change of control takes place. In connection with this transaction, the Company will cease operations in New York. See Note 14 to the Notes to Unaudited Condensed Consolidated Financial Statements, Subsequent Events, for additional details regarding the New York Asset Sale.

Previous wording

As the labor market continues to be tight and unemployment remains at low levels, the competition for new caregivers, including skilled healthcare staff, and support staff continues to be significant. In addition, the United States economy continues to experience significant inflationary pressures. To the extent that we continue to experience a shortage of caregivers, it may hinder our ability to fully meet the continuing demand for both our non-clinical and clinical services.

Current wording

As the labor market continues to be tight and unemployment remains at low levels, the competition for new caregivers, including skilled healthcare staff, and support staff continues to be significant. In recent periods, the United States economy has experienced, and may continue to experience, significant inflationary pressures. To the extent that we continue to experience a shortage of caregivers, it may hinder our ability to fully meet the continuing demand for both our non-clinical and clinical services.

Previous wording

The selection process for CDPAP fiscal intermediaries has changed significantly in recent years, and the program continues to be an area of focus for New York governmental authorities. The Company was not one of the entities selected through an RFO process to competitively procure fiscal intermediaries that was initiated in 2019 and, in November 2022, decided to suspend materially all of its new fee-for-service patient admissions through County Social Service Departments. The Company received a contract award in June 2023 and resumed new fee-for-service patient admissions. However, the New York fiscal year 2025 budget will replace the CDPAP fiscal intermediaries with a single statewide fiscal intermediary with a stated deadline of April 1, 2025. All service providers seeking to offer services under CDPAP will be required to contract with the statewide fiscal intermediary or its contractors in order to offer services. The Company does not believe it is likely to be selected as the single statewide fiscal intermediary, and it is difficult to predict the details of the implementation of these modifications and their final timeline and, thus, their impact on the Company’s business and operations. As a result of the changes and uncertainty in the state, the Company determined that its New York personal care operations no longer fit its growth strategy and reached an agreement to divest these operations. See Note 4 to the Notes to Unaudited Condensed Consolidated Financial Statements, Acquisition and Divestiture, for additional details regarding our divestiture.

Current wording

The selection process for CDPAP fiscal intermediaries has changed significantly in recent years and the program continues to be an area of focus for New York governmental authorities. As a result of the changes and uncertainty in the state, the Company determined that its New York personal care operations no longer fit its growth strategy and reached an agreement to divest these operations. See Note 4 to the Notes to Unaudited Condensed Consolidated Financial Statements, Acquisition and Divestiture, for additional details regarding our divestiture.

Previous wording

The personal care segment derives a significant amount of its net service revenues in Illinois, which represented 38.6% and 40.0% of our net service revenues for the three months ended June 30, 2024 and 2023, respectively, and accounted for 38.5% and 39.5% of our net service revenues for the six months ended June 30, 2024 and 2023, respectively.

Current wording

The personal care segment derives a significant amount of its net service revenues in Illinois, which represented 38.6% and 38.9% of our net service revenues for the three months ended September 30, 2024 and 2023, respectively, and accounted for 38.5% and 39.2% of our net service revenues for the nine months ended September 30, 2024 and 2023, respectively.

Previous wording

A significant amount of our net service revenues are derived from one payor, the Illinois Department on Aging, the largest payor program for our Illinois personal care operations, which accounted for 21.1% and 21.5% of our net service revenues for the three months ended June 30, 2024 and 2023, respectively, and accounted for 20.9% and 21.5% of the Company’s net service revenues for the six months ended June 30, 2024 and 2023, respectively.

Current wording

A significant amount of our net service revenues are derived from one payor, the Illinois Department on Aging, the largest payor program for our Illinois personal care operations, which accounted for 21.4% and 20.5% of our net service revenues for the three months ended September 30, 2024 and 2023, respectively, and accounted for 21.1% and 21.2% of the Company’s net service revenues for the nine months ended September 30, 2024 and 2023, respectively.

Previous wording

On November 26, 2019, the City of Chicago voted to approve additional increases in the Chicago minimum wage to $14 per hour beginning July 1, 2020 and to $15 per hour beginning July 1, 2021. In each subsequent year, the City is required to raise the wage based on increases in the Consumer Price Index (“CPI”) subject to a cap and other requirements. On July 1, 2023, the rate was adjusted to $15.80 based on the increase in the CPI.

Current wording

The City of Chicago requires the Chicago minimum wage to be adjusted annually based on increases in the Consumer Price Index (“CPI”), subject to a cap and other requirements. On July 1, 2024, the rate was adjusted to $16.20 based on the increase in the CPI.

Previous wording

Our business will benefit from the rate increases noted above as planned for 2025, but there is no assurance that there will be additional offsetting rate increases in Illinois for fiscal years beyond fiscal year 2025, and our financial performance will be adversely impacted for any periods in which an additional offsetting reimbursement rate increase is not in effect.

Current wording

Our business will benefit from the rate increases noted above as planned for 2025, but there is no assurance that there will be additional rate increases in Illinois for fiscal years beyond fiscal year 2025 to offset increases to minimum wage, and our financial performance will be adversely impacted for any periods in which an additional offsetting reimbursement rate increase is not in effect.

Previous wording

Hospice services provided to Medicare beneficiaries are paid under the Medicare Hospice Prospective Payment System, under which CMS sets a daily rate for each day a patient is enrolled in the hospice benefit. CMS updates these rates each federal fiscal year. Effective October 1, 2023, CMS increased hospice payment rates by 3.1%. This reflects a 3.3% market basket increase and a negative 0.2 percentage point productivity adjustment. Hospices that do not satisfy quality reporting requirements will be subject to a 4-percentage point reduction to the market basket update.

Current wording

Hospice services provided to Medicare beneficiaries are paid under the Medicare Hospice Prospective Payment System, under which CMS sets a daily rate for each day a patient is enrolled in the hospice benefit. CMS updates these rates each federal fiscal year. Effective October 1, 2024, CMS increased hospice payment rates by 2.9%. This reflects a 3.4% market basket increase and a negative 0.5 percentage point productivity adjustment. Hospices that do not satisfy quality reporting requirements are subject to a 4-percentage point reduction to the market basket update.

Previous wording

Overall payments made by Medicare to each hospice provider number are subject to an inpatient cap and an aggregate cap, which is 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, which limits the total Medicare reimbursement that a hospice may receive based on an annual per-beneficiary cap amount and the number of Medicare patients served, was updated to $33,494.01 for federal fiscal year 2024. If a hospice’s Medicare payments exceed its inpatient or aggregate caps, it must repay Medicare the excess amount.

Current wording

Overall payments made by Medicare to each hospice provider number are subject to an inpatient cap and an aggregate cap, which is 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, which limits the total Medicare reimbursement that a hospice may receive based on an annual per-beneficiary cap amount and the number of Medicare patients served, was updated to $34,465.34 for federal fiscal year 2025. If a hospice’s Medicare payments exceed its inpatient or aggregate caps, it must repay Medicare the excess amount.

Previous wording

In certain states, payment of claims may be impacted by the Review Choice Demonstration for Home Health Services, a program intended to identify and prevent fraud, reduce the number of Medicare appeals and improve provider compliance with Medicare program requirements. The program currently applies to home health agencies in certain states, including Illinois, Ohio, Oklahoma, North Carolina, Florida and Texas. Providers in states subject to the Review Choice Demonstration may initially select either pre-claim review or post-payment review. Previously, providers could also opt for minimal post-payment review with a 25% payment reduction, but CMS has removed this option. Providers that had selected the minimal post-payment review option will transition to pre-claim or post-payment review in mid-July. Home health agencies that maintain high compliance levels are eligible for additional options that may be less burdensome. This program has not had a material impact on our results of operations or financial position.

Current wording

In certain states, payment of claims may be impacted by the Review Choice Demonstration for Home Health Services, a program intended to identify and prevent fraud, reduce the number of Medicare appeals and improve provider compliance with Medicare program requirements. The program currently applies to home health agencies in certain states, including Illinois, Ohio, Oklahoma, North Carolina, Florida and Texas. Providers in states subject to the Review Choice Demonstration for Home Health Services may initially select either pre-claim review or post-payment review. Previously, providers could also opt for minimal post-payment review with a 25% payment reduction, but CMS has removed this option. Providers that had selected the minimal post-payment review option transitioned to pre-claim or post-payment review in mid-July. Home health agencies that maintain high compliance levels are eligible for additional options that may be less burdensome. This program has not had a material impact on our results of operations or financial position.

Previous wording

The CDPAP is 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. We provide support services as a CDPAP fiscal intermediary. The Company recognized approximately $10.6 million and $21.0 million in revenue from the program for the three and six months ended June 30, 2024 and $10.3 million and $20.4 million in revenue from the program for the three and six months ended June 30, 2023, respectively.

Current wording

The CDPAP is 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. We provide support services as a CDPAP fiscal intermediary. The Company recognized approximately $9.3 million and $30.3 million in revenue from the program for the three and nine months ended September 30, 2024, respectively and $10.2 million and $30.6 million in revenue from the program for the three and nine months ended September 30, 2023, respectively.

Previous wording

All of our income is from domestic sources. We incur state and local taxes in the states in which we operate. The effective income tax rates were 26.3% and 23.8% for the three months ended June 30, 2024 and 2023, respectively. The effective income tax rates were 26.0% and 23.0% for the six months ended June 30, 2024 and 2023, respectively. The difference between our federal statutory rate of 21% and our effective income tax rates is principally due to the inclusion of state taxes and non-deductible compensation, partially offset by the use of federal employment tax credits.

Current wording

All of our income is from domestic sources. We incur state and local taxes in the states in which we operate. The effective income tax rates were 26.1% and 23.8% for the three months ended September 30, 2024 and 2023, respectively. The effective income tax rates were 26.1% and 23.3% for the nine months ended September 30, 2024 and 2023, respectively. The difference between our federal statutory rate of 21% and our effective income tax rates is principally due to the inclusion of state taxes and non-deductible compensation, partially offset by the use of federal employment tax credits.

Previous wording

Net service revenues increased by 10.4% to $286.9 million for the three months ended June 30, 2024 compared to $260.0 million for the three months ended June 30, 2023. Revenue increased by $14.5 million in our personal care segment, $5.8 million in our hospice segment and $6.6 million in our home health segment during the three months ended June 30, 2023, compared to the same period in 2022. The increase in our personal care segment was mainly due to an increase in revenues per billable hour for the three months ended June 30, 2023. The increase in our hospice and home health segment was primarily due to the acquisition of the operations of Tennessee Quality Care on August 1, 2023.

Current wording

Net service revenues increased by 7.0% to $289.8 million for the three months ended September 30, 2024 compared to $270.7 million for the three months ended September 30, 2023. Revenue increased by $13.6 million in our personal care segment, $4.2 million in our hospice segment and $1.3 million in our home health segment during the three months ended September 30, 2024, compared to the same period in 2023. The increase in our personal care segment was mainly due to an increase in revenues per billable hour for the three months ended September 30, 2024. The increase in our hospice and home health segments was primarily due to the acquisition of the operations of Tennessee Quality Care on August 1, 2023.

Previous wording

Gross profit, expressed as a percentage of net service revenues, increased to 32.5% for the three months ended June 30, 2024, compared to 31.7% for the same period in 2023, due to an increase in revenue and higher margin in our home health and hospice segments due to the acquisition of the operations of Tennessee Quality Care on August 1, 2023.

Current wording

Gross profit, expressed as a percentage of net service revenues, decreased to 31.8% for the three months ended September 30, 2024, compared to 32.0% for the same period in 2023, due to slightly lower margins in our personal care and hospice segments as the result of increases to direct care wages.

Previous wording

General and administrative expenses increased to $63.6 million for the three months ended June 30, 2024, as compared to $57.4 million for the three months ended June 30, 2023. The increase in general and administrative expenses was primarily due to the Tennessee Quality Care acquisition that resulted in an increase in administrative employee wages, bonus, taxes and benefit costs of $3.7 million and an increase in acquisition-related expense of $1.1 million. General and administrative expenses, expressed as a percentage of net service revenues, increased to 22.2% for the three months ended June 30, 2024, from 22.1% for the three months ended June 30, 2023.

Current wording

General and administrative expenses increased to $62.8 million for the three months ended September 30, 2024, as compared to $60.3 million for the three months ended September 30, 2023. The increase in general and administrative expenses was primarily due to the Tennessee Quality Care acquisition that resulted in an increase in administrative employee wages, bonus, taxes and benefit costs of $2.5 million. General and administrative expenses, expressed as a percentage of net service revenues, decreased to 21.7% for the three months ended September 30, 2024, from 22.3% for the three months ended September 30, 2023.

Previous wording

Interest expense decreased to $2.1 million for the three months ended June 30, 2024 from $2.3 million for the three months ended June 30, 2023. The decrease in interest expense was primarily due to decreased amounts held under our credit facility for the three months ended June 30, 2024 compared to the three months ended June 30, 2023.

Current wording

Interest expense decreased to $0.6 million for the three months ended September 30, 2024 from $3.2 million for the three months ended September 30, 2023. The decrease in interest expense was primarily due to decreased amounts held under our credit facility for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. Interest income increased $1.3 million due to an increase in cash investment into interest bearing accounts from the Public Offering.

Previous wording

All of our income is from domestic sources. We incur state and local taxes in states in which we operate. The effective income tax rate was 26.3% and 23.8% for the three months ended June 30, 2024 and 2023, respectively. Our higher effective income tax rate for the three months ended June 30, 2024 was principally due to a lower excess tax benefit as well as a lower benefit from the use of federal employment tax credits. For the three months ended June 30, 2024 and 2023, the excess tax benefit and federal employment tax credits were 2.8% and 5.6%, respectively.

Current wording

All of our income is from domestic sources. We incur state and local taxes in states in which we operate. The effective income tax rate was 26.1% and 23.8% for the three months ended September 30, 2024 and 2023, respectively. Our higher effective income tax rate for the three months ended September 30, 2024 was principally due to a lower excess tax benefit as well as a lower benefit from the use of federal employment tax credits. For the three months ended September 30, 2024 and 2023, the excess tax benefit and federal employment tax credits were 3.1% and 5.0%, respectively.

Previous wording

Net service revenues increased by 11.0% to $567.7 million for the six months ended June 30, 2024 compared to $511.6 million for the six months ended June 30, 2023. Net service revenue increased by $32.5 million in our personal care segment, by $12.6 million in our hospice segment and by $11.0 million in our home health segment during the six months ended June 30, 2024, compared to the same period in 2023. During the six months ended June 30, 2024, the increase in our personal care segment net service revenues was primarily due to an increase in revenue per billable hour, attributable to the rate increases discussed above, compared to the same period in 2023. The increase in net service revenues in our hospice and home health segments is primarily attributable to the acquisition of the operations of Tennessee Quality Care on August 1, 2023.

Current wording

Net service revenues increased by 9.6% to $857.5 million for the nine months ended September 30, 2024 compared to $782.3 million for the nine months ended September 30, 2023. Net service revenue increased by $46.0 million in our personal care segment, by $16.8 million in our hospice segment and by $12.3 million in our home health segment during the nine months ended September 30, 2024, compared to the same period in 2023. During the nine months ended September 30, 2024, the increase in our personal care segment net service revenues was primarily due to an increase in revenues per billable hour, attributable to the rate increases discussed above, compared to the same period in 2023. The increase in net service revenues in our hospice and home health segments is primarily attributable to the acquisition of the operations of Tennessee Quality Care on August 1, 2023.

Previous wording

Gross profit, expressed as a percentage of net service revenues, increased to 31.9% for the six months ended June 30, 2024 compared to 31.4% for the six months ended June 30, 2023 due to an increase in net service revenues and gross profit in our personal care segment and higher margin in our home health and hospice segments due to the acquisition of the operations of Tennessee Quality Care on August 1, 2023.

Current wording

Gross profit, expressed as a percentage of net service revenues, increased to 31.9% for the nine months ended September 30, 2024 compared to 31.6% for the nine months ended September 30, 2023 due to an increase in net service revenues and gross profit in our personal care segment and higher margin in our hospice segment due to the acquisition of the operations of Tennessee Quality Care on August 1, 2023.

Previous wording

General and administrative expenses increased to $124.6 million for the six months ended June 30, 2024 as compared to $113.8 million for the six months ended June 30, 2023. The increase in general and administrative expenses was primarily due to the Tennessee Quality Care acquisitions that resulted in an increase in administrative employee wages, bonus, taxes and benefit costs of $5.9 million and an increase in acquisition-related expense of $2.5 million. General and administrative expenses, expressed as a percentage of net service revenues, decreased to 22.0% for the six months ended June 30, 2024, from 22.2% for the six months ended June 30, 2023.

Current wording

General and administrative expenses increased to $187.4 million for the nine months ended September 30, 2024 as compared to $174.0 million for the nine months ended September 30, 2023. The increase in general and administrative expenses was primarily due to the Tennessee Quality Care acquisitions that resulted in an increase in administrative employee wages, bonus, taxes and benefit costs of $8.4 million and an increase in acquisition-related expense of $2.8 million. General and administrative expenses, expressed as a percentage of net service revenues, decreased to 21.9% for the nine months ended September 30, 2024, from 22.2% for the nine months ended September 30, 2023.

Previous wording

Interest expense increased to $4.9 for the six months ended June 30, 2024, as compared to $4.8 million for the six months ended June 30, 2023. The increase in interest expense was primarily due to increased interest rates under our credit facility for the six months ended June 30, 2024, compared to the six months ended June 30, 2023.

Current wording

Interest expense decreased to $5.4 million for the nine months ended September 30, 2024, as compared to $8.0 million for the nine months ended September 30, 2023. The decrease in interest expense was primarily due to decreased amounts held under our credit facility for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023. Interest income increased $1.8 million due to an increase in cash investment into interest bearing accounts from the Public Offering.

Previous wording

All of our income is from domestic sources. We incur state and local taxes in states in which we operate. The effective income tax rate was 26.0% and 23.0% for the six months ended June 30, 2024 and 2023, respectively. Our higher effective income tax rate for the six months ended June 30, 2024 was principally due to a lower excess tax benefit as well as a lower benefit from the use of federal employment tax credits. For the six months ended June 30, 2024 and 2023, the excess tax benefit and federal employment tax credits were 3.1% and 6.2%, respectively.

Current wording

All of our income is from domestic sources. We incur state and local taxes in states in which we operate. The effective income tax rate was 26.1% and 23.3% for the nine months ended September 30, 2024 and 2023, respectively. Our higher effective income tax rate for the nine months ended September 30, 2024 was principally due to a lower excess tax benefit as well as a lower benefit from the use of federal employment tax credits. For the nine months ended September 30, 2024 and 2023, the excess tax benefit and federal employment tax credits were 3.1% and 5.8%, respectively.

Previous wording

The personal care segment derives a significant amount of its net service revenues from operations in Illinois, which represented 38.6% and 40.0% of our net service revenues for the three months ended June 30, 2024 and 2023, respectively, and accounted for 38.5% and 39.5% of our net service revenues for the six months ended June 30, 2024 and 2023, respectively. One payor, the Illinois Department on Aging, accounted for 21.1% and 21.5% of net service revenues for the three months ended June 30, 2024 and 2023, respectively, and accounted for 20.9% and 21.5% of net service revenues for the six months ended June 30, 2024 and 2023, respectively.

Current wording

The personal care segment derives a significant amount of its net service revenues from operations in Illinois, which represented 38.6% and 38.9% of our net service revenues for the three months ended September 30, 2024 and 2023, respectively, and accounted for 38.5% and 39.2% of our net service revenues for the nine months ended September 30, 2024 and 2023, respectively. One payor, the Illinois Department on Aging, accounted for 21.4% and 20.5% of net service revenues for the three months ended September 30, 2024 and 2023, respectively, and accounted for 21.1% and 21.2% of net service revenues for the nine months ended September 30, 2024 and 2023, respectively.

Previous wording

Net service revenues from state, local and other governmental programs accounted for 53.1% and 50.6% of personal care segment net service revenues for the three months ended June 30, 2024 and 2023, respectively. Managed care organizations accounted for 44.2% and 46.0% of personal care segment net service revenues for the three months ended June 30, 2024 and 2023, respectively, with commercial insurance, private pay and other payors accounting for the remainder of personal care segment net service revenues. Net service revenues from state, local and other governmental programs accounted for 52.5% and 50.4% of net service revenues for the six months ended June 30, 2024 and 2023, respectively. Managed care organizations accounted for 44.8% and 46.1% of personal care segment net service revenues for the six months ended June 30, 2024 and 2023, respectively, with commercial insurance, private pay and other payors accounting for the remainder of net service revenues.

Current wording

Net service revenues from state, local and other governmental programs accounted for 54.2% and 50.4% of personal care segment net service revenues for the three months ended September 30, 2024 and 2023, respectively. Managed care organizations accounted for 43.3% and 46.4% of personal care segment net service revenues for the three months ended September 30, 2024 and 2023, respectively, with commercial insurance, private pay and other payors accounting for the remainder of personal care segment net service revenues. Net service revenues from state, local and other governmental programs accounted for 53.0% and 50.4% of net service revenues for the nine months ended September 30, 2024 and 2023, respectively. Managed care organizations accounted for 44.3% and 46.2% of personal care segment net service revenues for the nine months ended September 30, 2024 and 2023, respectively, with commercial insurance, private pay and other payors accounting for the remainder of net service revenues.

Previous wording

Personal care segment net service revenues increased by 7.3% and 8.4% for the three and six months ended June 30, 2024, respectively, compared to the three and six months ended June 30, 2023. Net service revenues included a 7.4% and 8.5% increase in revenues per billable hour for the three and six months ended June 30, 2024, respectively, mainly attributed to rate increases discussed above, as compared to the three and six months ended June 30, 2023.

Current wording

Personal care segment net service revenues increased by 6.7% and 7.8% for the three and nine months ended September 30, 2024, respectively, compared to the three and nine months ended September 30, 2023. Net service revenues included a 5.7% and 7.5% increase in revenues per billable hour for the three and nine months ended September 30, 2024, respectively, mainly attributed to rate increases discussed above, as compared to the three and nine months ended September 30, 2023.

Previous wording

The hospice segment generates net service revenues by providing care to patients with a life expectancy of six months or less, as well as related services for their families. Hospice offers four levels of care, as defined by Medicare, to meet the varying needs of patients and their families. The four levels of hospice include routine home care, continuous home care, general inpatient care and respite care. Our hospice segment principally provides routine home care and continuous home care services, and with the JourneyCare acquisition, expanded into providing general inpatient care services. In our hospice segment, net service revenues from Medicare accounted for 91.2% and 90.7% of total hospice segment net service revenues for the three months ended June 30, 2024 and 2023, respectively, and 91.0% for both the six months ended June 30, 2024 and 2023. Net service revenues from managed care organizations accounted for 3.1% and 3.8% of total hospice segment net service revenues for each the three months ended June 30, 2024 and 2023, respectively, and 3.3% and 3.2% for the six months ended June 30, 2024 and 2023, respectively.

Current wording

The hospice segment generates net service revenues by providing care to patients with a life expectancy of six months or less, as well as related services for their families. Hospice offers four levels of care, as defined by Medicare, to meet the varying needs of patients and their families. The four levels of hospice include routine home care, continuous home care, general inpatient care and respite care. Our hospice segment principally provides routine home care and continuous home care services, and with the JourneyCare acquisition, expanded into providing general inpatient care services. In our hospice segment, net service revenues from Medicare accounted for 91.5% and 89.1% of total hospice segment net service revenues for the three months ended September 30, 2024 and 2023, respectively, and 91.1% and 90.2% for the nine months ended September 30, 2024 and 2023, respectively. Net service revenues from managed care organizations accounted for 3.2% and 3.4% of total hospice segment net service revenues for each the three months ended September 30, 2024 and 2023, respectively, and 3.3% and 3.3% for the nine months ended September 30, 2024 and 2023, respectively.

Previous wording

Hospice net service revenues increased by $5.8 million and $12.6 million for the three and six months ended June 30, 2024, respectively, compared to the three and six months ended June 30, 2023, primarily attributed to organic growth and the acquisitions of the operations of Tennessee Quality Care on August 1, 2023.

Current wording

Hospice net service revenues increased by $4.2 million and $16.8 million for the three and nine months ended September 30, 2024, respectively, compared to the three and nine months ended September 30, 2023, primarily attributed to organic growth and the acquisitions of the operations of Tennessee Quality Care on August 1, 2023.

Previous wording

Gross profit, expressed as a percentage of net service revenues, was 46.9% and 47.0% for the three months ended June 30, 2024 and 2023, respectively, and 47.5% and 45.7% for the six months ended June 30, 2024 and 2023, respectively. For the three months ended June 30, 2024, gross profit was relatively consistent with the prior period, and for the six months ended June 30, 2024, the increase was mainly attributed to a decrease in direct employee wages, taxes and benefit costs as a percentage of net service revenues.

Current wording

Gross profit, expressed as a percentage of net service revenues, was 46.8% and 47.0% for the three months ended September 30, 2024 and 2023, respectively, and 47.3% and 46.2% for the nine months ended September 30, 2024 and 2023, respectively. For the three months ended September 30, 2024, gross profit was relatively consistent with the prior period, and for the nine months ended September 30, 2024, the increase was mainly attributed to a decrease in direct care wages, taxes and benefit costs as a percentage of net service revenues.

Previous wording

The hospice segment’s general and administrative expenses primarily consist of administrative employee wages, taxes and benefit costs, rent, information technology and office expenses. General and administrative expenses, expressed as a percentage of net service revenues, were 24.0% and 25.4% for the three months ended June 30, 2024 and 2023, respectively, and 24.0% and 26.0% for the six months ended June 30, 2024 and 2023, respectively. The decrease in general and administrative expenses as a percentage of net service revenues was primarily due to more efficient operations for administrative employees for the three and six months ended June 30, 2024.

Current wording

The hospice segment’s general and administrative expenses primarily consist of administrative employee wages, taxes and benefit costs, rent, information technology and office expenses. General and administrative expenses, expressed as a percentage of net service revenues, were 24.6% and 24.9% for the three months ended September 30, 2024 and 2023, respectively, and 24.2% and 25.6% for the nine months ended September 30, 2024 and 2023, respectively. The decrease in general and administrative expenses as a percentage of net service revenues was primarily due to more efficient operations for administrative employees for the three and nine months ended September 30, 2024.

Previous wording

The home health segment generates net service revenues by providing home health services on a short-term, intermittent or episodic basis to individuals, generally to treat an illness or injury. Net service revenues from Medicare accounted for 69.3% and 76.1%, managed care organizations accounted for 25.9% and 19.6% and other accounted for 4.3% and 6.4% of total home health segment net service revenues for the three months ended June 30, 2024 and 2023, respectively. Net service revenues from Medicare accounted for 69.2% and 75.1%, managed care organizations accounted for 26.0% and 20.0% and other accounted for 4.9% and 6.3% of total home health segment net service revenues for the six months ended June 30, 2024 and 2023, respectively. Home health services provided to Medicare beneficiaries are paid under the Medicare Home Health Prospective Payment System, which uses national, standardized 30-day period payment rates for periods of care. CMS uses the PDGM as the case-mix classification model to place periods of care into payment categories, classifying patients based on clinical characteristics. An outlier adjustment may be paid for periods of care in which costs exceed a specific threshold amount.

Current wording

The home health segment generates net service revenues by providing home health services on a short-term, intermittent or episodic basis to individuals, generally to treat an illness or injury. Net service revenues from Medicare accounted for 70.6% and 72.1%, managed care organizations accounted for 24.7% and 21.9% and other accounted for 4.7% and 6.0% of total home health segment net service revenues for the three months ended September 30, 2024 and 2023, respectively. Net service revenues from Medicare accounted for 69.6% and 73.9%, managed care organizations accounted for 25.6% and 20.8% and other accounted for 4.8% and 5.3% of total home health segment net service revenues for the nine months ended September 30, 2024 and 2023, respectively. Home health services provided to Medicare beneficiaries are paid under the Medicare Home Health Prospective Payment System, which uses national, standardized 30-day period payment rates for periods of care. CMS uses the PDGM as the case-mix classification model to place periods of care into payment categories, classifying patients based on clinical characteristics. An outlier adjustment may be paid for periods of care in which costs exceed a specific threshold amount.

Previous wording

Home health net service revenues increased by $6.6 million and $4.1 million for the three and six months ended June 30, 2024, respectively, compared to the three and six months ended June 30, 2023. Total visits increased for the three months and six months ended June 30, 2024, mainly attributed to the acquisition of Tennessee Quality Care on August 1, 2023.

Current wording

Home health net service revenues increased by $1.3 million and $12.3 million for the three and nine months ended September 30, 2024, respectively, compared to the three and nine months ended September 30, 2023. Total visits increased for the three months and nine months ended September 30, 2024, mainly attributed to the acquisition of Tennessee Quality Care on August 1, 2023.

Previous wording

Gross profit, expressed as a percentage of net service revenues, was 37.6% and 38.2% for the three months ended June 30, 2024 and 2023, respectively, and 36.1% and 38.9% for the six months ended June 30, 2024 and 2023, respectively. For the three and six months ended June 30, 2024, the decrease was primarily due to an increase in cost of service revenues, which more than offset the increase in net service revenues compared to the three and six months ended June 30, 2023.

Current wording

Gross profit, expressed as a percentage of net service revenues, was 36.4% and 36.2% for the three months ended September 30, 2024 and 2023, respectively, and 36.2% and 37.9% for the nine months ended September 30, 2024 and 2023, respectively. For the nine months ended September 30, 2024, the decrease was primarily due to an increase in direct care wages compared to net service revenues.

Previous wording

The home health segment’s general and administrative expenses primarily consist of administrative employee wages, taxes and benefit costs, rent, information technology and office expenses. General and administrative expenses, expressed as a percentage of net service revenues, were 25.3% and 23.1% for the three months ended June 30, 2024 and 2023, respectively, and 26.1% and 23.1% for the six months ended June 30, 2024 and 2023, respectively. The increase in general and administrative expenses as a percentage of net service revenues was primarily due to increases in administrative employee wages, taxes and benefit costs for the three and six months ended June 30, 2024.

Current wording

The home health segment’s general and administrative expenses primarily consist of administrative employee wages, taxes and benefit costs, rent, information technology and office expenses. General and administrative expenses, expressed as a percentage of net service revenues, were 25.5% and 26.3% for the three months ended September 30, 2024 and 2023, respectively, and 25.9% and 24.3% for the nine months ended September 30, 2024 and 2023, respectively. The increase in general and administrative expenses as a percentage of net service revenues was primarily due to increases in administrative employee wages, taxes and benefit costs for the nine months ended September 30, 2024.

Previous wording

Our primary sources of liquidity are cash on hand and cash from operations and borrowings under our credit facility. At June 30, 2024 and December 31, 2023, we had cash balances of $173.3 million and $64.8 million, respectively. At June 30, 2024, we had a $600.0 million revolving credit facility and a $125.0 million incremental loan facility, which may be for term loans or an increase to the revolving loan commitments. The maturity of this credit facility is July 30, 2026.

Current wording

Our primary sources of liquidity are cash on hand and cash from operations and borrowings under our credit facility. At September 30, 2024 and December 31, 2023, we had cash balances of $222.9 million and $64.8 million, respectively. At September 30, 2024, we had a $600.0 million revolving credit facility and a $125.0 million incremental loan facility, which may be for term loans or an increase to the revolving loan commitments. The maturity of this credit facility, as of September 30, 2024, was July 30, 2026. It was subsequently extended to July 30, 2028.

Previous wording

During the six months ended June 30, 2024, we used $0.4 million in cash to fund the Upstate acquisition and repaid $126.4 million under our revolving credit facility. As of June 30, 2024, we had no revolving loans outstanding on our credit facility and after giving effect to the amount drawn on our credit facility, approximately $8.0 million of outstanding letters of credit and borrowing limits based on an advance multiple of adjusted EBITDA (as defined in the Credit Agreement), we had $504.4 million of capacity and $496.4 million available for borrowing under our credit facility. At December 31, 2023, we had a total of $126.4 million revolving credit loans, with an interest rate of 7.21%, outstanding on our credit facility.

Current wording

During the nine months ended September 30, 2024, we used $0.4 million in cash to fund the Upstate acquisition and repaid $126.4 million under our revolving credit facility. As of September 30, 2024, we had no revolving loans outstanding on our credit facility and after giving effect to the amount drawn on our credit facility, approximately $8.0 million of outstanding letters of credit and borrowing limits based on an advance multiple of adjusted EBITDA (as defined in the Credit Agreement), we had $511.5 million of capacity and $503.5 million available for borrowing under our credit facility. At December 31, 2023, we had a total of $126.4 million revolving credit loans, with an interest rate of 7.21%, outstanding on our credit facility.