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 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.

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 significant global inflation and interest rates, legislative and political developments, including any hold on or cancellation of congressionally authorized spending or interruptions in the distribution of government funds, trade policies and tensions, including changes in, or the imposition of, tariffs and/or trade barriers and the economic impacts, volatility and uncertainty resulting therefrom, and the potential adverse effects of current conditions; business disruptions due to inclement weather, natural disasters, acts of terrorism, pandemics, civil insurrection or social unrest; 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; the impact of decisions of the U.S. Supreme Court regarding the actions of federal agencies; changes in presidential administrations; changes in the structure and administration of, and funding for, federal and state agencies and programs; 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; o…

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 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.

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 35.6% and 34.2% of our net service revenues during the three months ended March 31, 2025 and 2024, respectively.

Previous 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.

Current wording

As of March 31, 2025, we provided our services in 23 states through 260 offices. We served approximately 72,000 and 57,000 discrete individuals, respectively, during the three months ended March 31, 2025 and 2024. Our personal care segment also includes staffing services, with clients including assisted living facilities, nursing homes, and hospice facilities.

Previous wording

In addition to our organic growth, we have grown through acquisitions that have expanded our presence in current markets, with the goal of having all three levels of in-home care in our markets or facilitating our entry into new markets where in-home care has been moving to managed care organizations.

Current wording

In addition to our organic growth, we have grown through acquisitions that have expanded our presence in current markets, with the goal of having all three levels of in-home care in our markets or facilitating our entry into new markets where in-home care has been moving to managed care organizations or that present other strategic opportunities.

Previous wording

On March 9, 2024, we completed our acquisition of the operations of Upstate for $0.4 million, with funding provided by available cash. With the purchase of Upstate, the Company expanded its personal care services segment in South Carolina.

Current wording

On March 9, 2024, we completed our acquisition of the operations of Upstate Home Care Solutions (“Upstate”) for $0.4 million, with funding provided by available cash. With the purchase of Upstate, the Company expanded its personal care segment in South Carolina.

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. With the purchase of Tennessee Quality Care, the Company expanded its services within its hospice and home health segments to Tennessee.

Current wording

On December 2, 2024, we completed the acquisition of the personal care business of Curo Health Services, LLC, a Delaware limited liability company that does business as Gentiva, consisting of certain equity interests and assets and liabilities (collectively, the “Gentiva Acquisition”) for approximately $353.6 million, with funding primarily provided by drawing on the Company’s revolving credit facility and a portion of the net proceeds of the Company’s public offering of common stock. The purchase price is subject to the completion of working capital and related adjustments. With the Gentiva Acquisition, the Company expanded its services within its personal care segment in Arizona, Arkansas, California, and North Carolina, and entered the market in Missouri and Texas. The home health segment also was expanded in Tennessee.

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. See Note 14 to the Notes to Unaudited Condensed Consolidated Financial Statements, Subsequent Events, for additional details regarding the New York Asset Sale.

Current wording

Effective May 20, 2024, we entered into the New York Asset Sale. The Company entered into a consulting agreement with the purchaser, 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 ceased operations in New York. See Note 3 to the Notes to Unaudited Condensed Consolidated Financial Statements, Divesture, for additional details regarding our divestiture.

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 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.

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 addition, the United States economy continues to experience 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

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.

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 18.5% and 20.8% of our net service revenues for the three months ended March 31, 2025 and 2024, respectively.

Previous wording

The Illinois fiscal year 2025 budget includes an increase in hourly rates for in-home care services to $29.63, to take effect January 1, 2025, subject to federal approval. This rate supports the required minimum wage of $18.00 per hour for direct service workers.

Current wording

The Illinois fiscal year 2025 budget included an increase in hourly rates for in-home care services to $29.63, effective January 1, 2025, and required a minimum wage of $18.00 per hour for direct service workers. CMS approved an amendment to Illinois’ Persons Who are Elderly waiver program that included this rate increase, effective January 1, 2025.

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, 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.

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. The daily rate depends on the level of care provided to a patient (routine home care, continuous home care, inpatient respite care, or general inpatient care). Daily rates are adjusted for factors such as area wage levels. CMS updates hospice payment 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 $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.

Current wording

Overall payments made by Medicare to each hospice provider number are subject to an inpatient cap and an aggregate cap. The inpatient cap limits the number of days of inpatient care for which Medicare will pay to no more than 20% of total patient care days. Days in excess of the limitation are paid at the routine home care rate. The aggregate cap limits the total Medicare reimbursement that a hospice may receive in a cap year (typically the federal fiscal year) based on an annual per-beneficiary cap amount, which is set each federal fiscal year, and the number of Medicare patients served. The per-beneficiary cap amount 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

Home health services provided to Medicare beneficiaries are paid under the Medicare Home Health Prospective Payment System (“HHPPS”), which uses national, standardized 30-day period payment rates for periods of care that meet a certain threshold of home health visits (periods of care that do not meet the visit threshold are paid a per-visit payment rate for providing care). Although payment is made for each 30-day period, the HHPPS permits continuous 60-day certification periods through which beneficiaries are verified as eligible for the home health benefit. The daily home health payment rate is adjusted for case-mix and area wage levels. CMS uses the Patient-Driven Groupings Model (“PDGM”) as the case-mix classification model to place periods of care into payment categories, classifying patients based on clinical characteristics and their resource needs. An outlier adjustment may be paid for periods of care where costs exceed a specific threshold amount.

Current wording

Home health services provided to Medicare beneficiaries are paid under the Medicare Home Health Prospective Payment System (“HHPPS”), which uses national, standardized 30-day period payment rates for periods of care that meet a certain threshold of home health visits (periods of care that do not meet the visit threshold are paid a per-visit payment rate for the discipline providing care). Although payment is made for each 30-day period, the HHPPS permits continuous 60-day certification periods through which beneficiaries are verified as eligible for the home health benefit. The daily home health payment rate is adjusted for case-mix and area wage levels. CMS uses the Patient-Driven Groupings Model (“PDGM”) as the case-mix classification model to place periods of care into payment categories, classifying patients based on clinical characteristics and their resource needs. An outlier adjustment may be paid for periods of care where costs exceed a specific threshold amount.

Previous wording

CMS updates the HHPPS payment rates each calendar year. For calendar year 2024, CMS estimates that Medicare payments to home health agencies will increase by 0.8%. This is based on a home health payment update percentage of 3.0, which reflects a 3.3% market basket update reduced by a productivity adjustment of negative 0.3 percentage points, and an estimated 2.6% decrease associated with the transition to the PDGM, among other changes. Home health providers that do not comply with quality data reporting requirements are subject to a 2-percentage point reduction to their market basket update. In addition, Medicare requires home health agencies to submit a one-time Notice of Admission (“NOA”) for each patient that establishes that the beneficiary is under a Medicare home health period of care. Failure to submit the NOA within five calendar days from the start of care will result in a reduction to the 30-day period payment amount for each day from the start of care date until the date the NOA is submitted.

Current wording

CMS updates the HHPPS payment rates each calendar year. For calendar year 2025, CMS estimates that Medicare payments to home health agencies will increase by 0.5%. This is based on a home health payment update percentage of 2.7%, which reflects a 3.2% market basket update, reduced by a productivity adjustment of 0.5 percentage points, and an estimated 1.8% decrease associated with the transition to the PDGM, among other changes. Home health providers that do not comply with quality data reporting requirements are subject to a 2-percentage point reduction to their market basket update. In addition, Medicare requires home health agencies to submit a one-time Notice of Admission (“NOA”) for each patient that establishes that the beneficiary is under a Medicare home health period of care. Failure to submit the NOA within five calendar days from the start of care will result in a reduction to the 30-day period payment amount for each day from the start of care date until the date the NOA is submitted.

Previous wording

CMS began implementing a nationwide expansion of the Home Health Value-Based Purchasing (“HHVBP”) Model in 2022. Under the HHVBP Model, home health agencies receive increases or decreases to their Medicare fee-for-service payments of up to 5% based on performance against specific quality measures relative to the performance of other home health providers. Data collected in each performance year will impact Medicare payments two years later. Calendar year 2023 was the first performance year under the expanded HHVBP Model, which will affect payments in calendar year 2025.

Current wording

Under the nationwide Home Health Value-Based Purchasing (“HHVBP”) Model, home health agencies receive increases or decreases to their Medicare fee-for-service payments of up to 5% based on performance against specific quality measures relative to the performance of other home health providers. Data collected in each performance year will impact Medicare payments two years later. This program has not had a material impact on our results of operations or financial position.

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 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.

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 is currently limited to home health agencies in 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. 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

On April 22, 2024, CMS announced a final rule intended to improve access to services and quality of care for Medicaid beneficiaries across fee-for-service and managed care delivery systems. The final rule includes significant provisions related to HCBS, including the “80/20” or “payment adequacy” requirement, which will require states to ensure that at least 80% of all Medicaid payments a provider receives for homemaker, home health aide, and personal care services, less certain excluded costs, under specified programs are spent on total compensation (including benefits) for direct care workers furnishing these services, rather than administrative overhead or profit, subject to limited exceptions. States are required to ensure compliance with the 80/20 requirement by mid-2030. The final rule made a number of technical changes to the definitions used in calculating compliance that clarified or narrowed the revenue covered by the calculation and clarified or expanded the payments to workers that are counted in satisfying the requirement, which combined to make compliance less onerous to providers.

Current wording

In May 2024, CMS finalized a rule intended to improve access to services and quality of care for Medicaid beneficiaries across fee-for-service and managed care delivery systems. The final rule includes significant provisions related to HCBS, including the “80/20” or “payment adequacy” requirement, which will require states to ensure that at least 80% of all Medicaid payments a provider receives for homemaker, home health aide, and personal care services, less certain excluded costs, under specified programs are spent on total compensation (including benefits) for direct care workers furnishing these services, rather than administrative overhead or profit, subject to limited exceptions. States are required to ensure compliance with the 80/20 requirement by mid-2030. The final rule includes several other measures intended to promote transparency and enhance quality and access to services, including a variety of reporting requirements for states. Given the very long implementation period and the likelihood of further changes as a result of litigation, administration and congressional changes, further rule-making and state changes in response to the final rule, it is premature to predict the ultimate impact of the final rule on our business.

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 26.1% 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.

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 21.4% and 25.7% for the three months ended March 31, 2025 and 2024, respectively, compared to our federal statutory rate of 21%. The difference between our federal statutory and effective income tax rates was principally due to the inclusion of state taxes, non-deductible compensation, excess tax expense/benefit and the use of federal employment tax credits.

Previous wording

The following table sets forth, for the periods indicated, our unaudited condensed consolidated results of operations.

Current wording

The following table sets forth our unaudited condensed consolidated results of operations.

Previous 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.

Current wording

Net service revenues increased by 20.3% to $337.7 million for the three months ended March 31, 2025 compared to $280.7 million for the three months ended March 31, 2024. Revenue increased by $50.3 million in our personal care segment, by $5.6 million in our hospice segment and by $1.1 million in our home health segment during the three months ended March 31, 2025, compared to the same period in 2024. The increase in our personal care and home health segments was primarily due to the completion of the Gentiva Acquisition on December 2, 2024, as well as the same store growth in our home health segment. The increase in our hospice segment revenue was due to organic growth.

Previous 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.

Current wording

Gross profit, expressed as a percentage of net service revenues, increased to 31.9% for the three months ended March 31, 2025, compared to 31.4% for the same period in 2024 due to growth in our higher margin hospice segment, the New York Asset Sale and the Gentiva Acquisition.

Previous 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.

Current wording

General and administrative expenses increased to $73.2 million for the three months ended March 31, 2025, as compared to $61.1 million for the three months ended March 31, 2024. The increase in general and administrative expenses was primarily due to the Gentiva Acquisition that resulted in an increase in administrative employee wage, bonus, tax, and benefit costs of $9.4 million. General and administrative expenses, expressed as a percentage of net service revenues, decreased to 21.7% for the three months ended March 31, 2025, from 21.8% for the three months ended March 31, 2024.

Previous 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.

Current wording

Interest expense increased to $4.0 million for the three months ended March 31, 2025 from $2.8 million for the three months ended March 31, 2024. The increase in interest expense was primarily due to higher average outstanding borrowings held under our credit facility for the three months ended March 31, 2025 compared to the three months ended March 31, 2024.

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 26.1% 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.

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 21.4% and 25.7% for the three months ended March 31, 2025 and 2024, respectively. Our lower effective income tax rate for the three months ended March 31, 2025 was principally due to a higher excess tax benefit with a lower benefit from the use of federal employment tax credits. For the three months ended March 31, 2025 and 2024, the excess tax benefit and federal employment tax credits were 7.2% and 3.5%, respectively.

Previous 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.

Current wording

The personal care segment derives a significant amount of its net service revenues from operations in Illinois, which represented 33.0% and 38.3% of our net service revenues for the three months ended March 31, 2025 and 2024, respectively. One payor, the Illinois Department on Aging, accounted for 18.5% and 20.8% of net service revenues for the three months ended March 31, 2025 and 2024, respectively.

Previous 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.

Current wording

Net service revenues from state, local, and other governmental programs accounted for 51.5% and 51.8% of net service revenues for the three months ended March 31, 2025 and 2024, respectively. Managed care organizations accounted for 45.3% of net service revenues for both the three months ended March 31, 2025 and 2024, 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 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.

Current wording

Net service revenues increased by 24.2% for the three months ended March 31, 2025 compared to the three months ended March 31, 2024. Net service revenues included a 7.4% decrease in revenues per billable hour for the three months ended March 31, 2025, due to lower reimbursement rates attributable to the Gentiva Acquisition, as well as the New York Asset Sale, compared to the three months ended March 31, 2024.

Previous wording

The personal care segment’s general and administrative expenses primarily consist of administrative employee wages, taxes and benefit costs, rent, information technology and office expenses. General and administrative expenses, expressed as a percentage of net service revenues, were 8.1% and 8.0% for the three months ended September 30, 2024 and 2023, respectively, and 7.8% and 8.2% for the nine months ended September 30, 2024 and 2023, respectively.

Current wording

The personal care segment’s general and administrative expenses primarily consist of administrative employee wages, taxes, and benefit costs, rent, information technology, and office expenses. General and administrative expenses, expressed as a percentage of net service revenues, was 9.2% and 7.4% for the three months ended March 31, 2025 and 2024, respectively.

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 91.5% 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.

Current wording

The hospice segment generates revenue 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.

Previous 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.

Current wording

Net service revenues increased by $5.6 million for the three months ended March 31, 2025 compared to the three months ended March 31, 2024, primarily attributed to organic growth in average daily census.

Previous wording

Gross profit, expressed as a percentage of net service revenues, decreased to 27.5% for the three months ended September 30, 2024 from 27.8% for the three months ended September 30, 2023. The decrease was mainly attributed to increases in direct care wages, taxes and benefit costs for the three months ended September 30, 2024. Gross profit, expressed as a percentage of net service revenues, was 27.5% for both the nine months ended September 30, 2024 and the nine months ended September 30, 2023.

Current wording

Gross profit, expressed as a percentage of net service revenues, was 47.5% and 48.1% for the three months ended March 31, 2025 and 2024, respectively. For the three months ended March 31, 2025, the decrease was mainly attributed to increases in direct employee wage, tax, 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 24.6% 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.

Current wording

The hospice segment’s general and administrative expenses primarily consist of administrative employee wage, tax, and benefit costs, rent, information technology, and office expenses. General and administrative expenses, expressed as a percentage of net service revenues, was 23.7% and 24.1% for the three months ended March 31, 2025 and 2024, 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 months ended March 31, 2025.

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 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.

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 69.9% and 69.1%, managed care organizations accounted for 21.2% and 26.1%, and state, local, and other governmental programs accounted for 6.0% and 0.2% for the three months ended March 31, 2025 and 2024, 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

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.

Current wording

Gross profit, expressed as a percentage of net service revenues, was 40.0% and 34.4% for the three months ended March 31, 2025 and 2024, respectively. For the three months ended March 31, 2025, the increase was primarily due to an increase in net service revenues compared to the three months ended March 31, 2024.

Previous 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.

Current wording

Our primary sources of liquidity are cash on hand and cash from operations and borrowings under our credit facility. At March 31, 2025 and December 31, 2024, we had cash balances of $97.0 million and $98.9 million, respectively. At March 31, 2025, we had a $650.0 million revolving credit facility and a $150.0 million incremental loan facility, which may be for term loans or an increase to the revolving loan commitments. The maturity of this credit facility was extended to July 30, 2028.

Previous 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.

Current wording

During the three months ended March 31, 2025, we used $3.4 million in cash to fund the Jacksonville Acquisition and the Great Lakes Acquisition and repaid $20.0 million under our revolving credit facility. As of March 31, 2025, we had a total of $203.0 million in revolving loans, with an interest rate of 6.32% 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 $632.9 million of capacity and $421.9 million available for borrowing under our credit facility. At December 31, 2024, we had a total of $223.0 million revolving credit loans, with an interest rate of 6.34%, outstanding on our credit facility.

Previous wording

See Note 9 to the Notes to Unaudited Condensed Consolidated Financial Statements, Long-Term Debt, and Note 14 to the Notes to Unaudited Condensed Consolidated Financial Statements, Subsequent Events, for additional details of our long-term debt.

Current wording

See Note 8 to the Notes to Unaudited Condensed Consolidated Financial Statements, Long-Term Debt, for additional details of our long-term debt.

Previous wording

Current Macroeconomic Conditions and COVID-19 Relief Funding

Current wording

Current Macroeconomic Conditions and American Rescue Plan Act of 2021 Relief Funding

Previous wording

Economic conditions in the United States continue to be challenging in various respects. For example, the United States economy continues to experience inflationary pressures, elevated interest rates and challenging labor market conditions. Any resulting economic downturn would pose a risk to states’ revenues, which in turn could affect our reimbursements and collections received for services rendered. Depending on the severity and length of any potential economic downturn as well as the extent of any federal support, states could face significant fiscal challenges and revise their revenue forecasts and adjust their budgets, and sales tax collections and income tax withholdings could be depressed.

Current wording

Economic conditions in the United States continue to be challenging in various respects. For example, the United States economy continues to experience inflationary pressures, elevated interest rates, challenging labor market conditions and uncertainty regarding the impact of increased tariffs and trade disruptions. Any economic downturn would pose a risk to states’ revenues, which in turn could affect our reimbursements and collections received for services rendered. Depending on the severity and length of any potential economic downturn as well as the extent of any federal support, states could face significant fiscal challenges and revise their revenue forecasts and adjust their budgets, and sales tax collections and income tax withholdings could be depressed.

Previous wording

The ARPA provides for $350 billion in relief funding for eligible state, local, territorial, and Tribal governments to mitigate the fiscal effects of the COVID-19 public health emergency. Additionally, the law provided for a 10 percentage point increase in federal matching funds for Medicaid HCBS from April 1, 2021, through March 31, 2022, provided the state satisfied certain conditions. States are permitted to use the state funds equivalent to the additional federal funds through March 31, 2025. States must use the monies attributable to this matching fund increase to supplement, not supplant, their level of state spending for the implementation of activities enhanced under the Medicaid HCBS in effect as of April 1, 2021.

Current wording

The ARPA provides for $350 billion in relief funding for eligible state, local, territorial, and Tribal governments to mitigate the fiscal effects of the COVID-19 public health emergency. Additionally, the law provided for a 10 percentage point increase in federal matching funds for Medicaid HCBS from April 1, 2021, through March 31, 2022, provided the state satisfied certain conditions. States were generally permitted to use the state funds equivalent to the additional federal funds through March 31, 2025, but CMS granted extensions to several states. States must use the monies attributable to this matching fund increase to supplement, not supplant, their level of state spending for the implementation of activities enhanced under the Medicaid HCBS in effect as of April 1, 2021.