Addus HomeCare Corp Q1 FY2021 Earnings Call

Good morning, and welcome to the Addus HomeCare Corporation First Quarter 2021 Earnings Conference Call. Today's call is being recorded. To the extent that any non-GAAP financial measure is discussed in today's call, you'll also find a reconciliation of that measure to the most directly comparable financial measure calculated according to GAAP by going to the company's website and reviewing yesterday's news release. This conference call may also contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements, among others, regarding Addus' expected quarterly and annual financial performance for 2021 or beyond. For this purpose, any statements made during this call that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing discussions of forecasts, estimates, targets, plans, beliefs, expectations and the like are intended to identify forward-looking statements. You are hereby cautioned that these statements may be affected by important factors, among others, set forth in Addus' filings with the Securities and Exchange Commission and in its first quarter 2021 news release. Consequently, actual operations and results may differ materially from the results discussed in the forward-looking statements. The company undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. At this time, I would like to turn the call over to the company's Chairman and Chief Executive Officer, Dirk Allison. Please go ahead, sir.

Thank you, Dru. Good morning, and welcome to our 2021 first quarter earnings call. With me today are Brian Poff, our Executive Vice President, Chief Financial Officer; and Brad Bickham, our President and Chief Operating Officer. Today, I will begin with some overall comments, and then Brian will discuss the first quarter results in more detail. Following our comments, we would be happy to respond to any questions. While the pandemic continues to create challenges, we have begun to see positive momentum in a number of our markets starting in mid-February. While I expect the environment to continue to have some difficulties over the next several months, we are encouraged by the progress being made with the COVID vaccine rollout and the steady reduction in COVID cases since the peak in late December. We look forward to the time in the near future when this pandemic is no longer a disruption to both the country and to our operations. One of the important takeaways from this pandemic has been the increased understanding of the importance of home and community-based care. Addus caregivers have been an important part of the healthcare system as we work to keep our elderly citizens safe from the virus and ensure that these consumers had the daily help they needed. I'm extremely proud of our dedicated team that has demonstrated their ability to meet our mission and execute upon our strategy even during this unprecedented pandemic. Yesterday, we announced our financial results for the first quarter of 2021. We continued our solid operating performance, even with the challenges from COVID that we are all facing. Our revenue for the first quarter was $205.3 million as compared to $190.2 million for the first quarter of 2020. Adjusted earnings per diluted share for the first quarter of 2021 was $0.74 as compared to $0.77 for the first quarter of 2020, despite last year's first quarter being a record quarter prior to the full onset of COVID-19 as well as the effect of the Chicago minimum wage increase, which occurred on July 1, 2020. As we discussed on our last earnings call, the Illinois state rate increase to cover this minimum wage adjustment became effective on April 1, 2021, and will be reflected beginning with our 2021 second quarter results. Also last year, our adjusted EBITDA for the first quarter of 2021 was $19.3 million as compared to $17.7 million for the first quarter of 2020, an increase of approximately 9%. As expected, our first quarter same-store revenues continued to be impacted by the COVID-19 virus. As was the case in our last few quarters, this reduction occurred to varying degrees in all three segments of our business, which I will discuss in just a few minutes. As I'm sure you are aware, the changes in the leadership of our federal government are bringing about a number of potentially positive changes to our company, especially around Medicaid reimbursement. The COVID relief legislation that was signed into law by the President will provide general financial relief to states suffering revenue losses from the pandemic, which will help to strengthen the budgets of these states and their Medicaid reimbursement. We expect to see the funds from the $350 billion state benefit in this bill to be dispersed starting in May. In addition, the additional 10% federal Medicaid match, which is specifically for Medicaid home and community-based services, should be a positive for Addus. We believe the federal government will clarify the rules around this much soon, which should allow states to start to use these additional monies to support home and community-based services. On the state level, we face one last scheduled minimum wage increase for Chicago. This $1 wage increase will be effective on July 1, 2021. The governor of Illinois did include funding in his fiscal 2022 budget for an additional rate increase to offset the upcoming wage increase. However, this state reimbursement rate increase is currently scheduled to be delayed six months, similar to the past few years, and is scheduled to become effective on January 1, 2022. We continue to have discussions with state leaders about the delayed timing of the reimbursement increase and the potential to accelerate due to the additional Medicaid funding from the federal government. As we discussed on our last earnings call, we continued to assess the New York CDPAP statewide change. While we have approximately $52 million of revenue from this particular service line in New York, it has not been a very profitable program and will be less so with the recently published reimbursement rates. Let me remind you that we are only a fiscal intermediary in CDPAP with a caregiver working directly for the consumer. This is not our normal form of personal care services. We have filed a protest concerning our omission from the provider selection process and understand from the recent finalization of the fiscal 2022 New York state budget that a few additional awards may be granted. We will keep you updated as we receive additional information and explore other potential options to remain in this particular program. As for timing, we believe it will be at least nine to twelve months before the state fully implements the new program if no other structural changes are made. As I previously mentioned, our same-store revenue has been affected by the COVID-19 virus. However, we are starting to see a positive trend in all three segments in which we operate. For the first quarter of 2021, our personal care same-store revenue growth was 2.4% when compared to the first quarter of 2020, the last quarter without the full impact from the pandemic. As we discussed on our last call, during November and December, we saw a significant increase in the number of our caregivers who had to enter into quarantine. We also saw client call-offs increase again starting in November, lasting until the first week of February. In addition to the impact on growth due to COVID, we were affected by the February winter storm that spread across several states where we provide personal care services, which we estimate had a negative impact on our first quarter personal care revenues of approximately $1 million. With the fourth quarter COVID surge we discussed, we experienced a large increase in our employees who were in quarantine and unable to serve their consumers. We went from 187 employees per week in quarantine in the third quarter of 2020 to 448 employees per week in our fourth quarter of 2020, which affected our hours of care through January. For April, this number is now down to 149 employees per week, which should help our growth rate return to a more normal level in our second quarter of 2021. We also saw a similar dynamic as it relates to our client call-offs in personal care. Our personal care caregiver hires for the August through October 2020 timeframe were up approximately 9% over the same period in 2019, leading to the highest amount of hires per business day in over a year. However, during November and December of this past year, when we saw the increase in virus counts, our hiring slowed to where we were down 1.3% versus the same two months in 2019. Our hiring numbers did improve in the first quarter of 2021 with hires per business day increasing 4.2% on a sequential basis and 1.2% over the first quarter of 2020. We are encouraged by the trend and in our ability to hire as we continue to see positive numbers so far in April. With the positive trends we are seeing in personal care, along with the April 1 reimbursement rate increase from Illinois, we expect our personal care same-store revenue to be at or above our expectation of 3% to 5% for the next few quarters. For the first quarter of 2021, our hospice same-store revenue decreased 8.4%, which is still a 220 basis point improvement over our fourth quarter of last year. While ADC remains under pressure, we did see our highest quarter of hospice admissions since the first quarter of 2020, with a sequential increase of approximately 4.6% from the fourth quarter of 2020. While our admissions have been strong, we have seen a reduction in our same-store median length of stay over the past few quarters. This median length of stay decreased from 26 days early in 2020 to just 15 days in January, which contributed to our lower ADC. Our median length of stay continued to trend upwards in March, increasing to 17.5 days. January is when we started to see our ADC bottom out with slightly increasing ADC through the middle of April. With New Mexico being our second largest hospice market, it continues to have an overall negative effect on growth, even while other hospice markets are showing improving census. As for our Queens City acquisition, which closed December 1, 2020, our hospice census has grown from 890 when we closed this transaction to over 940 in April of this year, despite the business going through the normal stages of integration, including converting to HomeCare Homebase and ADP. I am very proud of this team for continuing to grow while transitioning to the Addus system. As for our New Mexico hospice locations, we believe we will continue to see both assisted living facilities and independent living facilities lose their restrictions around personnel access as a percentage of New Mexico residents who are vaccinated continues to grow and should help this market return to a more normal ADC. We are excited to see our home health same-store revenue back to the level we experienced in the first quarter of 2020 prior to the effect of the pandemic. This compares to a fourth quarter of 2020 decrease of 8.2% in our home health same-store revenues. Since the beginning of 2021, our home health admissions have increased steadily, with this favorable trend continuing into April. While January same-store revenues for home health were down 11.5%, February marked the turning point, with March being up 11.9% versus the same period in 2020. We are seeing our April home health numbers continue this growth trend. Turning to our efforts concerning acquisitions, our pipeline continues to be strong with the current slant towards home health. Our primary focus on acquisitions remains on opportunities that add clinical services to our existing personal care markets with the goal of having additional markets with all three levels of care that we provide. With our strong liquidity position, we continue to believe that we have the ability to close additional acquisitions during the next few months. While purchase multiples for clinical services remain high, we will continue to pursue transactions that are accretive while bringing both revenue and operating synergies to Addus. As I look back over the past year, I am proud of the team as they've continued to do a tremendous job of living our mission during these extraordinary times. Our caregivers have been able to positively affect the trajectory and impact of the COVID-19 pandemic by continuing to serve the needs of our consumers and patients in their homes. All caregivers in all segments of healthcare deserve our appreciation for this commitment to patient care. I especially want to thank the Addus team for continuing to put our patients first. Before I turn the call over to Brian, I wanted to remind our team of the value of our services. While the COVID virus is still a challenge for our country as well as the world, we need to continue to deliver our mission and values while serving our consumers and patients. Each of these individuals needs to be in their homes, where we can help to keep them safe from the virus while providing much-needed care. With that, let me turn the call over to Brian.

Thank you, Dirk, and good morning, everyone. Addus had solid financial performance at the start of the year with consistent profitable growth and improving volume trends comparable to our pre-pandemic levels. With two of our three segments at or above our first quarter 2020 same-store revenues and our hospice ADC beginning to trend positively, we look forward to a continued return to a more normalized growth profile as the COVID environment improves. We will also benefit from the most recent rate increase from Illinois, our largest market, which became effective on April 1, 2021. Looking at the comps over the prior year period, last year's first quarter was our strongest quarter before we really felt the full impact of COVID-19. So we were very pleased with the results for the current year quarter. Our volumes continue to improve in personal care and home health, and we are optimistic about hospice care volumes returning to pre-pandemic levels as more people are vaccinated and we see greater facility access. We have a strong business model in place and believe we are well positioned to meet expected demand as consumers become more confident in a less restricted environment. Included in our results are the incremental benefits of the four acquisitions we completed in the second half of 2020; three in personal care and one in hospice, which totaled approximately $84 million in annualized revenue. Together, acquisitions completed over the past two years have a combined total annualized revenue of approximately $214 million. We continue to have a robust pipeline of potential transactions that are in line with our strategy of adding clinical services in markets where we have personal care operations and continuing to enhance our existing personal care markets. Based on current market conditions, we remain confident that we will have opportunities to achieve or exceed our stated goal of adding a minimum of $100 million in annualized revenue through acquisition this year. As Dirk noted, total net service revenues for the first quarter were $205.3 million. The revenue breakdown is as follows: personal care revenues were $164.8 million or 80.3% of revenue. Hospice care revenues were $36.1 million or 17.5% of revenue. These results include the first full quarter of our Queen City Hospice acquisition, which closed near the end of 2020. Home health revenues were $4.3 million or 2.1% of revenue. Other financial results for the first quarter of 2021 include the following: our gross margin percentage was 29.8%, an increase from 29.4% for the first quarter last year, largely attributable to a higher mix of clinical services, which are now approximately 20% of our revenue, up from 16% in the first quarter last year. This increase was partially offset by the normal reset of payroll taxes in the new year, which impacted our margin by approximately 80 basis points sequentially. While we still experienced a negative impact this quarter from the additional minimum wage increase in Chicago, on July 1, 2020, the statewide reimbursement increase in Illinois that became effective on April 1 will offset beginning in the second quarter. G&A expense was 22.1% of revenue for the quarter, a slight decrease from 22.2% last year. Adjusted G&A expense was 20.4% of revenue, up slightly from 20% in the first quarter of 2020 and primarily as a result of the higher mix of skilled business with a higher G&A profile. The company's adjusted EBITDA increased to $19.3 million for the first quarter of 2021 compared to $17.7 million in the first quarter of 2020. Adjusted EBITDA margin was 9.4%, an increase from 9.3% for the first quarter of 2020. Adjusted net income per diluted share was $0.74. The adjusted per share results for the first quarter of 2021 exclude the following: COVID-19 expense benefit net of $0.03, which includes the impact of temporary rate increases, partially offset by the COVID-19 direct expenses. Acquisition and de novo expenses of $0.08, restructuring and other costs of $0.02, and non-cash stock-based compensation of $0.12. Our adjusted per share results for the first quarter of 2020 exclude COVID-19 expenses net of $0.01, acquisition de novo expenses of $0.09, restructuring and other costs of $0.05, and non-cash stock-based compensation of $0.08. Our tax rate for the first quarter of 2021 was 19.5% as a result of an excess tax benefit generated by our stock compensation. For the full year 2021, we continue to expect our tax rate to be in the low to mid-20% range. DSOs were 60.8 days at the end of the first quarter of 2021, consistent with the fourth quarter. However, DSOs for the Illinois Department of Aging were 72 days at the end of the first quarter of 2021 as we saw slower payments primarily as a result of the timing of tax revenues in the state. With the increase in tax revenues and the stimulus assistance coming from the federal government in the second quarter, we have seen an acceleration in payments from Illinois and have received over $24 million since the beginning of April. Our first quarter net cash used by operations totaled $18.4 million, inclusive of the return of $10.8 million in Care Act funding received as part of the Queen City acquisition. Additionally, the timing of normal payroll payments negatively impacted cash flows by approximately $15.5 million in the quarter. At March 31, 2021, the company had cash of $145.1 million, $196.3 million of bank debt and $112.8 million in availability under our revolver. With continued low net leverage and a well-positioned balance sheet, we continue to be able to execute our acquisition strategy. This concludes our prepared remarks this morning, and thank you for being with us. I'll now ask the operator to please open the line for your questions.

Our first question comes from Frank Morgan with RBC Capital Markets.

Appreciate color around labor and the issues and the improvement in the worker quarantine. I'm just curious, quarantine aside, labor has always been sort of the thing I think you worry about the most, Dirk. So just how do you feel about the labor market today as we sort of make our way into this post-COVID world? Do you feel better or worse? Or are there any new strategies that you're considering or thinking about as the economy reopens?

Yes. This is Brad. When you look at the labor, as I tell the team in the field, it's a challenging recruitment environment all the time. We unfortunately have a turnover in the industry, and it's a little higher than we would like it to be. We're actually doing a little better than the industry statistics. That being said, we've got the unique problem since I've been here where we have, frankly, more business than workers. And I would rather have that than the other. But with respect to recruitment, our numbers have improved. When you look at the trends, April is looking pretty good. I think there's still some headwinds with the additional unemployment out there. Economies are reopening. But again, I think we've done a pretty good job of keeping those numbers trending in the right direction. I know we are working on kind of strategies, both utilizing the national job boards, being creative, constantly refreshing, and updating our ads to make them more enticing to potential employees to click on them. And then also doing a lot of work in the communities and really stressing that we can't forget about what the local community recruitment efforts can look like.

And Frank, overall, as you know, we've talked about it for the last couple of years. Recruitment has been one of our bigger challenges. I think if you go back to last year, where we were looking at what was going on and then the larger unemployment benefit from the federal government, it was certainly a very challenging environment. And while it's still a little bit today, as Brad mentioned, with the $300, we really are optimistic that over the next few months, we will start to see our ability to recruit and to hire continue to improve as we've seen in the last month or two. So we're in a much better position in our minds today than we were maybe a few months ago.

Got you. And then I guess, switching gears on M&A, your comments about maybe more of a slant toward the home health care market. Just curious what you're seeing there. I know there was a recent home health care hospice relatively good size announced. But what do you see driving the shift toward home health care? Is it valuations? Or is it just kind of you want to change your clinical mix?

Yes, Frank, this is Brian. I think what we're seeing in our pipeline, I think we expected to see that coming into this year is just more potential assets coming to market out there. I think last year, a lot of us had expectations that we would see a lot of activity and really didn't see that. So I think we had kind of a bolus of potential targets that are actually coming to market now. So I think we've seen a little slant of that in our pipeline. I think our focus is still largely on clinical services and enhanced personal care. And they all three legs of that stool in each of our markets. I think we just got a little more, I would say, skilled home health in our pipeline today than in the other two segments currently.

Got you. Finally, regarding the margin situation, you mentioned that the change in your clinical mix is limiting leverage at the G&A line. Do you still see an opportunity to gain some leverage on your G&A expenses as your revenue increases? I'll turn it back to you.

Yes, Rick, I think we definitely continue to see leverage, especially in our corporate G&A, but even our field G&A as we add some of these services in markets where we have personal care and other operations. We should get some additional synergies there as well. So that's our expectation is continued leverage as we continue to grow.

Our next question comes from the line of Matt Borsch with BMO Capital Markets.

Can you provide more details about the M&A pipeline in personal care, specifically regarding the impacts of the pandemic? How has this affected the willingness to sell and the number of available opportunities?

Yes. The problem with a lot of the personal care, the bigger ones that have come out that we could look at is that there have been reasons why it would be difficult for us to look at. I mean there was a concentration in a market where we already operated, and it would have been a difficult combination or, quite honestly, some of them are revolving around the New York marketplace. And at this point in time, New York is not a focus of our company. We need to see that particular market really stabilize and see the direction that the governor and the leaders of the state are going to take at program. For us, well we're always interested in personal care that is our 80% of our business, we want to strengthen the states in which we operate, continue to look at that. It just seems like lately, the acquisitions of any size have been more on the clinical side, and for us, honestly, hospice has been very expensive. We've reached out in some strategic opportunities with HPA and with Queen City to acquire those. At this point in time, though, we also feel it's very important to add the home health service to our lines of care. As we continue to look to grow, not only with our relationships with MCOs, but as we start looking at the types of payment situations we may look for down the road with MCO partners.

Matt, I just want to add that we're not really seeing an increase in personal care assets for sale due to the pandemic. As you know, we've been quite supportive with temporary rate increases for home and community-based services in all the states where we operate. Because of this, we haven't experienced a surge in potential opportunities, just a typical flow.

Got it. That all makes sense. And actually, Dirk, you sort of anticipated my follow-up question, which was on New York specifically in the reimbursement environment. And I know you're not alone in facing challenges there. I guess, maybe there's not much to be said here. It's just it is what it is for right now, and correct me if I'm wrong, but there isn't really a catalyst we can see for a more partnership environment emerging in the near-term maybe or it should, in theory, because funding has improved in this fiscal situation apparently as well. But sorry, I just sort of was the question here. You put answered it. But if you have anything more to say on that? I'm interested.

Yes. Honestly, the thing I would say is it is disappointing. From our standpoint, the state did receive federal money, and there's not been more support from the state regarding home and community-based care. The state has put funding in their budget, but they don't always get that to the provider. It's a very difficult market. There's also changes in the way things are reimbursed there as it relates to benefits to the caregivers, which we're very excited about when minimum wage goes up as long as it's reimbursed. But New York is, not at this point in time, it's not been as forthcoming in some of the other states in supporting those increases. So right now, again, we'd love to be able to be stronger in New York, but it's not a market that at this point in time, we're going to put a lot of additional growth dollars into.

Our next question comes from the line of Scott Fidel with Stephens.

First question, I wanted to follow up on Matt's inquiry regarding growth opportunities in personal care, specifically apart from M&A options. I'm curious about your observations on potential geographic expansion. Are there any states where it appears that they are committed to allocating enhanced funding for Medicaid HCBS services to providers, which could create new geographic opportunities for you?

I think, Scott, we will be looking at this and hope that as the rules are clarified, there will be some opportunities. The issue we face is that the additional funds from the federal government have not yet arrived, and the regulations surrounding those funds have not been finalized or adequately communicated to the states and providers. As more clarity on these rules is provided, we believe there are opportunities, particularly regarding the 10% additional match for Medicaid funds available for a year. Although it is temporary, this funding could allow states to enhance their home and community-based care offerings and potentially apply it toward previously discussed rate increases. We hope that this can facilitate rate increases happening sooner rather than later. These are the topics we are discussing with various states related to the federal funding.

Got it. And yes, I realize that we're sort of in that feeling our way through the darkness a little bit here with getting visibility on how these new fundings are going to be translating down into the rates. I guess in a similar vein here, but would be interested in what you're hearing, if anything, in terms of any additional details on the federal side in terms of Biden's $400 billion proposed boost to Medicaid HCBS spending? And any type of visibility you're getting into thoughts on how that funding would actually be deployed in terms of what types of initiatives that will be allowed to be used on? And then your thoughts on what you're hearing politically in terms of general support for actually getting this included in one of these packages that are being worked on. I would assume that it's obviously part of that first infrastructure bill, which would seem like something that would maybe be more appropriate in Biden's second families bill. But just interested politically and what you guys are hearing as well around support for that.

Yes. Well, what we're hearing politically is certainly, there's a lot of support for the $400 billion from the democratic side of both the House and the Senate. It does seem to be, at least at this point, that the Republicans are not quite as on board as maybe the President and the rest of the Democrats are. So whether or not this is going to end up being part of any bill that may or may not occur. We do believe it's an important part. We're certainly letting folks know that we think it's needed. But we will see. But as it relates to what we believe it will be used for. And again, remember, there's very little out there, very little detail that we can grasp hold of today. But we do believe that what it's probably going to be focused on is both expanding access to home and community-based care to consumers. A lot of those, there's a lot of talk about the waiting lists that are out there for this care. So we believe the funds will be directed towards trying to handle some of that waiting list and giving more access to care. And then also, there seem to be initiatives around increased wages for caregivers to ensure that the caregivers who are providing that care have a living wage. So that's kind of what we're thinking that will be useful.

Got it. And then just one last one for me. Interested, I know it was a generally difficult backdrop for the hospice space around some of the pandemic headwinds in the first quarter. But it sounds like Queen City was able to deliver pretty solid results month-on-month throughout the quarter. Just interested in terms of, if operationally, you were able to glean anything into some of the trends that they were able to deliver around that performance and whether that would impute to you think that they were likely taking some market share in the market as well.

Yes, Scott, this is Brad. We are very impressed with Queen City's ability to grow the business, especially during the integration process. One significant factor was the importance of having density in the ALS and ILS they service, which allowed them to maintain access in those facilities. Although we haven't closely tracked market share numbers during the pandemic, I suspect they likely captured some market share in those areas. This experience highlights that having density in facilities makes you more likely to remain a provider in local areas during shutdowns or provider reductions.

Our next question comes from the line of Brian Tanquilut with Jefferies.

Thanks for all the color that you've got so far. I guess, Dirk, my question for you. I mean, having been in the hospice space for a long time. We're seeing, obviously, a broad-based challenge or headwind in the hospice business. How are you seeing this kind of like recovery out of that happen? And what do you as a provider need to do to turn that business around? Or is this merely a waiting game of just waiting for the recovery post-COVID?

Well, part of the issue around median length of stay has to do with the fact that a lot of the longer-length of stay patients come from assisted living facilities and skilled nursing facilities. We've seen, not only have we seen the census in those facilities go down, but we've also seen, as we've talked about, the access. So what's happened is it's now skewed more of the admissions we're getting to acute care facilities, those that have a shorter length of stay. We also believe that probably as a natural progression of the pandemic, I apologize for the disruption. We do believe that as we see this pandemic, the vaccination rollout and the pandemic become less of an issue, we're hoping to see a couple of things happen. One, there is a census in the nursing homes that return more to a normal level and that the families may have delayed the discussion around hospice because they're working from home and they're able to take care of their family members longer. We believe that would return to something that's more normal. So for us, we're not just stopping there and saying ADC is going to return through length of stay growth over the next few months. We're working with our sales team. We're looking at places where we can try to drive additional length of stay. But I do believe as an industry itself, overall we should start seeing over the remainder of the year, some improvement in that leading more back towards the normal level of median length of stay around the mid-20s.

Got it. And then, Brian, when you think about the different moving parts on the different reimbursement rates or state reimbursements that are changing. So between Illinois, the sequester delay, and also the increase in wages in July. If you don't mind just walking us through kind of like your estimates of the numbers, like sequential changes from Q1.

Yes. I mean, let's look at where sequentially. During the Q2, to your point, Brian, you'll see the benefit from the Illinois rate increase, which is going to be offset partially by the increase in wages in our non-Chicago workers. So there will be some margin there. It'll be helpful. So it'll move our gross margin up slightly from where you see in Q1. You won't have any other real impact in Q2 and Q3, you'll see kind of an offset in Chicago minimum wage increase that Dirk referenced in his comments, so we'll see kind of that normal 40 basis points or so reduction there as we don't have reimbursement offset until July unless something changes and Illinois is able to pull that forward, and we're in conversations to see if that's possible. And then you get through the end of the year. And sequester, I think as long as that's out there, we are benefiting like a lot of folks from that as well.

Our next question from the line of Mitra Ramgopal with Sidoti.

I know you mentioned the increased federal funding for the industry and the greater emphasis on healthcare being delivered at home. From an M&A perspective, I'm curious if this is leading to rising valuations as you explore opportunities.

Mitra, I think there's definitely a lot of appreciation for our home care services, especially through the pandemic, even more so. I think prior to COVID, obviously, there was a value proposition there. I think through COVID, you also see a lot of choice and reaction to a pandemic-type environment and people's preference to be in their homes. So I think there's definitely an appreciation in the space, and that's driving more of the clinical services we've seen, I think more of those multiples climb out, particularly in hospice sound proved through last year. I think personal care multiples that we've seen, the ones that we typically would target have been pretty consistent. We haven't seen a lot of movement in those multiples at this point.

Okay. That's great. And then on Medicare Advantage, I was wondering if you have an update there. I know that was seen as a nice potential growth opportunity for you and things got delayed as a result of the pandemic in terms of maybe implementing some programs, et cetera. Just wondering if you're seeing any pickup in the environment here.

Mitra, this is Brad. With respect to Medicare Advantage and other value-based arrangements possibilities, we're certainly seeing increased discussion around it, and we're actively engaged in those discussions. We've got several projects out there that are implemented or at various stages of implementation. So I think long term, there's certainly a nice tailwind for the industry. There's a lot more discussion on the federal level about a long-term benefit just recently. So I think there's lots of opportunities. I think the MA piece is still, as we said, a couple of years away from seeing any real meaningful numbers there. But I think in the near term, we're starting to see some pretty interesting projects that we're participating in that I think will further demonstrate the savings that our services can provide.

And finally, regarding the vaccines and their rollout, I am curious if you have encountered any cases where your caregivers and employees are hesitant to get vaccinated, particularly in the healthcare sector. Has this been an issue for your employees and caregivers?

Yes. On the vaccine front, we've made good progress. I think we're not as far along as we'd like to be overall. But part of that is just some regional differences in the pace of the availability of the vaccine. When you look at our skilled segment, in our home health division, it's probably about just under 50% fully vaccinated. Hospice is not quite to that level; it's probably more in the 40% level, and there's more geographic dispersion there. Personal care is lagging a little bit behind the skilled sectors, but mainly because just access was not as widely available at the time. I think now what's encouraging is that you don't have to schedule the appointments; you can just show up and get vaccinated. And I suspect that we'll start seeing some pretty good traction there because I think just the ease of obtaining the vaccine will be a big driver.

Your next question comes from the line of Matt Larew with William Blair.

I was just wondering if there's a way that you could try to quantify the impact in New Mexico on assisted living, independent living facility restrictions in terms of your access. And then maybe give us a sense for how as vaccinations system have improved your access has improved?

Yes. Certainly, when we look at just our admission trends, where we really were impacted was a pretty significant reduction in those ALS and the ILS and the SNFs. What we have seen in the near term is SNF admissions actually have improved incrementally. So we're starting to see some traction there. Overall, admission volume even in New Mexico was very robust. So we weren't disappointed in admission volume. It's just a lot of it was late stage. That being said, when you look at kind of where we were last year from the perspective of ALS and ILS, certainly we're not where we want to be. On those admission volumes in New Mexico. But I think there's some optimism that since facilities are starting to open up more in New Mexico. And keep in mind, it was probably one of the more locked-down states throughout the pandemic. I mean they started kind of early on locking facilities down and locking to stay down. And they've just now really started to open.

When examining our hospice markets, most have shown growth. However, New Mexico, which is our second largest market and faced more restrictions than others, experienced a greater impact than we would have preferred.

I wanted to revisit the announcement made mid-quarter regarding Homecare Homebase and its integration with the CellTrak EVV function. I'm interested in understanding what the final product will look like. Will it be exclusive to Addus? What is your role in this project? I'm curious about the plans for it, especially since you mentioned a rollout in early 2022. It seems like a potentially interesting tool.

Yes. Well, first off, it is a true partnership with Homecare Homebase and CellTrak. We are not investing dollars into the software creation. What we are investing is time and expertise. One of the things that we were able to do with Homecare Homebase is we probably are one of the top personal care providers in the country, and we understand what we, as a company, at least, need to run our business properly; the type of data we need to input and output from systems to allow us to have some of the access that we have today on the clinical side. So our partnership there, while it will not be exclusive, we will be the company to really decide how that software system operates. And our goal, as you would expect, because we're going to have personal care all the way through hospice services, we would like to be able to have that record and be able to see that patient regardless of what level of care they are in our company and get the same data out of that. So that's really the aspect we have with Homecare Homebase today.

Okay. Dirk, going back to a comment you made about the mid-20s impact, it seems there are many factors at play. Would you say that it might take two or three quarters to return to a more normalized length of stay?

Well, we've gone from 15 days up now to 18 in April. So we've grown three days, which, while it doesn't sound like a lot as a percentage, it's a nice move. To get back to the mid-20s, you're probably going to see the third and fourth quarter of this year. We believe by the end of 2021, you should see our median length of stay closer to where we would expect it to be, which is that mid-20 number.

There are no further questions. I will now turn the call over to Dirk Allison for any closing remarks.

Thank you, operator. I want to thank everyone for their interest in Addus today and for being part of our earnings call. We hope you have a great week. Thank you.

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.