The home healthcare sector is closely watching developments that could significantly impact reimbursement rates and operational requirements. Addus HomeCare Corporation (Nasdaq: ADUS), a leading provider of personal care, hospice, and home health services, anticipates positive changes on two fronts: the potential repeal of the Medicaid 80/20 rule and continued success in securing state-level Medicaid rate increases. These developments come as the company reported strong financial results for the fourth quarter of 2025, demonstrating a 23.2% year-over-year increase in full-year revenue, reaching approximately $1.4 billion.
The company’s leadership expressed optimism regarding the potential rollback of the Medicaid 80/20 rule, a provision that mandates 80% of Medicaid dollars allocated to home-based care services be directed towards worker compensation. Although the full impact of a repeal is still years away, Addus executives view it as a positive sign for the industry. Simultaneously, Addus is actively pursuing and achieving favorable rate adjustments at the state level, a strategy that yielded an estimated $35 million revenue boost in the past year. This dual focus on policy changes and localized negotiations positions the company for continued growth in a dynamic healthcare landscape.
New Mexico Rate Increase and Illinois Budget Outlook
Addus is particularly encouraged by developments in New Mexico, where a 4% to 5% Medicaid rate increase appears poised for approval. Brian Poff, executive vice president and chief financial officer, reported on the company’s Q4 2025 earnings call that the increase has passed the state legislature and awaits the governor’s signature. This rate increase is expected to benefit Addus in the second half of 2026. The state had previously paused consideration of rate adjustments due to other legislative priorities, making the current momentum a welcome development.
In contrast, the situation in Illinois appears less promising, at least in the short term. Governor J.B. Pritzker’s proposed budget does not currently include a Medicaid rate increase for home healthcare providers. However, Addus remains cautiously optimistic, noting that the governor’s initial budget last year also lacked an increase, but one was ultimately secured later in the legislative session. The company intends to continue engaging with state lawmakers throughout the process.
The 80/20 Rule: A Potential Shift in Medicaid Funding
The potential repeal of the Medicaid 80/20 rule represents a more long-term, but potentially significant, opportunity for Addus and the broader home healthcare industry. Implemented during the second Trump administration, the rule aimed to ensure a substantial portion of Medicaid funding for home-based care went directly to worker compensation. Critics argued that the rule could stifle innovation and limit investment in other crucial areas of care.
While the repeal process is expected to seize several years and won’t immediately impact Addus’ financial performance, company leadership views it as a positive signal. Allison, a company executive, emphasized that Addus is actively working with lobbyists and the Centers for Medicare & Medicaid Services (CMS) to advocate for changes to the rule. The company has received indications that the timing for potential changes could be “sooner rather than later,” though cautioned that the process remains subject to change.
Strong Financial Performance Driven by Personal Care Growth
Addus’ positive outlook is underpinned by robust financial performance. The company reported total service revenues of $371.1 million in Q4 2025, a 25.6% increase compared to the same period in the previous year. The personal care segment continues to be the primary driver of growth, accounting for 76.6% of Q4 revenues. This growth was further bolstered by the acquisition of Del Cielo Home Care Services in October 2025, which significantly expanded Addus’ presence in the Texas market, making it the company’s second-largest personal care market.
Addus is also investing in technology to enhance service delivery and efficiency. The company launched its mobile app, Addus Connect, in New Mexico in 2025. This app allows caregivers to access information and connect with support teams, contributing to a service percentage rate in the upper 80th percentile throughout the year. The company plans to roll out Addus Connect in Texas during the first quarter of 2026, with full deployment expected by the end of the second or early third quarter. Heather Dixon, the company’s chief operating officer, highlighted the potential for further momentum in the Texas market due to the specific dynamics of electronic visit verification (EVV) submission in the state.
Addus Connect: Enhancing Caregiver Support
The Addus Connect app represents a strategic investment in technology aimed at improving caregiver support and streamlining operations. By providing caregivers with mobile access to essential information and communication tools, the company aims to enhance the quality of care delivered and improve overall efficiency. The positive impact observed in the New Mexico market suggests that the app could be a valuable asset as Addus expands its operations in other states.
Looking Ahead: Key Takeaways
- Addus HomeCare is anticipating the potential repeal of the Medicaid 80/20 rule, which could free up funding for broader investments in home-based care.
- The company is actively securing state-level Medicaid rate increases, with a promising development in New Mexico awaiting the governor’s signature.
- Strong financial performance, driven by growth in the personal care segment and strategic acquisitions, positions Addus for continued success.
- Investment in technology, such as the Addus Connect app, is enhancing service delivery and caregiver support.
The company’s next major checkpoint will be the governor of New Mexico’s decision regarding the proposed Medicaid rate increase. Investors and industry stakeholders will be closely monitoring this development, as it could set a precedent for other states. Addus HomeCare’s continued focus on both policy advocacy and operational excellence suggests a proactive approach to navigating the evolving healthcare landscape.
We encourage readers to share their thoughts on these developments and the future of home healthcare in the comments below. Your insights are valuable as we continue to cover this critical topic.
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