Addus HomeCare Comments on Budget Approval for In-Home Care Rate Increases in Illinois and Texas Markets

Addus HomeCare (ADUS) announced that the states of Illinois and Texas have approved in-home care rate increases in their fiscal 2026 budgets, expected to add approximately $17.5 million and $17.7 million in annualized revenue, respectively. Illinois finalized a 3.9% increase to $30.80 per hour, effective January 1, 2026, while Texas finalized a 9.9% increase to $17.13 per hour, effective September 1, 2025; both are subject to federal approval and are projected to yield margins consistent with the company's existing personal care business in those states, just over 20%.

Analysis

Addus HomeCare Corporation (ADUS) is poised for significant revenue enhancement following favorable state budget approvals for in-home care rate increases in Illinois and Texas. The State of Illinois has finalized a 3.9% increase in its base hourly reimbursement rate to $30.80, effective January 1, 2026, projected to add approximately $17.5 million in annualized revenue for Addus. Margins from this increase are expected to be consistent with its existing Illinois personal care business, in the low 20%s, and adhere to the state's 77.0% requirement for caregiver wages and benefits. Concurrently, the State of Texas approved a more substantial 9.9% increase in its base hourly reimbursement rate to $17.13, effective September 1, 2025. This is anticipated to contribute an additional $17.7 million in annualized revenue, with margins also expected to align with its current Texas personal care business at just over 20% after wage adjustments. These developments are particularly impactful as Illinois represents Addus's largest state market for personal care services, and Texas has become its second largest following the Gentiva acquisition. Both rate increases are subject to federal approval, a key contingency. The company views these legislative actions as a recognition of the value and cost-effectiveness of home-based care, reinforcing its growth outlook in these key markets.

Key Decisions for Investors

• Investors should view these state-level reimbursement rate increases as a positive catalyst for Addus HomeCare's revenue and earnings growth in fiscal years 2025 and 2026, particularly given the materiality of the Illinois and Texas markets to its personal care segment.
• Monitor the status of federal approvals for these rate changes, as this is a critical prerequisite for the realization of the projected financial benefits.
• Consider the consistent margin outlook despite rate increases, suggesting effective cost management and potential for sustained profitability improvements, while remaining mindful of the forward-looking nature of these revenue and margin projections and associated risks.