Logo of jester cap with thought bubble.

Image source: The Motley Fool.

Addus HomeCare (NASDAQ:ADUS)
Q3 2019 Earnings Call
Nov 05, 2019, 9:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Operator

Good morning, and welcome to the Addus HomeCare Corporation third-quarter 2019 earnings conference call. Today's call is being recorded. To the extent any non-GAAP financial measure is discussed in today's call, you will 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 2019 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 third-quarter 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. I would now like to turn the call over to the company's president and chief executive officer, Mr. Dirk Allison. Please go ahead, sir.

Dirk Allison -- President and Chief Executive Officer

Thank you, Drew. Good morning, everyone, and thank you for joining us for our 2019 third- quarter earnings call. With me today is Brian Poff, our chief financial officer; and Brad Bickham, our chief operating officer. As usual, I will begin with some overall comments and then Brian will discuss the third-quarter results that we issued yesterday afternoon.

Following our comments, we would be happy to respond to any questions. As you saw with our earnings release yesterday, we had a very busy third quarter. In early September, we completed the offering of 2.3 million shares of equity, resulting in Addus raising over $172 million. This offering allowed us to acquire Hospice Partners of America, our previously announced $130 million hospice acquisition while maintaining a clean balance sheet, allowing us to continue to focus on our acquisition strategy.

With the completion of this offering and after the funding of the HPA transaction, we continue to have a strong cash position with minimal debt. In addition to our equity offering, during the third quarter, we settled the previously disclosed Illinois qui tam suit brought against Addus in 2015. This suit related to our previously discontinued home health segment, which was sold in 2013. A portion of the lawsuit had been previously dismissed, and the U.S.

government had declined to intervene in the lawsuit. While we viewed and continue to view the claim against Addus as meritless, our leadership believes that settling this suit at the announced -- amount we announced was a prudent business decision. This settlement allowed us to move forward without the ongoing legal expenses that would be required to resolve the matter up to and including an actual trial. As for the financial results we announced yesterday, our solid operating performance continued in the third quarter of 2019.

Revenue for the third quarter was $169.8 million compared to $137.7 million for the same period in 2018, an increase of 23.2%. Adjusted earnings per diluted share for the third quarter of 2019 increased to $0.62 as compared to $0.48 for the same period in 2018, an increase of 29.2%. Our adjusted EBITDA for the third quarter of 2019 was $14.9 million as compared to $11.6 million for the same period in 2018, an increase of 27.8%. As we discussed on our last earnings call, in the fiscal 2020 Illinois state budget, our industry received two reimbursement rate increases to offset the statutory minimum wage increases experienced in both Chicago and Cook County.

The first-rate increase, which was expected to be effective on September 1st, 2019, would increase our rate to $20.28 per hour. This increase has been delayed due to the state's need to file additional information required to obtain approval from the federal government. This information has now been filed with the appropriate federal department, with their approval expected shortly. While we do not have a date as of today for when this increase will be approved and become effective, we do believe this could occur within the next few weeks.

This delay means our third-quarter financial results were negatively affected by the lack of reimbursement offset for the required July 1, 2019, minimum wage increases in Chicago and Cook County. The federal approval, when granted, will cover both the increase to $20.28, as well as the January 1, 2020 increase, which will take our hourly rate to $21.84. We are appreciative that the leadership of the State of Illinois recognized the need to make adjustments to cover the costs associated with the higher minimum wages mandated by statute and look forward to the final federal approval needed to complete this process. With our increasing presence in clinical service, primarily hospice, we felt it was time to begin to break out our same-store growth between personal care services and clinical services.

For the last few quarters, our same-store growth for personal care services has exceeded our stated target range of 3 to 5%. For the third quarter of 2019, our personal care same-store growth was 7.7%, driven by our growth in the New York market as the final stages of the state-led narrowing of the provider network were completed, as well as the MCO rate increase in Illinois, which was effective July 31st. As a reminder, this MCO business represents approximately 30% of our overall Illinois business. Going forward, our higher than normal same-store growth in the New York market should moderate as the process to narrow the provider network comes to its conclusion.

However, we should continue to see solid same-store growth as the expected Illinois rate increase takes effect. For our clinical services, our same-store growth was 32.3%, largely driven by the solid growth we have seen in our ambercare hospice program. While we have not published the stated same-store growth goal for our clinical services segment, as of today, we will be looking to provide that goal once we have a quarter or two of history with the HPA operation. On August 1st, 2019, we completed the acquisitions of both alliance home healthcare, a hospice, home health and personal care provider in New Mexico, and foremost home care, a personal care provider in New York City.

To remind you, the alliance acquisition broadened our hospice coverage in markets in New Mexico that we previously did not serve. Foremost home care strengthened our personal care services in the New York City metropolitan area and is now an important part of our VIP operation, which we acquired on June 1, 2019. Both of these most recent acquisitions aligned with our strategy of strengthening our coverage in states where we currently operate. On October 1st, 2019, we closed on our previously announced acquisition of hospice partners of America, a $55 million multistate provider of hospice services.

This acquisition allows us to provide hospice services to six additional states, including four states where we already have a strong personal care presence. It also gave us an entry into the Texas market, which has been a strategic goal of our company. With the completion of the HPA transaction, Addus now provides hospice services to approximately 1,800 patients in seven states. With the completion of this acquisition, clinical services now represent approximately 15% of our total revenues.

During 2019, we have acquired four companies with approximately $130 million of annualized revenue. With all four acquisitions closing in the last five months, our team has been focused on ensuring that our integration plans are being followed and are on schedule. I am proud of the efforts of our Addus team as we have jointly focused on ensuring smooth integration of these acquisitions while continuing to effectively operate our growing company. As discussed on our last few calls, we continue to be excited about the opportunities for Addus under medicare advantage.

We are currently contracted with national medicare advantage plans to provide personal care services to their members. In addition, we are working with several medicare advantage plans on the development of future benefit offerings with the goal of improving quality and reducing overall medical spend. We believe that these opportunities will expand as MA plans begin to realize the cost savings potential of personal care services through a more integrated care delivery model. While we anticipate additional MA plan participants with personal care offerings in 2020, we feel 2021 and later is still the true growth horizon for this additional opportunity for Addus.

That being said, we are experiencing increased referrals from our current MA partners, and we expect this trend to continue. Before I turn this call over to Brian for a more detailed review of third-quarter financial performance, let me thank all the employees of Addus. Our mission, providing cost-effective care and assistance that gives people the freedom to remain in their homes, is one that each of our team endeavors to live each day. I am extremely proud of all these efforts and know each employee works hard to live our values while serving our patients.

We have a very important responsibility to the thousands of patients and their families who trust us with their care, and I am very appreciative for the ongoing efforts of our team. With that, let me turn the call over to Brian.

Brian Poff -- Chief Financial Officer

Thank you, Dirk, and good morning, everyone. Addus had another strong quarter of profitable growth as we produce solid same-store revenue growth in personal care services of 7.7% in the third quarter of 2019 compared with the third quarter of 2018. We also reported same-store sales for hospice and home health, our skilled care segments, as we had our first comparable full quarter of results for the prior-year period following the 2018 acquisition of ambercare. These service segments showed a combined 32.3% increase over the same period last year.

These results demonstrate that we are executing on our organic growth strategy with favorable results, and we believe we are well positioned to continue this growth. In addition to solid growth trends in our current operations, we look forward to the incremental benefit of the four acquisitions we have completed this year with total annualized revenue of approximately $130 million. We also continue to evaluate and pursue other acquisition opportunities from a robust pipeline of potential transactions. As Dirk mentioned, total net service revenues for the third- quarter increased 23.3% to 169.8 million from 37.7 million for the third quarter of 2018.

Personal care revenues accounted for 91% of revenue for the third quarter, and increased by 20.6% over last year. This growth reflected a 9.4% increase in billable hours per business day and an 8.5% increase in revenue per billable hour. The remaining growth in revenue was attributable to our hospice and home health services. Hospice care revenue continues to grow and reached 10.9 million, a 52.8% increase from 7.1 million last year.

Home health contributed approximately $4.3 million in revenue. Combined, our hospice and home health skilled business segments contributed 15.2 million in revenue for the third quarter of 2019, up 33.2% sequentially from 11.4 million for the second quarter of this year. Our gross margin percentage remained relatively consistent sequentially at 27.1% for the third quarter and compared with 26.7% for the third quarter last year. For year-to-date period, our gross margin improved to 27% from 26.5% for the first nine months of last year, primarily due to the higher-margin profile of our skilled business.

G&A expense was 21.2% of revenue for the quarter compared with 20.5% last year, primarily due to higher acquisition and severance costs. Adjusted G&A expense was 18.3%, consistent with the prior year on a higher mix of skilled business with a higher G&A profile. Sequentially, adjusted G&A expense was lower by 20 basis points from the second quarter primarily from leverage on our corporate costs from our revenue growth. The company's adjusted EBITDA increased 27.8% to $14.9 million for the third quarter of 2019 compared to $11.6 million in the third quarter of 2018.

Adjusted EBITDA margin was 8.8%, inclusive of the net negative impact from the partially reimbursed Chicago minimum wage increase, compared with 8.5% for the third quarter of 2018. While the expected Illinois statewide reimbursement increase was not effective during the quarter, the state's managed Medicaid programs were required by Governor Pritzker to honor the new higher rate effective July 1, and revenue from these programs currently constitute approximately one third of our volume in Illinois. Combined with the increase to $13 per hour of Chicago minimum wage and the wage increase for a non-Chicago business for managed Medicaid, we experienced a net negative impact of approximately $0.5 million in profitability during the quarter. Once the reimbursement rate increase becomes effective statewide, we will realize the full impact of the expected additional revenue and related positive margin from the first of the two budgeted rate increases.

Adjusted net income per diluted share grew 29.2% to $0.62 for the third quarter from $0.48 for the third quarter of 2018. The adjusted per share results for the third quarter of 2019 exclude the following: interest income from Illinois of $0.02; M&A transaction expenses of $0.10; severance and other nonrecurring costs of $0.08; and noncash stock-based compensation of $0.08. As previously reported, our adjusted per share results for the third quarter of 2018 exclude: M&A transaction expenses of $0.11; severance and other nonrecurring costs of $0.02; and noncash stock-based compensation of $0.07. Our tax rate for the third quarter of 2019 was 24.4%, within the range of our expectation.

For the full-year 2019, we continue to expect our tax rate to be in the low to mid-20% range. As Dirk mentioned, during the quarter, we entered into a settlement agreement that resolved our historical qui tam litigation, and have reflected the amount of the settlement and related legal cost as discontinued operations, net of tax, as this related to our previously divested home health business. DSOs were 75 days at the end of the third quarter of 2019 compared with 81 days at the end of the second quarter of 2019. During the quarter, we saw increased payments on the Illinois Department of Aging, as anticipated, with their DSO declining to 65 days at the end of the third quarter of 2019 compared with 82 days at the end of the second quarter of 2019.

We while we were pleased with this improvement, the state has also begun a further shift of clients to managed Medicaid plans, which entered a further reduction in our overall DSO number as those plans complete the transfer process. We anticipate this activity to continue in the fourth quarter and intend to work diligently with both the state and managed Medicaid plans to ensure as smooth a transition as possible. Our third quarter net cash provided by operations totaled 12.2 million. And at September 30, 2019, we had 239.6 million in cash on hand prior to the completion of the Hospice Partners acquisition on October 1.

We continue to have substantial capacity to support our acquisition strategy, with only 60.2 million of bank debt at quarter end and 134.1 million in availability under our revolver. This concludes our prepared comments this morning. I want to thank you for being with us. I'll now ask the operator to please open the line for your questions.

Questions & Answers:


Operator

[Operator instructions] Our first question comes from the line of Scott Fidel with Stephens. Your line is open.

Scott Fidel -- Stephens Inc. -- Analyst

Morning. First question, just as you get those two incremental rate increases that you're expecting in Illinois in the 4Q and in the 1Q, any update on what the incremental revenue impact is that you're expecting from those two rate increases as they fully move into the run rate?

Brian Poff -- Chief Financial Officer

Yes, that's going to be just under the total of what we have not received today, will be right at 40 million, Scott, in revenue.

Scott Fidel -- Stephens Inc. -- Analyst

Right, perfect. Then second question, just on the improvement in the DSOs, Brian, it sounds like, at least with the shift to more managed Medicaid patients in Illinois that that could continue to be a bit of a tailwind in the 4Q. So any expectations on sort of where you're expecting DSOs to trend to in the fourth quarter? Then maybe also just related to that, just in general, what you're thinking about operating cash flow expectations for the 4Q as well?

Brian Poff -- Chief Financial Officer

Yes. Keep in mind we've experienced this before with Illinois. Whenever they go through this transition phase, it typically has a negative impact on cash flow during that transition as they move those patients and authorizations over to plan. So we typically see a lag during that transition.

And then there's a catch-up once those patients are fully incorporated into the managed Medicaid plan. So that's what we would kind of expect to see in Q4, I do say, it continues that push. Ultimately, though, we do see it as a positive as they continue to increase the MCO presence, but there will be a cash flow impact in that transition period.

Scott Fidel -- Stephens Inc. -- Analyst

OK. And then just one last question for me. Just as we're thinking about 2020 at this point. Interested in maybe just your update on sort of high-level headwinds and tailwinds.

I know, obviously, the Illinois rate increase would seem to be a tailwind as you sort of fully capture that. I know you mentioned some expected normalization and the growth rate in New York. Just interested in terms of what else. You obviously have the annualization of the HPA deal as well.

But interested, just in general, are there sort of headwinds and tailwinds that you want to call out for us as we think about modeling our 2020? And then that's it for me.

Dirk Allison -- President and Chief Executive Officer

Yes, Scott. I think, clearly, the tailwinds for the company -- as you know, the Illinois rate increase is going to be a big deal for us. It's going to take care of the two minimum wage increases that we've given to our Illinois employees over the last couple of years. So that's very exciting.

We've seen as far as the tailwind, the consolidation in the New York marketplace. Now we're starting to see that come to an end. So that process is going to be complete. There are challenges in New York.

It's a state that has budget challenges going forward. We'll continue to work hard in that state. So I would say as far as somewhat of a headwind, that may be a little bit one. But understand, too, all states have ups and downs with their budgets, and we've been able to effectively operate through that over the last three years.

I think the continuing headwind as it relates to just an overall part of the company relates to recruiting. It's still difficult to recruit. It's difficult to retain. It's a tough market with the unemployment as low as it is.

So I think that's going to continue to be a challenge.

Scott Fidel -- Stephens Inc. -- Analyst

OK. Thank you.

Operator

Thank you. Our next question comes from the line of Matt Larew with William Blair. Your line is open.

Matt Larew -- William Blair and Company -- Analyst

Hi, good morning. Thanks for taking my question. I first wanted to ask about some of the acquisitions. Obviously, some closed intra-quarter, and obviously, this is your first full quarter with VIP.

So could you maybe just update on how those have arrived relative to expectations? What they contributed in the quarter to the extent you can break them out? And then where you stand in terms of integration process, be it the persistent conversion and anything like that with each of those?

Brian Poff -- Chief Financial Officer

Yes, Matt, I can take that. This is Brian. I think all the integration activities for the acquisitions have been completed so far are on track and have met our expectations, financial performance as well. I think VIP coming on board in June, obviously, most of that transition is complete.

alliance and foremost that came under in the quarter is going very well and is on track. So working through that conversion of homecare home base for alliance, but that is as scheduled and then I think, initially, one month into the HPA acquisition through October. That leadership team is working very well with ours. I think that also is on track for us.

So no surprises to date. I know there's been a lot of activity this year, but our teams are working very diligently with all of those that we've acquired and have achieved what we've expected.

Brad Bickham -- Chief Operating Officer

Yes, this is Brad. I agree with Brian on that. The integration activities are going well. We're actually in New York working on consolidating our South Shore and VIP operations in certain markets.

So that will go kind of Q1, a couple of small office mergers there and then also moving our South Shore IT platform to the VIP platform, so they'll be on a common platform for management purposes.

Matt Larew -- William Blair and Company -- Analyst

OK, got it. And then, Dirk, I wanted to ask you about some of the comments around medicare advantage opportunity. Obviously, you're seeing some additional referrals now, but the newer opportunities that you're seeing, are those potentially changes in contracts changing the way they're structured with respect to risk-sharing, with respect to additional responsibilities, potentially mixes of skilled and non-skilled services where you have capabilities? Just how do you evolve -- how do you expect the next couple of years of growth in MA to maybe differ or be similar to the growth you've experienced in the past kind of 24 months?

Dirk Allison -- President and Chief Executive Officer

Yes. One of the things we're doing now is we are working with certain MA plans, different from the ones we're currently contracted with to look at value-based offerings, whether it's mainly going to be a program or a process around, can we save them dollars through things we've discussed before, emergency room visits, hospitalization, readmissions. The two we're working with have a little different structure, but they're both basically, an opportunity for us to get our per diem rate, while at the same time, then sharing in potential cost savings going forward. So we're very excited about that.

Those should start probably in the first quarter of 2020. So by the end of 2020, we'll have those results. And so, for our long-term aspect for us, we do believe we're going to be moving toward cost sharing, eventually a risk-based approach, which we're excited about. And we're probably looking at that being 2021, 2022.

Matt Larew -- William Blair and Company -- Analyst

OK. And then just the last one would be whether you've had any discussions with other states beyond New York about more aggressive network narrowing at any time kind of here in the next year or two?

Brian Poff -- Chief Financial Officer

Yes. No, at this point, we haven't had any conversations or know of any state that is going to go through a similar process. I think, obviously, our strategy of trying to become strong and have a solid presence in states in preparation for that. I think it plays well and it's played well in New York.

But at this time, no other states that we're aware of that have indicated a similar process to start.

Matt Larew -- William Blair and Company -- Analyst

All right. Thanks for taking my questions.

Operator

Thank you. Our next question comes from the line of Matthew Borsch with BMO Capital Markets. Your line is open.

Matthew Borsch -- BMO Capital Markets -- Analyst

All right. Thank you. Maybe I could just ask on the question that you just addressed regarding the narrow networks. Are you finding that that is something that comes with the demand for lower reimbursement? Is there a trade-off that's involved there? I mean, as you look ahead, do you think this is something that's going to play significantly to your advantage, given your ability to meet the -- whatever complex requirements might be demanded of these plans?

Dirk Allison -- President and Chief Executive Officer

I think the narrowing of the networks that, to date, have not come with a reduction in fee as of yet. We've been able to negotiate strong rates in the New York marketplace, even while the networks were narrowing. And I think that's partially due to our size, our coverage and our really strong relationships with the MCOs. However, in the future, there are always going to be situations where the states get into budget issues where they're going to be looking at how do they control cost, and we believe our size and ability at times, maybe to take a little lower increase in the rate, while at the same time, taking on more new patients makes a lot of sense.

So that's all part of our strategic focus on getting size in a market so that we can partner across the table with these MCOs.

Matthew Borsch -- BMO Capital Markets -- Analyst

And you had touched on one of the tailwinds -- or sorry, headwinds next year possibly being the budget constraints in New York. Is there anything specific that you would point to there?

Dirk Allison -- President and Chief Executive Officer

The budget itself has gotten tight. Now the state was looking at a way to reduce one of the programs called CDPAP. And they were looking at whether it was narrowing the network or redoing the way they priced it. We're working with the state now as an industry to try to make sure that whatever comes through, it's good for both sides.

So I think like all states, New York is one of those we'll continue to work with and hopefully have strong relationships so that we can help them and help us determine what's the best way moving forward so that we can control the cost of this service that we provide.

Matthew Borsch -- BMO Capital Markets -- Analyst

OK. Thank you.

Operator

Thank you. Our next question comes from the line of Matthew Gillmor with Baird. Your line is open.

Matthew Gillmor -- Robert W. Baird and Company -- Analyst

Hey, thanks for the question. I wanted to ask about the same-store growth metric and sort of how that shook out by geography. So can you and I'm -- if you don't want to be really specific, I certainly appreciate that. But could you maybe at least rank sort of your major markets in terms of the growth rate? And if you had any indications or views in terms of how that would trend as you look into 2020, that would be helpful as well.

Brad Bickham -- Chief Operating Officer

Yes, Matt, this is Brad. I can take that one. I think probably, the top four markets that we had that really contributed to the strong growth this quarter and a couple that we've talked about, New York, obviously, is an area in the network -- Illinois, partial rate increase also was helpful. But as we talked about previously, we've done well in New Mexico with our rate negotiations there.

And on a comp basis that continues to provide meaningful impact to our same-store numbers. So those three, and I think alternatively, in one of our other larger states, Washington State had some really good volume growth and also some positive rate impact that contributed. So between those, I think that was what really drove to the high end of where we ended for the quarter.

Matthew Gillmor -- Robert W. Baird and Company -- Analyst

OK. Fair enough. And then on the acquisition pipeline, I know you've had a busy year with 130 million of acquired revenue. And you also mentioned the focus on integrating some of the recent deals.

Should we still think about the annual target being 75 to 100 million as we're moving into 2020? And could you also then just give us an update in terms of the mix of what's in the pipeline, if that's weighted to personal care or to hospice right now?

Dirk Allison -- President and Chief Executive Officer

Yes. I would say that you could continue to expect 75 to 100 million for the next couple of years as our target. Obviously, we've been able to overachieve that for the last couple of years, and we would expect with our pipeline continuing to do well. As we look at what's in the pipeline today, I would say, probably, the vast majority of what we're looking at, our personal care services.

Although there are today, some hospice assets we're looking at, mainly the smaller assets now that we have, ambercare and the alliance, as well as the HPA base of business to grow from going into next year. Now one of the things I want to make sure we point out to is we'll be looking at what the -- even though PDGM effect was reduced, appropriately so, he still will affect the industry a bit as will the reduction of the RAP payments. So as a company, we have become very interested in home health. It's done very well for us in our new Mexico market, working with the -- having all three levels of care.

I know Brad and his team have done a very good job of that and then seeing somewhat of the synergies back and forth among service lines. So I would say in 2020, in addition to most of our outlook will be at personal care, we'll also start looking at home health assets and seeing if we can bring them on.

Matthew Gillmor -- Robert W. Baird and Company -- Analyst

Got it. Thanks very much.

Operator

Thank you. Our next question comes from Brian Tanquilut with Jefferies. Your line is open.

Brian Tanquilut -- Jefferies -- Analyst

Hey, guys, good morning. Congrats on the very good quarter. I guess, Brian, my first question for you is, as I think about the rate increase in Illinois or the increases, do you mind just walk us through the mechanics? I know that's still pending with CMS. When does that get effective? Is it retroactive to September 1st? I mean, just walk us through how we should think about how the rate increases will progress if they're approved.

Dirk Allison -- President and Chief Executive Officer

Yes, let me start with that, and then we'll -- I'll let Brian talk about the mechanics. But from our standpoint, we don't expect it to be retroactive. Doesn't mean that it won't be. But at this point in time, we are not planning on that.

The process is going through the normal rate increase process when you have a 10% increase or greater. Takes a little more paperwork, takes a little more time. We are getting close to the estimated time that we should have an answer. Let me emphasize it's estimated.

We have no firm knowledge that it will be by the mid-November, late November time frame, but we do believe it is getting close. We feel comfortable it will be approved. But that's yet to be seen. So whether it will be approved in November and effective November 1st, or be approved and effective December 1st is still to be seen.

Can you talk about the process?

Brian Poff -- Chief Financial Officer

Yes. It is just for some clarity. So in the quarter, keep in mind, in Q3, we absorbed the impact of the Chicago minimum wage step up. We did get the benefit of the MCO rate increase, and there's also the related wage costs in the quarter as well.

So once CMS approves the remainder of the rate increase scheduled for this year, there's the conversations that we'll have with SEIU. And then we'll see a similar effect Jan 1 with a reimbursement rate increase and a step-up in wages corresponding.

Dirk Allison -- President and Chief Executive Officer

One of the things that I think you know, but I want to clarify is the minimum wage is increased in Chicago and Cook County, but it has not increased anywhere else in the Illinois marketplace. And so as we received rate increases from the state, part of our process is negotiate with our partners at the Union what the appropriate rating increases for those employees that did not fall under the Chicago minimum wage increase. So part of this, when we get the first increase, we'll be determining the proper flow through to those employees at other parts of the state. And then obviously, when the January increase comes through the same process at that point, with those outside the Chicago and South Cook market.

Brian Tanquilut -- Jefferies -- Analyst

Got it. And then, I guess, my follow-up as I think about 2020, without going -- I know you don't give guidance, but as I think about the moving parts, just like you mentioned, Dirk, potential rate increases or wage increases for your employees in Illinois, the New York benefit tailwinds should carry over probably until September is my guess. How should -- and then the HPA comes in. How should we think about the moving parts in terms of your expectation for same-store and margins next year as the mix shift to a greater proportion of hospice?

Brian Poff -- Chief Financial Officer

Yes, I think I can start and then Dirk can add some comments. Well, this is Brian. I think we obviously had a couple of things that have impacted us positively in same-store, particularly in personal care, over the last couple of quarters as we kind of move through those comps in the next couple, we would expect to kind of still be in that higher range. But I think from our perspective, just in an aggregate sense, we still believe that 3 to 5% guide that we've given overall for organic growth still is what we would expect to see long term.

We try to start providing more information on hospice and health, obviously, the operational changes that we've made from ambercare in the last year really paid a lot of dividends. We would expect them to eventually have a little higher growth profile than personal care on a long-term basis. But with HPA coming on board, we think that mix and being able to kind of put those platforms together is -- it's definitely helpful for us.

Dirk Allison -- President and Chief Executive Officer

Yes, let me add to Brian's comments as it relates to personal care and our goal of 3% to 5%. We set this goal early in 2016, where we were still learning the industry, and it's proven to be, I think, a fairly accurate reflection of what the industry has grown and what we've been able to do. We do know now that we're becoming a bigger part of personal care markets in a number of states, and with that comes the ability, hopefully, to grow, maybe above market. So we'll look at the 3 to 5% growth rate over the next year or so to see if that needs to be adjusted.

Right now, we're comfortable with it, knowing that for the next four or five quarters, we're going to probably be at the high end or above that range because of things such as the Illinois rate increase coming through. But with the unit growth that Brad and his team has been seeing right now, we want to wait before we adjust that. It's been good unit growth. We want to make sure we can continue that.

Brad Bickham -- Chief Operating Officer

Yes. And this is Brad. Just real quick on the home health and the hospice side. With any acquisition, you tend to have a little distraction before, meaning before closing and then shortly after closing.

So I'll say that the comps were a little easy, easier on the home health and hospice side this quarter. They're going to get a little tougher as we go into 2020.

Brian Tanquilut -- Jefferies -- Analyst

Makes sense. Thanks guys.

Operator

Thank you [Operator instructions] Our next question comes from the line of Mitra Ramgopal with Sidoti. Your line is open.

Mitra Ramgopal -- Sidoti and Company -- Analyst

Good morning, thanks for taking the questions. First, I was just wondering, obviously, you expect a nice tailwind from Illinois as it relates to more favorable reimbursement. I was just wondering if there are other states you think you could be benefiting from also, as you look out to 2020 and beyond in terms of reimbursement?

Brad Bickham -- Chief Operating Officer

Yes, Mitra. I think we've done very well. Obviously, we've had a good year with Illinois coming through one of our largest markets. You know it very positively sets us up for the next couple of years.

I think our teams where we have the opportunities to have rate negotiations have been very successful in markets like New Mexico and New York. Keep in mind, most of our other states typically are -- that rate is set by the state and is tied into their budget. So we've gotten incremental increases where we've had minimum wage step-ups and others. But I don't have any on the horizon in 2020 that we would expect to see a similar size increase that we're seeing from Illinois at this point.

Dirk Allison -- President and Chief Executive Officer

Yes, let me also make a comment around that line that in certain of our markets, the industry has become unionized. And most of these are in the Midwest states, New York and the Northwest. And we have a -- I would classify it as a strong relationship with our unions in those particular markets, and they have been great partners with us. As we, as a company and an industry have worked with the states to make sure that the state rates mirror the increased minimum wage.

Our employees deserve these minimum wage increases, but we have to make sure we fund them so those jobs can continue, and we appreciate the partnership with the unions and the states in looking at those. And so we've had very effective history the last three years of making sure that as rates -- wage and rates increase, we've got these larger rate increases going forward. Now long term, once minimum wage moderates toward the 13 to $15 hour that most of these states are talking about, we probably will return to more of the historical rate increase year over year, which will be in that 3 to 5% or so target that we look at. So, so far, we've done well with our partners the last two or three years.

Mitra Ramgopal -- Sidoti and Company -- Analyst

OK. And just coming back on the acquisition front, obviously, Dirk, you mentioned you'd like to continue on the pace we have seen the last couple of years. I assume you still have a really nice pipeline. I was just wondering if you're seeing any competition as it relates to other players coming into the space now, potentially changing valuations as you look at deals?

Dirk Allison -- President and Chief Executive Officer

As it relates to our clinical services, well, home health, there's not been much activity, as you know, as people have waited for the industry to settle out with the change in reimbursement. Hospice, yes, certainly, there are -- there is competition in the hospice market. As we are looking forward to hospice acquisitions in the future, they're going to be the more targeted, probably on the smaller side. And probably won't have as much competition as maybe we based on some of the larger assets.

When you go to personal care, that's a really interesting industry because you've seen competitors of ours that have tried to grow that side of their business. It's hard to do. We're fortunate in that we have such a strong network across the 26 states in which we operate, that we're able to acquire some of the smaller operators and fold them into our operations and giving us a good base in that particular area. So I think because of the difficulty of building a large size presence in personal care in various states, we, at times, don't have as much competition on the personal care side as maybe we've seen on the hospice side.

So we anticipate, going forward, that will continue.

Mitra Ramgopal -- Sidoti and Company -- Analyst

OK. Thanks for taking the questions.

Operator

Thank you. I'm not showing any further questions. I would now like to turn the call over to Dirk Allison for closing remarks.

Dirk Allison -- President and Chief Executive Officer

Thank you, operator. I want to thank you all for your interest in Addus, and for you being part of our earnings call today. Have a great week. Thank you.

Operator

[Operator signoff]

Duration: 44 minutes

Call participants:

Dirk Allison -- President and Chief Executive Officer

Brian Poff -- Chief Financial Officer

Scott Fidel -- Stephens Inc. -- Analyst

Matt Larew -- William Blair and Company -- Analyst

Brad Bickham -- Chief Operating Officer

Matthew Borsch -- BMO Capital Markets -- Analyst

Matthew Gillmor -- Robert W. Baird and Company -- Analyst

Brian Tanquilut -- Jefferies -- Analyst

Mitra Ramgopal -- Sidoti and Company -- Analyst

More ADUS analysis

All earnings call transcripts