Full Press Release Details
Reports Third-Quarter 2016 Results
CINCINNATI--(BUSINESS WIRE)--October 26, 2016--Chemed Corporation
(Chemed) (NYSE:CHE), which operates VITAS Healthcare Corporation
(VITAS), the nation's largest provider of end-of-life care, and
Roto-Rooter, the nation's largest commercial and residential plumbing
and drain cleaning services provider, reported financial results for its
third quarter ended September 30, 2016, versus the comparable prior-year
Consolidated operating results:
Revenue increased 1.7% to $393 million
GAAP Diluted EPS decreased 1.8% to $1.62
Adjusted Diluted EPS decreased 2.8% to $1.73
VITAS segment operating results:
Net Patient Revenue of $283 million, a decrease of 0.8%
Average Daily Census (ADC) of 16,201, an increase of 3.0%
Unit for Unit admissions of 16,157, an increase of 1.7%
Net Income, including discrete items, of $20.9 million, a decrease of
Adjusted EBITDA of $38.6 million, a decrease of 14.7%
Roto-Rooter segment operating results:
Revenue of $110 million, an increase of 8.4%
Net Income of $12.9 million, an increase of 17.3%
Adjusted EBITDA of $23.7 million, an increase of 20.0%
Adjusted EBITDA margin of 21.6%, an increase of 208 basis points
Net revenue for VITAS was $283 million in the third quarter of 2016,
which is a decrease of 0.8%, when compared to the prior-year period.
This revenue decrease is comprised primarily of an average Medicare
reimbursement rate increase of approximately 0.6%, a 3.0% increase in
average daily census, offset by acuity mix shift which negatively
impacted revenue 1.7% and changes in Medicare hospice reimbursement
methodology which negatively impacted revenue 2.1%.
On January 1, 2016, CMS implemented a refinement to the Medicare hospice
reimbursement per diem. This refinement eliminated the single-tier per
diem for routine home care (RHC) and replaced it with a two-tiered rate,
with a higher per diem rate for the first 60 days of a hospice patient's
care, and a lower rate for days 61 and after. In addition, CMS provided
for a Service Intensity Add-on (SIA) payment which provides for
reimbursement of care provided by a registered nurse or social worker
for RHC patients within seven days prior to death. The reimbursement for
continuous care, inpatient care and respite care are not impacted by
The current two-tiered national per diem rate for RHC is $186.84 for the
first 60 days and $146.83 for RHC provided to patients in hospice beyond
60 days. An individual hospice's actual per diem rate is adjusted for
differences in geographic cost of living.
Rebasing in 2016 would be revenue neutral to a hospice if it has 37.6%
of total RHC days-of-care being provided to patients in their first 60
days of admission and 62.4% of total RHC days-of-care provided to
patients after the 60 days. (RHC Days-of-Care ratio).
In the third quarter of 2016, VITAS had a 24.6/75.4 RHC Days-of-Care
ratio and generated approximately $1.3 million in SIA payments. This
resulted in $6.0 million less revenue than under the previous Medicare
reimbursement methodology.
VITAS did not have any adjustments to revenue related to the Medicare
Cap billing limitation in the current or prior-year quarter for the 2016
Approximately $0.2 million of cap was recorded in the quarter relating
to the 2015 measurement period. The methodology used to calculate the
Medicare Cap is in dispute. CMS is calculating the Medicare Cap
liability using theoretical revenue that assumes no revenue reduction
At September 30, 2016, VITAS had 31 Medicare provider numbers, none of
which has an estimated 2016 Medicare Cap billing limitation.
Of VITAS' 31 unique Medicare provider numbers, 27 provider numbers have
a Medicare Cap cushion of 10% or greater for the 2016 Medicare Cap
period, two provider numbers have a cap cushion between 5% and 10%, and
two provider numbers have a cap cushion between 0% and 5%. VITAS
generated an aggregate cap cushion of $281 million during the trailing
twelve-month period.
Average revenue per patient per day in the quarter was $189.94, which is
3.6% below the prior-year period. Routine home care reimbursement and
high acuity care averaged $160.09 and $697.21, respectively. During the
quarter, high acuity days of care were 5.6% of total days of care, 58
basis points less than the prior-year quarter.
The third quarter of 2016 gross margin, excluding Medicare Cap, was
20.7%, which is a 260 basis point decline when compared to the third
Selling, general and administrative expense was $21.8 million in the
third quarter of 2016, which is 2.6% favorable when compared to the
prior-year quarter. Adjusted EBITDA, excluding Medicare Cap, totaled
$38.6 million in the quarter, a decrease of 14.7% over the prior-year
period. Adjusted EBITDA margin was 13.6% in the quarter which is 225
basis points below the prior-year period.
Roto-Rooter's plumbing and drain cleaning business generated sales of
$110 million for the third quarter of 2016, an increase of $8.5 million,
or 8.4%, over the prior-year quarter. Revenue from water restoration
totaled $11.9 million, an increase of 46.3% over the prior year.
Roto-Rooter's gross margin in the quarter was 47.8%, a 75 basis point
improvement when compared to the third quarter of 2015. Adjusted EBITDA
in the third quarter of 2016 totaled $23.7 million, an increase of
20.0%, and the Adjusted EBITDA margin was 21.6% in the quarter, 208
basis points higher than the prior year.
As of September 30, 2016, Chemed had total cash and cash equivalents of
$21 million and debt of $111 million.
In June 2014 Chemed entered into a five-year Amended and Restated Credit
Agreement that consisted of a $100 million amortizable term loan and a
$350 million revolving credit facility. The interest rate on this
facility has a floating rate that is currently LIBOR plus 112.5 basis
points. At September 30, 2016, the Company had approximately $288
million of undrawn borrowing capacity under this credit agreement.
Capital expenditures through September 30, 2016, aggregated $29.7
million and compares to depreciation and amortization during the same
period of $25.9 million.
On March 11, 2016, Chemed's Board of Directors authorized an additional
$100 million for stock repurchase under Chemed's existing share
repurchase program. On a year-to-date basis, the company has purchased