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,
today reported on several issues impacting operating results for
the third quarter of 2006. The Company announced VITAS is exiting
the hospice market in Phoenix, Arizona. VITAS has been successful
in growing admissions of terminally ill patients who reside
primarily in assisted living settings within the Phoenix community.
Patients residing in these types of facilities tend to exit
curative care and enter into hospice relatively early into their
terminal illness diagnosis. The current Medicare hospice
reimbursement program limits payment for hospice care when a
significant portion of the patient census enters into hospice early
into their terminal diagnosis. Although VITAS, on average, has
relatively short average and median lengths-of-stay in the majority
of its programs, each program is measured separately and cannot be
considered in aggregate of its hospice programs under common
control and ownership. The Phoenix program currently provides
hospice care to approximately 200 terminally ill patients per day.
Revenue and operating losses for Phoenix in the first six months of
2006 aggregated $3.0 million and $0.9 million, respectively,
including $1.7 million of revenue reduction for Medicare billing
limitations, or Medicare Cap. Full-year revenue and operating loss
projections for Phoenix are estimated at $3.7 million and $4.3
million, including $6.3 million in revenue reductions for Medicare
Cap. The after-tax cost to exit the Phoenix market, excluding the
operating losses noted above, is estimated to range from $4.5 to
$5.5 million. VITAS announced in the second quarter of 2006 that
two programs, excluding Phoenix, were anticipated to be in
contractual billing limitations with Medicare in calendar year
2006. Based upon current trends, the total Medicare Cap for these
two programs in calendar year 2006 is estimated to range between
$4.7 and $7.6 million, with $0.6 million being recorded in the
second quarter of 2006, $2.0 million to $3.0 million estimated to
be recorded in the third quarter of 2006 and $2.1 million to $4.0
million to be recorded in the fourth quarter of the year. These
estimates assume a modest deterioration in admission and discharge
metrics in these two programs through the end of 2006. These two
programs are estimated to generate over $3 million in operating
profit in 2006. The third-quarter 2006 Medicare Cap accrual will
also include an additional $1.0 million for estimated prior-year
billing limitations resulting from the Fiscal Intermediary
reallocating admissions for deceased Medicare patients who received
hospice care from multiple providers. Of this prior-year billing,
$0.5 million is for one of the programs noted above and $0.5
million is estimated for a program not anticipated to have a
billing restriction in calendar year 2006. VITAS also released
interim third quarter operating metrics. Through July and August
2006, VITAS had an Average Daily Census of 11,194, an increase of
9.7%, and admissions growth of 4.2%, when compared to the
equivalent prior year period. August 2006 year-to-date ADC and
admissions, excluding Phoenix, have increased 10.6% and 5.3%,
respectively. Chemed announced that it has reached a preliminary
agreement in regard to litigation related to the divestiture of its
Patient Care business segment. As part of this agreement, the
company will convert $2.6 million of the current receivable due
from Patient Care into a promissory note due October 2007. This
note will bear interest quarterly at a 9.5% annual interest rate.
The company will take an after-tax charge of $1.7 million
representing a write-off of the remaining receivable balance as
well as costs associated with certain contingent insurance claims
and other items related to the Patient Care business. Chemed
received Patient Care warrants with a value of $1.4 million at the
time of the divestiture. The company has determined the valuation
of these warrants is impaired. This impairment will result in a
third quarter 2006 after-tax charge of $0.9 million. Guidance for
2006 VITAS is estimated to generate full-year revenue growth from
continuing operations, prior to Medicare Cap, of 14.0% to 14.5%,
increased admissions of 5.0% to 5.5%, increased ADC of 10.0% to
11.0% and adjusted EBITDA margins, prior to Medicare Cap, of 12.9%
to 13.2%. This guidance assumes a Medicare price increase that will
average 3.8% in the fourth quarter of 2006. Full-year Medicare
contractual billing limitations, excluding Phoenix, which is
anticipated to be classified as a discontinued operation in 2006,
are estimated to range from $5.7 million to $8.6 million, which
equates to revenue reduction of 80 to 120 basis points. Roto-Rooter
is estimated to generate a 6.0% to 7.0% increase in revenue in
2006, job count growth between 0.5% and 1.0% and adjusted EBITDA
margins averaging between 16.5% and 17.0%. Based upon these
factors, an effective tax rate of 39% and average diluted share
count of 26.7 million in the second half of 2006, our expectation
is that full-year 2006 earnings per diluted share from continuing
operations, excluding any charges or credits not indicative of
ongoing operations, and excluding expense for stock options, will
be in the range of $2.00 to $2.10. This earnings per share guidance
includes $.13 to $.20 for the after-tax impact of Medicare Cap
related to continuing operations. Conference Call Chemed will host
a conference call and webcast at 9:00 a.m., ET, on Friday,
September 29, 2006, to discuss this press release and provide an
update on its business. The dial-in number for the conference call
is (800) 561-2601 for U.S. and Canadian participants and (617)
614-3518 for international participants. The participant pass code
is 50409048. A live webcast of the call can be accessed on Chemed's
website at www.chemed.com by clicking on Investor Relations Home. A
taped replay of the conference call will be available beginning
approximately two hours after the call's conclusion. It can be
accessed by dialing (888) 286-8010 for U.S. and Canadian callers
and (617) 801-6888 for international callers and will be available
for one week following the live call. The replay pass code is
79291237. An archived webcast will also be available at
www.chemed.com and will remain available for 14 days following the
live call. Chemed Corporation operates in the healthcare field
through its VITAS Healthcare Corporation subsidiary. VITAS provides
daily hospice services to over 11,000 patients with severe,
life-limiting illnesses. This type of care is focused on making the
terminally ill patient's final days as comfortable and pain-free as
possible. Chemed operates in the residential and commercial
plumbing and drain cleaning industry under the brand name
Roto-Rooter. Roto-Rooter provides plumbing and drain service
through company-owned branches, independent contractors and
franchisees in the United States and Canada. Roto-Rooter also has
licensed master franchisees in Indonesia, Singapore, Japan, Mexico,
and the Philippines. Forward-Looking Statements Certain statements
contained in this press release and the accompanying tables are
"forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. The words "believe,"
"expect," "hope," "anticipate," "plan" and similar expressions
identify forward-looking statements, which speak only as of the
date the statement was made. Chemed does not undertake and
specifically disclaims any obligation to publicly update or revise
any forward-looking statements, whether as a result of new
information, future events or otherwise. These statements are based
on current expectations and assumptions and involve various risks
and uncertainties, which could cause Chemed's actual results to
differ from those expressed in such forward-looking statements.
These risks and uncertainties arise from, among other things,
possible changes in regulations governing the hospice care or
plumbing and drain cleaning industries; periodic changes in
reimbursement levels and procedures under Medicare and Medicaid
programs; difficulties predicting patient length of stay and
estimating potential Medicare reimbursement obligations; challenges
inherent in Chemed's growth strategy; the current shortage of
qualified nurses, other healthcare professionals and licensed
plumbing and drain cleaning technicians; Chemed�s dependence on
patient referral sources; and other factors detailed under the
caption "Description of Business by Segment" or "Risk Factors" in
Chemed�s most recent report on form 10-Q or 10-K and its other
filings with the Securities and Exchange Commission. You are
cautioned not to place undue reliance on such forward-looking
statements and there are no assurances that the matters contained
in such statements will be achieved. 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, today reported on several issues
impacting operating results for the third quarter of 2006. The
Company announced VITAS is exiting the hospice market in Phoenix,
Arizona. VITAS has been successful in growing admissions of
terminally ill patients who reside primarily in assisted living
settings within the Phoenix community. Patients residing in these
types of facilities tend to exit curative care and enter into
hospice relatively early into their terminal illness diagnosis. The
current Medicare hospice reimbursement program limits payment for
hospice care when a significant portion of the patient census
enters into hospice early into their terminal diagnosis. Although
VITAS, on average, has relatively short average and median
lengths-of-stay in the majority of its programs, each program is
measured separately and cannot be considered in aggregate of its
hospice programs under common control and ownership. The Phoenix
program currently provides hospice care to approximately 200
terminally ill patients per day. Revenue and operating losses for
Phoenix in the first six months of 2006 aggregated $3.0 million and
$0.9 million, respectively, including $1.7 million of revenue
reduction for Medicare billing limitations, or Medicare Cap.
Full-year revenue and operating loss projections for Phoenix are
estimated at $3.7 million and $4.3 million, including $6.3 million
in revenue reductions for Medicare Cap. The after-tax cost to exit
the Phoenix market, excluding the operating losses noted above, is
estimated to range from $4.5 to $5.5 million. VITAS announced in
the second quarter of 2006 that two programs, excluding Phoenix,
were anticipated to be in contractual billing limitations with
Medicare in calendar year 2006. Based upon current trends, the
total Medicare Cap for these two programs in calendar year 2006 is
estimated to range between $4.7 and $7.6 million, with $0.6 million
being recorded in the second quarter of 2006, $2.0 million to $3.0
million estimated to be recorded in the third quarter of 2006 and
$2.1 million to $4.0 million to be recorded in the fourth quarter
of the year. These estimates assume a modest deterioration in
admission and discharge metrics in these two programs through the
end of 2006. These two programs are estimated to generate over $3
million in operating profit in 2006. The third-quarter 2006
Medicare Cap accrual will also include an additional $1.0 million
for estimated prior-year billing limitations resulting from the
Fiscal Intermediary reallocating admissions for deceased Medicare
patients who received hospice care from multiple providers. Of this
prior-year billing, $0.5 million is for one of the programs noted
above and $0.5 million is estimated for a program not anticipated
to have a billing restriction in calendar year 2006. VITAS also
released interim third quarter operating metrics. Through July and
August 2006, VITAS had an Average Daily Census of 11,194, an
increase of 9.7%, and admissions growth of 4.2%, when compared to
the equivalent prior year period. August 2006 year-to-date ADC and
admissions, excluding Phoenix, have increased 10.6% and 5.3%,
respectively. Chemed announced that it has reached a preliminary
agreement in regard to litigation related to the divestiture of its
Patient Care business segment. As part of this agreement, the
company will convert $2.6 million of the current receivable due
from Patient Care into a promissory note due October 2007. This
note will bear interest quarterly at a 9.5% annual interest rate.
The company will take an after-tax charge of $1.7 million
representing a write-off of the remaining receivable balance as
well as costs associated with certain contingent insurance claims
and other items related to the Patient Care business. Chemed
received Patient Care warrants with a value of $1.4 million at the
time of the divestiture. The company has determined the valuation
of these warrants is impaired. This impairment will result in a
third quarter 2006 after-tax charge of $0.9 million. Guidance for
2006 VITAS is estimated to generate full-year revenue growth from
continuing operations, prior to Medicare Cap, of 14.0% to 14.5%,
increased admissions of 5.0% to 5.5%, increased ADC of 10.0% to
11.0% and adjusted EBITDA margins, prior to Medicare Cap, of 12.9%
to 13.2%. This guidance assumes a Medicare price increase that will
average 3.8% in the fourth quarter of 2006. Full-year Medicare
contractual billing limitations, excluding Phoenix, which is
anticipated to be classified as a discontinued operation in 2006,
are estimated to range from $5.7 million to $8.6 million, which
equates to revenue reduction of 80 to 120 basis points. Roto-Rooter
is estimated to generate a 6.0% to 7.0% increase in revenue in
2006, job count growth between 0.5% and 1.0% and adjusted EBITDA
margins averaging between 16.5% and 17.0%. Based upon these
factors, an effective tax rate of 39% and average diluted share
count of 26.7 million in the second half of 2006, our expectation
is that full-year 2006 earnings per diluted share from continuing
operations, excluding any charges or credits not indicative of
ongoing operations, and excluding expense for stock options, will
be in the range of $2.00 to $2.10. This earnings per share guidance
includes $.13 to $.20 for the after-tax impact of Medicare Cap
related to continuing operations. Conference Call Chemed will host
a conference call and webcast at 9:00 a.m., ET, on Friday,
September 29, 2006, to discuss this press release and provide an
update on its business. The dial-in number for the conference call
is (800) 561-2601 for U.S. and Canadian participants and (617)
614-3518 for international participants. The participant pass code
is 50409048. A live webcast of the call can be accessed on Chemed's
website at www.chemed.com by clicking on Investor Relations Home. A
taped replay of the conference call will be available beginning
approximately two hours after the call's conclusion. It can be
accessed by dialing (888) 286-8010 for U.S. and Canadian callers
and (617) 801-6888 for international callers and will be available
for one week following the live call. The replay pass code is
79291237. An archived webcast will also be available at
www.chemed.com and will remain available for 14 days following the
live call. Chemed Corporation operates in the healthcare field
through its VITAS Healthcare Corporation subsidiary. VITAS provides
daily hospice services to over 11,000 patients with severe,
life-limiting illnesses. This type of care is focused on making the
terminally ill patient's final days as comfortable and pain-free as
possible. Chemed operates in the residential and commercial
plumbing and drain cleaning industry under the brand name
Roto-Rooter. Roto-Rooter provides plumbing and drain service
through company-owned branches, independent contractors and
franchisees in the United States and Canada. Roto-Rooter also has
licensed master franchisees in Indonesia, Singapore, Japan, Mexico,
and the Philippines. Forward-Looking Statements Certain statements
contained in this press release and the accompanying tables are
"forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. The words "believe,"
"expect," "hope," "anticipate," "plan" and similar expressions
identify forward-looking statements, which speak only as of the
date the statement was made. Chemed does not undertake and
specifically disclaims any obligation to publicly update or revise
any forward-looking statements, whether as a result of new
information, future events or otherwise. These statements are based
on current expectations and assumptions and involve various risks
and uncertainties, which could cause Chemed's actual results to
differ from those expressed in such forward-looking statements.
These risks and uncertainties arise from, among other things,
possible changes in regulations governing the hospice care or
plumbing and drain cleaning industries; periodic changes in
reimbursement levels and procedures under Medicare and Medicaid
programs; difficulties predicting patient length of stay and
estimating potential Medicare reimbursement obligations; challenges
inherent in Chemed's growth strategy; the current shortage of
qualified nurses, other healthcare professionals and licensed
plumbing and drain cleaning technicians; Chemed's dependence on
patient referral sources; and other factors detailed under the
caption "Description of Business by Segment" or "Risk Factors" in
Chemed's most recent report on form 10-Q or 10-K and its other
filings with the Securities and Exchange Commission. You are
cautioned not to place undue reliance on such forward-looking
statements and there are no assurances that the matters contained
in such statements will be achieved.
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