Shares of Chemed Corporation (NYSE:CHE) tumbled 14% following a company update that revealed disappointing Medicare admission trends in Florida, triggering concerns over revenue constraints at its hospice unit, VITAS.
Chemed now estimates that its VITAS subsidiary could face a Medicare Cap revenue limitation ranging between $18 million and $25 million for the U.S. government’s 2025 fiscal year, specifically related to its Florida consolidated operations, excluding the Tallahassee area. Notably, this anticipated cap was not accounted for in the company’s prior 2025 earnings projections.
The company attributed the unexpected cap issue to two main factors. First, its “community access” program—which has helped accelerate average daily census (ADC) and revenue growth over the last two years—also encourages earlier hospice enrollment, increasing exposure to Medicare Cap constraints. Second, a mismatch in reimbursement adjustments has created added financial strain. While the national Medicare Cap per admission rose 2.9%, Florida’s consolidated reimbursement climbed 5.2%, skewing the calculations by about $25 million.
Chemed also flagged softness in its Roto-Rooter division during the second quarter, citing a notable dip in residential service demand. This trend diverged from the stronger performance reported in Q1 2025. Although commercial demand saw some recovery, it wasn’t sufficient to make up for the residential shortfall.
In reaction to the update, RBC Capital’s Ben Hendrix reduced his price target for Chemed shares from $674 to $640 but maintained an Outperform rating. “While we are disappointed to see Medicare cap limitations weigh on the 2025 outlook, we are encouraged by VITAS’ new CON, which should help the company maintain strong positioning in an increasingly competitive FL market, while providing an incremental lever to better manage cap pressure going forward,” Hendrix said.
Chemed highlighted that VITAS was recently granted a Certificate of Need (CON) to launch operations in Pinellas County, Florida. The company views this expansion as a valuable growth opportunity and a potential offset to Medicare Cap pressures starting in 2026.
Investors will get a closer look at Chemed’s performance when the company releases its second-quarter results on July 29, 2025, after markets close.