Chemed Corporation (NYSE:CHE) Q3 2023 Earnings Call Transcript

I mean, they were — they’ve been struggling. We continue to see them struggle, but that so — I guess what Nick was really saying is, that some of those factors are certainly in the category of the unknown. But again, if you ask us — as we sit here, we see them continue to struggle, so that’s good news for us.

Joanna Gajuk: Okay, I appreciate it. And before I guess I ask my Roto-Rooter question, the last thing on VITAS. So, we know what the rate update is, which is pretty good, I guess, and sounds like you actually struck a little bit higher than average rate. But there are also some provisions in the hospice rate, but also in the home health proposal around the hospice [indiscernible] hospice oversight, right? So there the medical reviews of hospice stays that are longer than 90 days. There’s the Special Focus Program. And I guess they talk about selecting some providers for that additional review. So, can you talk about what does it mean for your business in terms of any impact to how you operate or any impact to the costs associated with just dealing with this increased oversight?

Nick Westfall: Yeah. So Joanna, if we take your comment sort of and break it into two different parts, your comment around any potential desire to look at patient records for any length of stay, I think it’s something — as you might imagine, we’re constantly and have — we’re constantly able to successfully defend those things. And with the research studies that I know many are aware of, that are illustrating longer length of stays in the hospice benefit, actually have a larger outsized return for the Medicare Trust Fund in terms of total cost of care reduction. We’ll see if the appetite to look at those things now aligns with the best interests of the Medicare Trust Fund as well. Regarding the Special Focus Program proposed rule and provisions, there will be some semblance of that will be finalized here over the next coming days.

But the one item that it would point to regarding it is when you look at the comment letters that are all public from the four trade associations that are representative of large providers, small providers, for-profit providers, non-profit providers, as well as bipartisan letters from congressional leadership, all those things point to and help to illustrate some of the concerns of the construct of the Special Focus Program embedded inside of the proposed rule, along with recommendations that CMS has been listening to and able to collaborate with, for consideration of things they can and should do within the SFP to be able to achieve their goal, which is identifying poor performing hospices, in particular those that with the vast explosion in the last four years of hospice licenses in California, Texas, Nevada and Arizona.

So, just as an illustration, some of those constructive comments are the need to normalize for providers related to condition-level deficiencies. So, they don’t treat a provider with [450] (ph) in ’25, exactly the same. They’re also highlighting 40% of hospice provider numbers haven’t had a survey in three years, over half don’t have a Cap score. And so, we think there’s continual work to do in the industry and all the providers are rowing in the same direction to provide that insight so that the government can achieve what their objective is. But speculating around something that is proposed, that should have some either significant modifications or a pause to just be able to get it right and achieve that objective that everybody believes in, I think is going to be key and critical.

And we’ll see how that plays out over the next week or two and then over the coming years.

Joanna Gajuk: No, exactly. I guess, we have to see where it stands when it’s finalized. But if I can, last question on the Roto-Rooter rate. So, things tracking a little bit better. Sounds like you conserved it on Q4, but still you raised your guidance, it sounds like maybe a little bit more than the Q3. So, what gives you confidence, I guess, in Roto doing better? And can you talk about maybe trends exiting Q3 and so far in October?