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Investing.com -- Chemed Corporation (NYSE:CHE) stock fell 14% after the company reported weaker-than-expected Medicare admissions in Florida, leading to projected revenue limitations for its VITAS subsidiary.
The healthcare services provider now projects a Medicare Cap revenue limitation of $18 million to $25 million for the 2025 government fiscal year related to its Florida consolidated program, excluding Tallahassee. Previous guidance for 2025 earnings did not include any Florida Medicare Cap limitations.
The company cited two factors contributing to the Medicare Cap issue. First, its "community access" program, which has driven higher-than-average ADC and revenue growth over the past two years, adds pressure due to patients accessing hospice care earlier. Second, a rate differential between the national Medicare Cap per admission increase (2.9%) and the Florida consolidated program reimbursement increase (5.2%) negatively impacts calculations by approximately $25 million.
Additionally, Chemed reported unexpected weakness in Roto-Rooter’s residential business demand during the second quarter, breaking from trends seen in the first quarter of 2025. While commercial demand showed improved trends, it wasn’t enough to offset lower residential demand.
RBC Capital analyst Ben Hendrix lowered the price target on Chemed to $640 from $674 while maintaining 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 commented.
The company noted that on June 20, VITAS received a Certificate of Need to begin operating in Pinellas County, Florida, which represents a significant opportunity for growth and Medicare Cap mitigation in 2026 and beyond.
Chemed will release its second quarter financial results on July 29, 2025, after market close.
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