Chemed (NYSE:CHE) executives said the company’s fourth-quarter 2025 results came in below expectations at both VITAS Healthcare and Roto-Rooter, but management laid out steps it believes will improve performance through 2026, with a heavier earnings contribution expected in the second half of the year.
Management cites short-stay mix at VITAS and water restoration issues at Roto-Rooter
President and CEO Kevin McNamara told investors the fourth quarter “fell short of our expectations for both subsidiaries,” driven in part by VITAS admitting more hospital-based, short-stay patients than originally budgeted and by rising write-offs and marketing costs at Roto-Rooter.
Management emphasized that the hospital-admission strategy helped improve the Florida Medicare cap position, but also pressured revenue growth and margins because those patients tend to have shorter lengths of stay. In mid-January 2026, VITAS began shifting admissions back toward a more balanced mix between hospital and other pre-admission locations, a change management expects to show up primarily in the second half of 2026.
VITAS: modest revenue growth, margin pressure, and improving Medicare cap outlook
Chief Financial Officer Michael Witzeman reported VITAS net revenue of $418.8 million in the fourth quarter, up 1.9% year over year. The increase reflected a 1.3% rise in days of care and an approximate 2.2% geographically weighted average Medicare reimbursement rate increase. Witzeman said an acuity mix shift reduced revenue growth by 143 basis points versus the prior-year revenue and level-of-care mix, while Medicare cap and other contra-revenue changes reduced growth by about 20 basis points.
VITAS accrued a $2.4 million Medicare cap billing limitation in the quarter. Witzeman noted there was no Medicare cap billing limitation accrued for a Florida program in the fourth quarter. Average revenue per patient day was $288.01, up 86 basis points from the prior year, and high-acuity days of care were 2.2% of total days, down 32 basis points.
Adjusted EBITDA, excluding Medicare cap, totaled $91.6 million, down 1.7% year over year, and the adjusted EBITDA margin (excluding Medicare cap) was 21.7%, down 79 basis points. Witzeman attributed the margin decline to the impact of admitting more hospital-based short-stay patients.
VITAS CEO Joel Wherley said average daily census (ADC) rose 1.3% to 22,462 in the quarter. Hospital-directed admissions increased 9.9%, while home-based admissions rose 4.1% and assisted living facility admissions increased 5.6%; nursing home admissions declined 8.7%.
Wherley reported an average length of stay of 115.1 days, compared with 105.5 days in the prior-year quarter, and a median length of stay of 17 days, one day lower year over year. He said the Florida combined program’s Medicare cap billing limitation was less than $2 million at the end of the fourth quarter, and that as of the end of January 2026 there was no billing limitation in the Florida combined program.
Roto-Rooter: revenue declines, higher write-offs, and plans to centralize billing and collections
Roto-Rooter revenue declined 3.7% in the fourth quarter, with residential revenue down 3.1% and commercial revenue up 1.6%, according to McNamara.
Witzeman said branch residential revenue was $155.6 million, with plumbing up 6.3% and excavation essentially flat, offset by water restoration down 10.3% and drain cleaning down 3.2%. On the commercial side, branch commercial revenue was $55.2 million, with excavation up 10.9%, drain cleaning up 2%, and plumbing essentially flat, offset by a 20% decline in water restoration.
Executives focused on rising water restoration write-offs—described as implicit price concessions and credit memos—as a major issue. McNamara said those items increased $4 million, or 57%, in the fourth quarter versus the prior year. Witzeman added that write-offs moved from slightly below 3% of gross revenue historically to over 4.5% in the second half of 2025, driving an $11 million increase in write-offs for fiscal 2025 compared to 2024.
Witzeman attributed the change largely to increased insurance-company scrutiny of billed line items, which he said has been aided by artificial intelligence. He also said some branches became reluctant to bill for certain services as collection scrutiny increased, which management cited as a key factor behind the revenue decline in residential water restoration.
In response, Roto-Rooter is working to improve documentation through better technology use and is centralizing water restoration billing and collections, which were previously handled at the branch level. Witzeman said the financial benefit is expected mostly in the second half of 2026, while the first half may see “some duplication of costs” and technology investment that creates modest headwinds.
Roto-Rooter adjusted EBITDA in the quarter was $47.5 million, down 21.1% year over year. The adjusted EBITDA margin was 21.5%, a 477-basis-point decline from the fourth quarter of 2024, driven by higher marketing costs and higher water restoration write-offs.
2026 guidance: second-half weighted improvement and share repurchases
For 2026, Witzeman guided to VITAS revenue (prior to Medicare cap) growth of 5.5% to 6.5% versus 2025, with ADC expected to increase 3.5% to 4%. Full-year EBITDA margin (prior to Medicare cap) is projected at 17.5% to 18%. Medicare cap billing limitations are estimated at $9.5 million in calendar 2026, compared with $27.2 million in calendar 2025, with the 2026 estimate including no limitations related to the Florida combined program.
Roto-Rooter is forecast to deliver 2026 revenue growth of 3% to 3.5% and an adjusted EBITDA margin of 22.5% to 23%. Witzeman said the outlook assumes improved lead volume, better billing and collections in water restoration, and growth in commercial business supported by a commercial-focused sales force.
Chemed’s 2026 adjusted earnings per diluted share is projected at $23.25 to $24.25, compared with 2025 adjusted EPS of $21.55. The guidance assumes a 24.5% effective corporate tax rate on adjusted earnings and a diluted share count of 13.9 million. Witzeman emphasized that the earnings trajectory is “weighted towards the second half of the year,” with 55% of consolidated adjusted net income and adjusted EBITDA (prior to Medicare cap) expected in the back half.
During the quarter, Chemed repurchased 400,000 shares at an average price of $436.39. Witzeman said that since the beginning of the repurchase program, the company has returned over $2.9 billion to shareholders through repurchases at an average cost of about $167 per share.
Call highlights: lead dynamics and Medicare cap discussion
In the Q&A, management expanded on its confidence in Roto-Rooter’s 2026 revenue growth outlook, citing three drivers: improving lead trends, expansion of the commercial sales effort, and partial recovery from the 2025 spike in water restoration write-offs. Witzeman said the company estimates it can recover about half of the $11 million write-off increase in 2026, which he described as a roughly $5.5 million tailwind.
McNamara also discussed the shift from “free leads” from natural search to paid leads, tying the change to evolving search-engine dynamics. He said total leads were flat in the fourth quarter, with paid leads up about 9.4% offset by declines in natural leads, and noted the company has engaged a new third-party search engine optimization provider.
On VITAS Medicare cap risk beyond Florida, Witzeman said the projected 2026 cap amount is “comprised of California mainly,” and management characterized other potential cap exposure as small and often tied to smaller programs that can move in and out of cap early in the Medicare cap year. Wherley said VITAS is applying strategies used in Florida across other markets and expressed no additional concerns about major programs.
Closing the call, McNamara acknowledged the magnitude of the fourth-quarter miss and said management is focused on meeting the new guidance, adding that the company has “abundant confidence” in the 2026 outlook.
About Chemed (NYSE:CHE)
Chemed Corporation is a diversified provider of essential home services and healthcare solutions in the United States. Headquartered in Cincinnati, Ohio, the company operates through two principal business segments—Roto-Rooter and Vitas Healthcare. Since its founding in 1974, Chemed has built a reputation for reliability and expertise, serving both residential and commercial customers across a broad range of markets.
The Roto-Rooter segment offers a comprehensive suite of plumbing, drain cleaning and water restoration services.
