CHEMED CORP

On October 4, 2024, CMS released a memo outlining the hospice Special Focus Program (“SFP”) criteria, and announcing that in November 2024, they would select the 50 hospices for participation in the SFP during the next calendar year.

As we disclosed in our Annual Report on form 10-K, filed February 29,2024, the SFP is intended to identify “poor performing” hospices based on a number of indicators. Under an algorithm that it has developed for the SFP, CMS will identify the bottom 10% of performers and provide additional oversight over the lowest 1% of performers to assist the programs with “continuous improvement.” It is possible that certain VITAS hospice locations are included in the hospices that the algorithm identifies within the bottom 10% or even bottom 1% of hospices, and therefore selected for the SFP. Although CMS has stated that providers will not be able to replicate the results of the algorithm because not all information utilized by CMS has been made public, given what is known, large providers appear to be significantly more likely to be identified as poor performers because the formula does not account for size of program when analyzing the number of substantiated complaints. Additionally, providers who submit Consumer Assessment of Healthcare Providers and Systems (“CAHPS”) scores (as VITAS does) appear to be more likely to be identified as poor performers.

Although there are no direct financial fines, fees, or other penalties or operational changes imposed due to selection in the SFP, the selection of one or more of VITAS programs in the SFP could have a material adverse effect on VITAS due to adverse effects on VITAS’ brand reputation and patient referral patterns. Additionally, participation in the SFP could materially increase costs of regulatory compliance for the programs selected to participate in the SFP due to additional government oversight and intervention in that program.

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There have been no other material changes from the risk factors previously disclosed in the Company’s most recent Annual Report on Form 10-K.