CHEMED CORP

Current report

Significant Tariffs Could Increase Costs, Decrease Margin, and Materially Adversely Affect the Business.

Current report

Both Roto-Rooter’s and VITAS’s primary businesses are the provision of services within the United States. Accordingly, they are likely to be less affected by the impact of specific or wide-ranging tariffs than many other entities in the United States and Global economies. However, significant tariffs on certain products, such as steel for Roto-Rooter’s cabling machines and pharmaceuticals utilized by VITAS, could materially increase the costs of Roto-Rooter and VITAS. Additionally, because our service businesses heavily rely on delivering service to customers or patients in their residences, increases in the costs of vehicle acquisition, maintenance, repair, and reimbursement for employees’ use of personal vehicles, could have a significant increase on our expenses.

Current report

These additional costs, in the case of VITAS, cannot be passed along to our patients because of the structure of hospice reimbursement, and in the case of Roto-Rooter, may not be able to be fully passed along to our customers. These additional costs could materially adversely affect our margins.

Current report

To the extent that tariffs cause any adverse impacts on global supply chains, it could further materially affect the ability of both businesses to timely source critical supplies, which may affect our delivery of services.

Current report

If, as a result of tariffs, the United States’ economy experiences a recession or other economic slowdown, the demand for Roto-Rooter’s non-emergency services may decline materially.

Previous report

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.

Previous report

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.

Previous report

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.