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Text: Before we begin, let me remind you that the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 apply to this conference call.
In addition, management may also discuss non-GAAP operating performance results during today's call, including earnings before interest, taxes, depreciation and amortization or EBITDA and adjusted EBITDA.
Kevin McNamara, President and Chief Executive Officer of Chemed Corporation; Dave Williams, Executive Vice President and Chief Financial Officer of Chemed; and Nick Westfall President and Chief Executive Officer of Chemed's VITAS Healthcare Corporation subsidiary.
Sherri is retiring at the end of the year, and this is her last introduction to our quarterly conference call.
I will begin with highlights for the quarter.
And David and Nick will follow up with additional operating detail.
Our third quarter 2021 operating results released last night, reflect very solid performance for both VITAS and Roto-Rooter.
On a go-forward basis, I would like to share with you some of the macro issues we are dealing with as we approach the end of the second year of the pandemic.
For VITAS, the most important issue, we are managing labor.
Staffing of license professionals has been exceptionally challenging to ensure adequate mix of license healthcare workers on a market by market basis.
This is particularly challenging during the pandemic, as we deal with dynamic fluctuations in patient census in every market.
Turnover within our license staff remains above our pre-pandemic rates, but we are seeing indications of normalization, as we continue to expand our hiring and retention initiatives in many markets.
Beyond managing our staffing levels, we are observing increasing pressure on salaries and wages.
To date, we've managed these pressures with increased paid time off or PTO, we view it as inevitable that healthcare wages will increase if we continue to have a nationwide systemic imbalance in supply and demand for license healthcare professionals.
Fortunately, for VITAS and the hospice industry, there is a natural hedge against the inflationary pressures on costs, specifically labor.
The annual increase in the Medicare and Medicaid hospice reimbursement rates is based primarily on inflation in the hospital wage index basket, as measured by the federal government's Bureau of Labor Statistics.
Typically, the annual inflation measured as of March 31 is used to determine the following October 1 reimbursement increase.
This should give the hospice industry reasonable stability in operating margins in an inflationary environment, albeit with a six month lag from the inflation measurement to the actual reimbursement increase.
The second critical challenge for VITAS is the continued disruption to senior housing occupancy and the latest hospice referrals.
A recent admission data suggests senior housing is in the process of recovery pre-pandemic nursing home base patients represented 18% of our total average daily census or ADC.
The nursing of ADC ratio hit a low of 14.3% in the first quarter of 2021.
In the second quarter of 2021 nursing home base patients increased 60 basis points to 14.9%.
And then, the third quarter of 2021, our nursing home patients represented 15.6% of our total ABC.
Our updated 2021 guidance anticipates sequential improvement in senior housing base patients in the fourth quarter of 2021 with acceleration in senior housing admissions anticipated in 2022.
For Roto Rooter, our must significant challenge has been to increase manpower.
We've expanded technician manpower by 8% in 2021.
However, based on our current demand levels, we continue to remain understaffed in many of our markets.
Technician compensation plays a role in recruiting new employees as well as retention of our existing employee base.
Our average 2021 technician and field sales force compensation is over $81,000 per year.
Most of our technicians are paid out on a commission basis of revenue generated.
As a result, pricing for our services is a critical component in increasing technician wages.
We're anticipating passing to inflationary price increases in all our markets in the fourth quarter of this year.
Demand for plumbing, drain cleaning, excavation, and water restoration services remain at record levels.
I want to give additional color on the depth and breadth of this increase in demand.
Let's compare Q3 2021 revenue to Q3 2019.
Excluding the HSW acquisition, which was completed in September 2019, under this unit for unit comparison, residential services have experienced incredible growth.
In aggregate, residential branch revenue increased 46.2% over this two-year period.
On a service segment basis, residential plumbing revenue increased 37.1%; drain cleaning expanded 36%; excavation increased 65.6%; and water restoration increased 48.1%.
Commercial demand has been more challenging, however, commercial revenue has experienced a significant recovery since the 40% decline in commercial demand noted in April 2020.
Overall, commercial revenue declined 3.1% over this 2-year period.
On an individual service segment basis, commercial plumbing service declined 4.9%, drain cleaning expanded 1.8% excavation declined 10.2%, and water restoration increased 7%.
We anticipate continued strengthening in commercial demand in the fourth quarter of 2021, as well as throughout 2022.
Over the past 20 years, the country has faced 9/11, the Great Recession, and now a global pandemic.
In each of these crises, Roto-Rooter remained operating and materially increased market share revenue and operating margin.
Just as important, post-crisis, Roto-Rooter held on to these increases in revenue market share and margins.
Roto-Rooter is well positioned postpaid pandemic, and we anticipate continued expansion of market share, by pressing our core competitive advantages in terms of brand awareness, customer response time, 24-7 call centers and Internet presence.
With that, I would like to turn the teleconference over to David.
VITAS's net revenue was $317 million in the third quarter of 2021, which is a decline of 5.8% when compared to the prior year period.
This revenue decline is comprised primarily of a 5.3% decline in days of care, partially offset by a geographically weighted average Medicare reimbursement rate increase, including the suspension of sequestration of approximately 1.2%.
Our acuity mix shift had a net impact of reducing revenue approximately $3 million or nine-tenths of 1% in the quarter, when compared to the prior-year revenue and level of care mix.
The combination of Medicare Cap and other contra-revenue changes, negatively impacted revenue growth, an additional 80 basis points.
VITAS accrued $100,000 in Medicare Cap billing limitations in the quarter.
This compares to $4.1 million reversal of Medicare Cap billing limitations in the third quarter of 2020.
Of our 30 Medicare provider numbers, 27 of these provider numbers currently have a Medicare Cap cushion of 10% or greater.
One provider number has a cap cushion between 0% and 5%.
And two of our provider numbers have a fiscal 2021 Medicare Cap billing limitation liability.
Roto-Rooter, generated quarterly revenue of $221 million in the third quarter of 2021, which is an increase of $30.1 million or 15.7% when compared to the prior year quarter.
Roto-Rooter's branch residential revenue in the quarter totaled $151 million, which is an increase of $22.2 million or 17.2% over our prior year period.
This aggregate residential revenue growth consisted of drain cleaning, increasing 11.7%, plumbing expanding 17.4%, excavation increasing 14.1%, and water restoration increasing 28%.
Roto-Rooter branch commercial revenue in the quarter totaled $52.3 million, which is an increase of $4.7 million or 10% over the prior year.
The aggregate commercial revenue growth consisted of drain cleaning increasing 17.6%, plumbing increasing 9.3%, and commercial excavation declining 1.3%.
Water restoration also increased 9.4%.
Now, let's turn to Chemed on a consolidated basis.
During the quarter, we repurchased 350,000 shares of Chemed stock for $164 million, which equates to a cost per share of $467.80.
As of September 30 of 2021, there is approximately $148 million of remaining share repurchase authorization under this plan.
Chemed restarted its share repurchase program in 2007.
Since that time, Chemed has repurchased approximately 15.2 million shares, aggregating approximately $1.7 billion, at an average share cost of $113.04.
Including dividends over the same period, Chemed has returned approximately $1.9 billion to shareholders.
We have updated our full-year 2021 guidance as follows: VITAS was 2021 revenue, prior to Medicare Cap, is estimated to decline approximately 5% when compared to the prior year period.
Average daily census in 2021, is estimated to decline 5.5%.
In our full-year adjusted EBITDA margin, prior to Medicare Cap, is estimated to be 18.8%.
We're currently estimating $6.6 million for Medicare Cap billing limitations release calendar year 2021.
Roto-Rooter is forecasted to achieve full-year 2021 revenue growth of 17.3%.
Roto-Rooter's adjusted EBITDA margin for 2021 is estimated to be between 28.5% and 29%.
Based on the above full-year 2021 adjusted earnings per diluted share, excluding non-cash expense for stock options, tax benefits from stock option exercises, cost related to litigation and other discrete items, is estimated to be in the range of $19 to $19.20.
This compares to our initial 2021 adjusted earnings guidance per diluted share of $17 in $17.50.
This revised 2021 guidance assumes an effective corporate tax rate on adjusted earnings of 25.1%.
This compares to Chemed's 2020 reported adjusted earnings per diluted share of $18.8.
In the third quarter, our average daily census was 18,034 patients, a decline of 5% over the prior year and 0.2% increase when compared to the second quarter of 2021.
This year-over-year decline in average daily census is a direct result of pandemic related disruptions across the entire healthcare system since March of 2020.
Our hospital generated emissions have largely normalized to pre-pandemic levels.
Referrals from senior housing, specifically nursing homes and assisted-living facilities, continue to be disrupted.
During the third quarter, we've seen admission stabilization and pockets of improvement in senior housing admissions.
However, it remains too early to accurately project the pace and time line for senior housing admissions to fully return to pre-pandemic levels.
In the third quarter of 2021, total VITAS admissions were 17, 598.
This is a 1.9% decline when compared to the third quarter of 2020 admissions and a 4.5% sequential increase when compared to the second quarter of 2021.
In the third quarter, on a year-over-year basis, our hospital directed admissions declined 0.8%.
Total home-based pre-admit admissions decreased 8.3%, nursing home admits declined 0.2%, and assisted living facility admissions declined 8.6%.
When you compare our third quarter 2021 admissions to the second quarter of 2021, we generated solid sequential improvement with hospital directed admissions improving 2%, total home based pre-admit admissions increasing 16.3%, nursing home admits expanding 8.9%, and assisted living facility admissions increasing 5% sequentially.
Our average length of stay in the quarter was 96 days.
This compares to 97.1 days in the third quarter of 2020 and 94.5 days in the second quarter of 2021.
Our median length of stay was 13 days in the quarter and compares to 14 days in the third quarter of 2020, and is equal to the second quarter of 2021.
I will now open this teleconference to questions.

user
sees fy adjusted earnings per share $19.00 to $19.20 excluding items.

assistant