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Article by DailyStocks_admin    (07-11-08 06:22 AM)

The Daily Magic Formula Stock for 07/11/2008 is Chemed Corp. According to the Magic Formula Investing Web Site, the ebit yield is 11% and the EBIT ROIC is >100 %.

Dailystocks.com only deals with facts, not biased journalism. What is a better way than to go to the SEC Filings? It's not exciting reading, but it makes you money. We cut and paste the important information from SEC filings for you to get started on your research on a specific company.

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The Company was incorporated in Delaware in 1970 as a subsidiary of W. R. Grace & Co. and succeeded to the business of W. R. Grace & Co.’s Specialty Products Group as of April 30, 1971 and remained a subsidiary of W. R. Grace & Co. until March 10, 1982. As used herein, “Company” refers to Chemed Corporation, and its subsidiaries and “Grace” refers to W. R. Grace & Co. and its subsidiaries.
On March 10, 1982, the Company transferred to Dearborn Chemical Company, a wholly owned subsidiary of the Company, the business and assets of the Company’s Dearborn Group, including the stock of certain subsidiaries within the Dearborn Group, plus $185 million in cash, and Dearborn Chemical Company assumed the Dearborn Group’s liabilities. Thereafter, on March 10, 1982 the Company transferred all of the stock of Dearborn Chemical Company to Grace in exchange for 33,481,604 shares of the capital stock of the Company owned by Grace with the result that Grace no longer has any ownership interest in the Company.
On December 31, 1986, the Company completed the sale of substantially all of the business and assets of Vestal Laboratories, Inc., a wholly owned subsidiary. The Company received cash payments aggregating approximately $67.4 million over the four-year period following the closing, the substantial portion of which was received on December 31, 1986.
On April 2, 1991, the Company completed the sale of DuBois Chemicals, Inc. (“DuBois”), a wholly owned subsidiary, to the Diversey Corporation (“Diversey”), then a subsidiary of The Molson Companies Ltd. Under terms of the sale, Diversey agreed to pay the Company net cash payments aggregating $223,386,000, including deferred payments aggregating $32,432,000.
On December 21, 1992, the Company acquired The Veratex Corporation and related businesses (“Veratex Group”) from Omnicare, Inc. The purchase price was $62,120,000 in cash paid at closing, plus a post-closing payment of $1,514,000 (paid in April 1993) based on the net assets of Veratex.
Effective January 1, 1994, the Company acquired all the capital stock of Patient Care, Inc. (“Patient Care”), for cash payments aggregating $20,582,000, plus 35,000 shares of the Company’s Capital Stock. An additional cash payment of $1,000,000 was made on March 31, 1996 and another payment of $1,000,000 was made on March 31, 1997.
In July 1995, the Company’s Omnia Group (formerly Veratex Group) completed the sale of the business and assets of its Veratex Retail division to Henry Schein, Inc. (“HSI”) for $10 million in cash plus a $4.1 million note for which payment was received in December 1995.
Effective September 17, 1996 the Company completed a merger of a subsidiary of the Company, Chemed Acquisition Corp., and Roto-Rooter, Inc. pursuant to a Tender Offer commenced on August 8, 1996 to acquire any and all of the outstanding shares of Common Stock of Roto-Rooter, Inc. for $41.00 per share in cash.
On September 24, 1997 the Company completed the sale of its wholly owned business comprising the Omnia Group to Banta Corporation for $50 million in cash and $2.3 million in deferred payments.
Effective September 30,1997, the Company completed a merger between its 81-percent-owned subsidiary, National Sanitary Supply Company, and a wholly owned subsidiary of Unisource Worldwide, Inc. for $21.00 per share, with total payments of $138.3 million.
Effective October 11, 2002, the Company sold its Patient Care subsidiary (“Patient Care”) to an investor group that included Schroder Ventures Life Sciences Group, Oak Investment Partners, Prospect Partners and Salix Ventures. The cash proceeds to the Company totaled $57,500,000, of which $5,000,000 was placed in escrow pending settlement of Patient Care’s receivables with third-party payers. Of this amount, $2,500,000 was distributed as of October 2003, $1,730,958 was distributed as of November 2004 and the remainder was distributed as of October 2006. In addition, the Company received a senior subordinated note receivable (“Note”) for $12,500,000 and a common stock purchase warrant (“Warrant”) for 2% of the outstanding stock of the purchasing company. The Note was due October 11, 2007, and bore interest at the annual rate of 7.5% through September 30, 2004, 8.5% from October 1,2004, through September 30, 2005, and 9.5% thereafter. This sale was the subject of litigation which settled in October 2006. We agreed to forgive $1.2 million of post-closing balance sheet valuation adjustments and convert the remainder into debt secured by a $2.2 million promissory note with the same terms as the $12.5 million Note. As part of the settlement, we also recorded a pretax impairment charge of $1.4 million related to the Warrant. In December 2007 we amended the terms of both notes. We agreed to waive the prepayment penalties if Patient Care paid $5 million of principal on or before December 31, 2007 and the remainder on or before March 31, 2008. They paid us $5 million of principal on December 31, 2007 and an additional $5.7 million in principal in January and February 2008.
Effective February 24, 2004, the Company completed a merger of its wholly owned indirect subsidiary, Marlin Merger Corp., and Vitas Healthcare Corporation. Under the terms of the merger agreement, Vitas stockholders received cash of $30.00 per share. The transaction, including the refinancing of existing Vitas debt and other payments made in connection with the merger, totaled approximately $415 million in cash. In order to complete the merger the Company sold four million shares of its Capital Stock in a private placement at a price of $25.00 per share, issued $110 million principal amount of floating rate senior secured notes due 2010 (“Floating Rate Notes”), issued $150 million principal amount of 8.75% Senior Notes due 2011 (“Fixed Rate Notes”), and entered into new $135 million senior secured credit facilities. These obligations were refinanced in 2005, 2006 and 2007.
On December 22, 2004, the Board of Directors authorized the discontinuance of the operations of the Company’s Service America segment, through an asset sale to the employees of Service America. The acquiring corporation purchased a substantial majority of Service America’s assets in exchange for assuming substantially all of Service America’s liabilities in May 2005. Included in the assets acquired was a receivable from the Company for approximately $4.7 million. The Company paid $1 million of the receivable upon closing and the remainder was paid over the following year in 11 equal monthly installments.
During 2007 the Company conducted its business operations in two segments: Vitas Group (“Vitas”) and the Roto-Rooter Group (“Roto-Rooter”).
Forward Looking Statements
This Annual Report contains or incorporates by reference certain forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The Company intends such statements to be subject to the safe harbors created by that legislation. Such statements involve risks and uncertainties that could cause actual results of operations to differ materially from these forward looking statements.
Financial Information about Industry Segments
The required segment and geographic data for the Company’s continuing operations (as described below) for three years ended December 31, 2005, 2006 and 2007 are shown in Note 4 of the Notes to Consolidated Financial Statements on pages 17-19 of the 2007 Annual Report to Stockholders and are incorporated herein by reference.

Description of Business by Segment
The information called for by this item is included within Note 4 of the Notes to Consolidated Financial Statements appearing on pages 17-19 of the 2007 Annual Report to Stockholders is incorporated herein by reference.
Product and Market Development
Each segment of the Company’s business engages in a continuing program for the development and marketing of new services and products. While new products and services and new market development are important factors for the growth of each active segment of the Company’s business, the Company does not expect that any new products and services or marketing effort, including those in the development stage, will require the investment of a material amount of the Company’s assets.
Raw Materials
The principal raw materials needed for the Company’s manufacturing operations are purchased from United States sources. Product sales from goods manufactured by Roto-Rooter represent less than 2% of Chemed’s total service revenues and sales. No segment of the Company experienced any material raw material shortages during 2007, although such shortages may occur in the future. Products manufactured and sold by the Company’s Roto-Rooter segment generally may be reformulated to avoid the adverse impact of specific raw material shortage.
Patents, Service Marks and Licenses
The Roto-Rooter â trademarks and service marks have been used and advertised since 1935 by Roto-Rooter Corporation, a wholly owned indirect subsidiary of the Company. The Roto-Rooter â marks are among the most highly recognized trademarks and service marks in the United States. The Company considers the Roto-Rooter â marks to be a valuable asset and a significant factor in the marketing of Roto-Rooter’s franchises, products and services and the products and services provided by its franchises.
“Vitas” and “Innovative Hospice Care” are trademarks and servicemarks of Vitas Healthcare Corporation. The Company and its subsidiaries also own certain trade secrets including training manuals, pricing information, customer information and software source codes.

Vitas also competes with a number of national and regional hospice providers, including Odyssey Healthcare, Inc. and VistaCare Inc., hospitals, nursing homes, home health agencies and other health care providers. Many providers offer home care to patients who are terminally ill, and some actively market palliative care and hospice-like programs. In addition, various health care companies have diversified into the hospice market. Some of these health care companies have greater financial resources than Vitas.
Relatively few barriers to entry exist in the majority of markets served by Vitas. Accordingly, other companies that are not currently providing hospice care may enter these markets and expand the variety of services offered.
Research and Development
The Company engages in a continuous program directed toward the development of new services, products and processes, the improvement of existing services, products and processes, and the development of new and different uses of existing products. The research and development expenditures from continuing operations have not been nor are they expected to be material.
Government Regulations
Roto-Rooter’s franchising activities are subject to various federal and state franchising laws and regulations, including the rules and regulations of the Federal Trade Commission (the “FTC”) regarding the offering or sale of franchises. The rules and regulations of the FTC require that Roto-Rooter provide all the prospective franchises with specific information regarding the franchise program and Roto-Rooter in the form of a detailed franchise offering circular. In addition, a number of states require Roto-Rooter to register its franchise offering prior to offering or selling franchises in the state. Various state laws also provide for certain rights in favor of franchisees, including (i) limitations on the franchisor’s ability to terminate a franchise except for good cause, (ii) restrictions on the franchisor’s ability to deny renewal of a franchise, (iii) circumstances under which the franchisor may be required to purchase certain inventory of franchisees when a franchise is terminated or not renewed in violation of such laws, and (iv) provisions relating to arbitration. Roto-Rooter’s ability to engage in the plumbing repair business is also subject to certain limitations and restrictions imposed by state and local licensing laws and regulations.
General. The health care industry and Vitas’ hospice programs are subject to extensive federal and state regulation. Vitas’ hospices are licensed as required under state law as either hospices or home health agencies, or both, depending on the regulatory requirements of each particular state. In addition, Vitas’ hospices are required to meet certain conditions of participation to be eligible to receive payments as hospices under Medicare and Medicaid programs. All of Vitas’ hospices, other than those currently in development, are certified for participation as hospices in the Medicare program, and are also eligible to receive payments as hospices from the Medicaid program in each of the states in which Vitas operates. Vitas’ hospices are subject to periodic survey by governmental authorities or private accrediting entities to assure compliance with state licensing, certification and accreditation requirements, as the case may be.
Medicare Conditions of Participation. Federal regulations require that a hospice program satisfy certain conditions of participation to be certified and receive Medicare payment for the services it provides. Failure to comply with the conditions of participation may result in sanctions, up to and including decertification from the Medicare program. See “ Surveys and Audits ” below.

The Medicare conditions of participation for hospice programs include the following:
Governing Body . Each hospice must have a governing body that assumes full responsibility for the policies and the overall operation of the hospice and for ensuring that all services are provided in a manner consistent with accepted standards of practice. The governing body must designate one individual who is responsible for the day-to-day management of the hospice.
Medical Director . Each hospice must have a medical director who is a physician and who assumes responsibility for overseeing the medical component of the hospice’s patient care program.
Direct Provision of Core Services . Medicare limits those services for which the hospice may use individual independent contractors or contract agencies to provide care to patients. Specifically, substantially all nursing, social work, and counseling services must be provided directly by hospice employees meeting specific educational and professional standards. During periods of peak patient loads or under extraordinary circumstances, the hospice may be permitted to use contract workers, but the hospice must agree in writing to maintain professional, financial and administrative responsibility for the services provided by those individuals or entities.
Professional Management of Non-Core Services. A hospice may arrange to have non-core services such as therapy services, home health aide services, medical supplies or drugs provided by a non-employee or outside entity. If the hospice elects to use an independent contractor to provide non-core services, however, the hospice must retain professional management responsibility for the arranged services and ensure that the services are furnished in a safe and effective manner by qualified personnel, and in accordance with the patient’s plan of care.
Plan of Care . The patient’s attending physician, the medical director or the designated hospice physician, and interdisciplinary team must establish an individualized written plan of care prior to providing care to any hospice patient. The plan must assess the patient’s needs and identify services to be provided to meet those needs and must be reviewed and updated at specified intervals.
Continuation of Care . A hospice may not discontinue or reduce care provided to a Medicare beneficiary if the individual becomes unable to pay for that care.
Informed Consent . The hospice must obtain the informed consent of the hospice patient, or the patient’s legal representative, that specifies the type of care services that may be provided as hospice care.
Training . A hospice must provide ongoing training for its employees.
Quality Assurance. A hospice must conduct ongoing and comprehensive self-assessments of the quality and appropriateness of care it provides and that its contractors provide under arrangements to hospice patients.
Interdisciplinary Team . A hospice must designate an interdisciplinary team to provide or supervise hospice care services. The interdisciplinary team develops and updates plans of care, and establishes policies governing the day-to-day provision of hospice services. The team must include at least a physician, registered nurse, social worker and spiritual or other counselor. A registered nurse must be designated to coordinate the plan of care.
Volunteers. Hospice programs are required to recruit and train volunteers to provide patient care services or administrative services. Volunteer services must be provided in an amount equal to at least five percent of the total patient care hours provided by all paid hospice employees and contract staff.

Licensure . Each hospice and all hospice personnel must be licensed, certified or registered in accordance with applicable federal, state and local laws and regulations.
Central Clinical Records . Hospice programs must maintain clinical records for each hospice patient that are organized in such a way that they may be easily retrieved. The clinical records must be complete and accurate and protected against loss, destruction, and unauthorized use.
Surveys and Audits . Hospice programs are subject to periodic survey by federal and state regulatory authorities and private accrediting entities to ensure compliance with applicable licensing and certification requirements and accreditation standards. Regulators conduct periodic surveys of hospice programs and provide reports containing statements of deficiencies for alleged failure to comply with various regulatory requirements. Survey reports and statements of deficiencies are common in the healthcare industry. In most cases, the hospice program and regulatory authorities will agree upon any steps to be taken to bring the hospice into compliance with applicable regulatory requirements. In some cases, however, a state or federal regulatory authority may take a number of adverse actions against a hospice program, including the imposition of fines, temporary suspension of admission of new patients to the hospice’s service or, in extreme circumstances, decertification from participation in the Medicare or Medicaid programs or revocation of the hospice’s license.
From time to time Vitas receives survey reports containing statements of deficiencies. Vitas reviews such reports and takes appropriate corrective action. Vitas believes that its hospices are in material compliance with applicable licensure and certification requirements. If a Vitas hospice were found to be out of compliance and actions were taken against a Vitas hospice, they could materially adversely affect the hospice’s ability to continue to operate, to provide certain services and to participate in the Medicare and Medicaid programs, which could materially adversely affect Vitas.
Billing Audits/ Claims Reviews . The Medicare program and its fiscal intermediaries and other payors periodically conduct pre-payment or post-payment reviews and other reviews and audits of health care claims, including hospice claims. There is pressure from state and federal governments and other payors to scrutinize health care claims to determine their validity and appropriateness. In order to conduct these reviews, the payor requests documentation from Vitas and then reviews that documentation to determine compliance with applicable rules and regulations, including the eligibility of patients to receive hospice benefits, the appropriateness of the care provided to those patients and the documentation of that care. During the past several years, Vitas’ claims have been subject to review and audit.
Certificate of Need Laws and Other Restrictions . Some states, including Florida, have certificate of need or similar health planning laws that apply to hospice care providers. These states may require some form of state agency review or approval prior to opening a new hospice program, to adding or expanding hospice services, to undertaking significant capital expenditures or under other specified circumstances. Approval under these certificate of need laws is generally conditioned on the showing of a demonstrable need for services in the community. Vitas may seek to develop, acquire or expand hospice programs in states having certificate of need laws. To the extent that state agencies require Vitas to obtain a certificate of need or other similar approvals to expand services at existing hospice programs or to make acquisitions or develop hospice programs in new or existing geographic markets, Vitas’ plans could be adversely affected by a failure to obtain such certificate or approval. In addition, competitors may seek administratively or judicially to challenge such an approval or proposed approval by the state agency. Such a challenge, whether or not ultimately successful, could adversely affect Vitas.
Limitations on For-Profit Ownership. A few states have laws that restrict the development and expansion of for-profit hospice programs. For example, in New York, a hospice generally cannot be owned by a corporation that has another corporation as a stockholder. These types of restrictions could affect Vitas’ ability to expand into New York, or in other jurisdictions with similar restrictions.

Limits on the Acquisition or Conversion of Non-Profit Health Care Organizations. An increasing number of states have enacted laws that restrict the ability of for-profit entities to acquire or otherwise assume the operations of a non-profit health care provider. Some states may require government review, public hearings, and/or government approval of transactions in which a for-profit entity proposes to purchase certain non-profit healthcare organizations. Heightened scrutiny of these transactions may significantly increase the costs associated with future acquisitions of non-profit hospice programs in some states, otherwise increase the difficulty in completing those acquisitions or prevent them entirely. Vitas cannot assure that it will not encounter regulatory or governmental obstacles in connection with any proposed acquisition of non-profit hospice programs in the future.
Professional Licensure and Participation Agreements . Many hospice employees are subject to federal and state laws and regulations governing the ethics and practice of their profession, including physicians, physical, speech and occupational therapists, social workers, home health aides, pharmacists and nurses. In addition, those professionals who are eligible to participate in the Medicare, Medicaid or other federal health care programs as individuals must not have been excluded from participation in those programs at any time.
State Licensure of Hospice . Each of Vitas’ hospices must be licensed in the state in which it operates. State licensure rules and regulations require that Vitas’ hospices maintain certain standards and meet certain requirements, which may vary from state to state. Vitas believes that its hospices are in material compliance with applicable licensure requirements. If a Vitas hospice were found to be out of compliance and actions were taken against a Vitas hospice, they could materially adversely affect the hospice’s ability to continue to operate, to provide certain services and to participate in the Medicare and Medicaid programs, which could materially adversely affect Vitas.
Overview of Government Payments—General . Over 90% of Vitas’ revenue consisted of payments from the Medicare and Medicaid programs. Such payments are made primarily on a “per diem” basis. Under the per diem reimbursement methodology, Vitas is essentially at risk for the cost of eligible services provided to hospice patients. Profitability is therefore largely dependent upon Vitas’ ability to manage the costs of providing hospice services to patients. Increases in operating costs, such as labor and supply costs that are subject to inflation and other increases, without a compensating increase in Medicare and Medicaid rates, could have a material adverse effect on Vitas’ business in the future. The Medicare and Medicaid programs are increasing pressure to control health care costs and to decrease or limit increases in reimbursement rates for health care services. As with most government programs, the Medicare and Medicaid programs are subject to statutory and regulatory changes, possible retroactive and prospective rate and payment adjustments, administrative rulings, freezes and funding reductions, all of which may adversely affect the level of program payments and could have a material adverse effect on Vitas’ business. Vitas’ levels of revenues and profitability will be subject to the effect of legislative and regulatory changes, including possible reductions in coverage or payment rates, or changes in methods of payment, by the Medicare and Medicaid programs.
Overview of Government Payments – Medicare
Medicare Eligibility Criteria . To receive Medicare payment for hospice services, the hospice medical director and, if the patient has one, the patient’s attending physician, must certify that the patient has a life expectancy of six months or less if the illness runs its normal course. This determination is made based on the physician’s clinical judgement. Due to the uncertainty of such prognoses, however, it is likely and expected that some percentage of hospice patients will not die within six months of entering a hospice program. The Medicare program (among other third-party payers) recognizes that terminal illnesses often do not follow an entirely predictable course, and therefore the hospice benefit remains available to beneficiaries so long as the hospice physician or the patient’s attending physician continues to certify that the patient’s life expectancy remains six months or less. Specifically, the Medicare hospice benefit provides for two initial 90-day benefit periods followed by an unlimited number of 60-day periods. In order to qualify for hospice care, a Medicare beneficiary must elect hospice care and waive any right to other Medicare benefits related to his or her terminal illness. A Medicare beneficiary may revoke his or her election of the Medicare hospice benefit at any time and resume receiving regular Medicare benefits. The patient may elect the hospice benefit again at a later date so long as he or she remains eligible. Increased regulatory scrutiny of compliance with the Medicare six-month eligibility rule has impacted the hospice industry. The Medicare program, however, has reaffirmed that Medicare hospice beneficiaries are not limited to six months of coverage and that there is no limit on how long a Medicare beneficiary can continue to receive hospice benefits and services, provided that the beneficiary continues to meet the eligibility criteria under the Medicare hospice program.
Levels of Care . Medicare pays for hospice services on a prospective payment system basis under which Vitas receives an established payment rate for each day that it provides hospice services to a Medicare beneficiary. These rates are subject to annual adjustments for inflation and vary based upon the geographic location where the services are provided. The rate Vitas receives depends on which of the following four levels of care is being provided to the beneficiary:
Routine Home Care . The routine home care rate is paid for each day that a patient is in a hospice program and is not receiving one of the other categories of hospice care. The routine home care rate does not vary based upon the volume or intensity of services provided by the hospice program.
General Inpatient Care . The general inpatient care rate is paid when a patient requires inpatient services for a short period for pain control or symptom management which cannot be managed in other settings. General inpatient care services must be provided in a Medicare or Medicaid certified hospital or long-term care facility or at a freestanding inpatient hospice facility with the required registered nurse staffing.
Continuous Home Care. Continuous home care is provided to patients while at home, during periods of crisis when intensive monitoring and care, primarily nursing care, is required in order to achieve palliation or management of acute medical symptoms. Continuous home care requires a minimum of 8 hours of care within a 24-hour day, which begins and ends at midnight. The care must be predominantly nursing care provided by either a registered nurse or licensed practical nurse. While the published Medicare continuous home care rates are daily rates, Medicare actually pays for continuous home care services on an hourly basis. This hourly rate is calculated by dividing the daily rate by 24.
Respite Care . Respite care permits a hospice patient to receive services on an inpatient basis for a short period of time in order to provide relief for the patient’s family or other caregivers from the demands of caring for the patient. A hospice can receive payment for respite care for a given patient for up to five consecutive days at a time, after which respite care is reimbursed at the routine home care rate.
Medicare Payment for Physician Services. Payment for direct patient care physician services delivered by hospice physicians is billed separately by the hospice to the Medicare intermediary and paid at the lesser of the actual charge or the Medicare allowable charge for these services. This payment is in addition to the daily rates Vitas receives for hospice care. Payment for hospice physicians’ administrative and general supervisory activities is included in the daily rates discussed above. Payments for attending physician professional services (other than services furnished by hospice physicians) are not paid to the hospice, but rather are paid directly to the attending physician by the Medicare intermediary. For fiscal 2007, 1.7% of Vitas’ net revenue was attributable to physician services.
Medicare Limits on Hospice Care Payments . Medicare payments for hospice services are subject to two additional limits or “caps”. Each of Vitas’ hospice programs is separately subject to both of these “caps”. Both of these “caps” are determined on an annual basis for the period running from November 1 through October 31 of each year.
First, under a Medicare rule known as the “80-20” rule applicable to the Medicare inpatient services, if the number of inpatient care days furnished by a hospice to Medicare beneficiaries exceeds 20% of the total days of hospice care furnished by such hospice to Medicare beneficiaries, Medicare payments to the hospice for inpatient care days exceeding the cap are reduced to the routine home care rate. Vitas has never exceeded the inpatient cap.
Second, Medicare payments to a hospice are also subject to a separate cap based on overall average payments per admission. Any payments exceeding this overall hospice cap must be refunded by the hospice. This cap was set at $21,410.04 per admission for the twelve-month period ended on October 31, 2007, and is adjusted annually to account for inflation. Vitas’ hospices may be subject to future payment reductions or recoupments as the result of this cap. As of December 31, 2007 we recorded no cap liability for the 2007 or 2008 measurement periods.
Medicare Managed Care Programs . The Medicare program has entered into contracts with managed care companies to provide managed care benefits to Medicare beneficiaries who elect to participate in managed care programs. These managed care programs are commonly referred to as Medicare HMOs, Medicare + Choice or Medicare risk products. Vitas provides hospice care to Medicare beneficiaries who participate in these managed care programs, and Vitas is paid for services provided to these beneficiaries in the same way and at the same rates as those of other Medicare beneficiaries who are not in a Medicare managed care program. Under current Medicare policy, Medicare pays the hospice directly for services provided to these managed care program participants and then reduces the standard per-member, per-month payment that the managed care program otherwise receives.


Mr. Hutton is Chairman of the Board of the Company and has held this position since May 2004. In May 2004, the Company amended its By- Laws to create the non-executive position of Chairman of the Board. Prior to May 2004, Mr. Hutton served in an executive position as Chairman of the Company from November 1993. Previously, from 1970 to May 2001, he also served the Company as Chief Executive Officer, and from 1970 to November 1993, he served the Company as President. Mr. Hutton also holds the honorary post of Chairman Emeritus, having served until February 2008 as the Chairman of the Board of Directors, of Omnicare, Inc., Covington, Kentucky (healthcare products and services), (hereinafter “Omnicare”). Mr. Hutton is the father of Thomas C. Hutton, a Vice President and a director of the Company.

Mr. McNamara is President and Chief Executive Officer of the Company and has held these positions since August 1994 and May 2001, respectively. Previously, he served as Executive Vice President, Secretary and General Counsel from November 1993, August 1986 and August 1986, respectively, to August 1994.

Mr. Gemunder is President and Chief Executive Officer of Omnicare and has held these positions since May 1981 and May 2001, respectively. He is also a director of Omnicare and Ultratech Stepper, Inc.

Mr. Grace is President of MLP Capital, Inc., an investment holding company which has had several real estate and mining interests in the southeastern United States. He has held that position since March 1996. From January 2002 to August 2002, he was also President and Chief Executive Officer of Kingdom Group, LLC (“Kingdom”), New York, New York (a provider of turnkey compressed natural gas fueling systems), which filed for bankruptcy January 2002, and he was Executive Vice President of Kingdom from August 1999 to December 2000.

Mr. Hutton is a Vice President of the Company and has held this position since February 1988. He is a son of Edward L. Hutton, Chairman of the Board and a director of the Company.

Mr. Krebs retired as Senior Vice President-Finance, Chief Financial Officer and Treasurer of Service America Systems, Inc., a former wholly-owned subsidiary of the Company (“Service America”), in July 1999, having held the position since October 1997. Previously, he was a Director- Financial Services of DiverseyLever, Inc. (formerly known as Diversey Corporation), Detroit, Michigan (specialty chemicals) (“Diversey”) from April 1991 to April 1996. Previously, from January 1990 to April 1991, he was Senior Vice President and the Chief Financial Officer of the Company’s then-wholly-owned subsidiary, DuBois Chemicals, Inc. (“DuBois”).

Ms. Laney is Chairman and CEO of Cadre Computer Resources Co., Cincinnati, Ohio (information security) and has held this position since August 21, 2001. Ms. Laney retired as an Executive Vice President and the Chief Administrative Officer of the Company on March 1, 2003, having held these positions since May 2001 and May 1991, respectively. Previously, from November 1993 until May 2001, she held the position of Senior Vice President of the Company. She is a director of Omnicare.

Ms. Lindell is Dean and a Professor of the College of Nursing at the University of Cincinnati, a position she has held since December 1990. Ms. Lindell is also Associate Senior Vice President of the Medical Center at the University of Cincinnati, a position she has held since July 1998. From September 1994 to June 2002, she also held an additional position as Interim Dean of the College of Allied Health Sciences at the University of Cincinnati. She is a director of Omnicare.

Mr. O’Toole is an Executive Vice President of the Company and has held this position since May 1992. He is Chief Executive Officer of Vitas Healthcare Corporation (“Vitas”), a wholly-owned subsidiary of the Company, and has held this position since February 2004. Previously, from May 1992 to February 2004, he also served the Company as Treasurer.

Mr. Saunders is Visiting Executive Professor at the Farmer School of Business, Miami University, Oxford, Ohio, and has held this position since August 2001. Mr. Saunders retired as President of DuBois, then a division of DiverseyLever, Inc., Detroit, Michigan (specialty chemicals), in October 2000, having held that position since November 1993.

Mr. Walsh is a partner with the law firm of Thompson Hine LLP, New York, New York, and has held this position since January 1979.

Mr. Wood is President and Chief Executive Officer of Secret Communications, LLC, Cincinnati, Ohio (owner and operator of radio stations) and has held this position since 1994. He is also co-founder and principal of The Darwin Group, Cincinnati, Ohio (venture capital firm specializing in second-stage investments) and has held this position since 1998. Since 2000, he has also served as chairman of 8e6 Technologies Corporation, Orange, California (developer of Internet filtering software). He is also a director of Tribune Company.


Executive Summary
We operate through our two wholly owned subsidiaries, VITAS Healthcare Corporation and Roto-Rooter Group, Inc. VITAS focuses on hospice care that helps make terminally ill patients’ final days as comfortable as possible. Through its team of doctors, nurses, home health aides, social workers, clergy and volunteers, VITAS provides direct medical services to patients, as well as spiritual and emotional counseling to both patients and their families. Roto-Rooter’s services are focused on providing plumbing and drain cleaning services to both residential and commercial customers. Through its network of company-owned branches, independent contractors and franchisees, Roto-Rooter offers plumbing and drain cleaning service to over 90% of the U.S. population.

The increase in consolidated service revenues and sales was driven by an 8% increase at VITAS while Roto-Rooter was essentially flat. The increase at VITAS was primarily the result of a 3.4% increase in average daily census (ADC) from the first quarter of 2007, the October 1, 2007 Medicare reimbursement rate increase of approximately 3% and a slight mix shift to higher acuity days of care. Roto-Rooter was driven by a 7% decrease in job count offset with an approximate 7.8% price and mix shift increase. Consolidated net income increased at a slower rate than the increase in revenues due mainly to increased admissions and direct labor costs reducing overall gross margins at VITAS. Diluted EPS increased as the result of increased earnings and a reduction of diluted share count due to our stock repurchase program.

Financial Condition
Liquidity and Capital Resources
Significant changes in the balance sheet accounts from December 31, 2007 to March 31, 2008 include the following:


The main cause of the $14.2 million decrease in accounts receivable relates to the timing of payments received from the US Government for VITAS. Offsetting the decrease due to timing of Medicare payments, our uncollected receivables and unbilled revenue from focused medical review (FMR) activity at VITAS increased approximately $3 million since year end. Roto-Rooter receivables are virtually unchanged reflecting the flat revenues from the fourth quarter of 2007.


The notes receivable due from Patient Care were collected in full during the first quarter of 2008.


The increase in treasury stock relates to the repurchase 300,000 shares made under the 2007 Share Repurchase Program.

Net cash provided by continuing operations increased $4.8 million due primarily to the decrease in accounts receivable discussed above.

We have issued $27.5 million in standby letters of credit as of March 31, 2008, mainly for insurance purposes. Issued letters of credit reduce our available credit under the revolving credit agreement. As of March 31, 2008, we have approximately $147.5 million of unused lines of credit available and eligible to be drawn down under our revolving credit facility, excluding the expansion feature. Management believes its liquidity and sources of capital are satisfactory for the Company’s needs in the foreseeable future.

Commitments and Contingencies
Collectively, the terms of our credit agreements require us to meet various financial covenants, to be tested quarterly. In connection therewith, we are in compliance with all financial and other debt covenants as of March 31, 2008 and anticipate remaining in compliance throughout 2008.

VITAS is party to a class action lawsuit filed in the Superior Court of California, Los Angeles County, in September 2006 by Bernadette Santos, Keith Knoche and Joyce White (“Santos”). This case alleges failure to pay overtime and failure to provide meal and rest periods to a purported class of California admissions nurses, chaplains and sales representatives. The case seeks payment of penalties, interest and Plaintiffs’ attorney fees. VITAS contests these allegations. The lawsuit is in its early stage and we are unable to estimate our potential liability, if any, with respect to these allegations.

In April 2007, our Roto-Rooter subsidiary was named in a class action lawsuit filed in San Mateo Superior Court by Stanley Ita (“Ita”) alleging class-wide wage and hour violations at one California branch. This suit alleges failure to provide meal and break periods, credit for work time beginning from the first call to dispatch rather than arrival at first assignment and improper calculations of work time and overtime. The case sought payment of penalties, interest and Plaintiffs’ attorney fees. After the suit was filed, we offered a settlement to certain members of the class and paid approximately $200,000. In January 2008, we agreed to a tentative settlement with the remaining members of the class for approximately $1.8 million. The tentative settlement is subject to court approval. The tentative settlement has been accrued in the accompanying financial statements as of and for the year ended December 31, 2007.

In April 2005, the Office of Inspector General (“OIG”) for the Department of Health and Human Services served VITAS with civil subpoenas relating to VITAS’ alleged failure to appropriately bill Medicare and Medicaid for hospice services. As part of this investigation, the OIG selected medical records for 320 past and current patients from VITAS’ three largest programs for review. It also sought policies and procedures dating back to 1998 covering admissions, certifications, recertifications and discharges. During the third quarter of 2005 and again in May 2006, the OIG requested additional information from us. The Court dismissed a related qui tam complaint filed in U.S. District Court for the Southern District of Florida with prejudice in July 2007. The plaintiffs are appealing this dismissal. Pretax expenses related to complying with OIG requests were immaterial for the three months ended March 31, 2008 and 2007.

The government continues to investigate the complaint’s allegations. We are unable to predict the outcome of this matter or the impact, if any, that the investigation may have on our business, results of operations, liquidity or capital resources. Regardless of outcome, responding to the subpoenas and defending the litigation can adversely affect us through defense costs, diversion of our time and related publicity.

R esults of Operations
First Quarter 2008 versus First Quarter 2007 - Consolidated Results
Our service revenues and sales for the first quarter of 2008 increased 5.5% versus revenues for the first quarter of 2007. Of this increase, $14.5 million was attributable to VITAS and $293,000 was attributable to Roto-Rooter.

The increase in VITAS’ revenues for the first quarter of 2008 versus the first quarter of 2007 is attributable to an increase in ADC of 3.3% for routine homecare, 2.5% for continuous care and 6.3% for general inpatient. ADC is a key measure we use to monitor volume growth in our hospice business. Changes in total program admissions and average length of stay for our patients are the main drivers of changes in ADC. The remainder of the revenue increase is due primarily to the annual increase in Medicare reimbursement rates in the fourth quarter of 2007, as well as geographic mix shifts within patient care categories. In excess of 90% of VITAS’ revenues for the period were from Medicare and Medicaid.

The increase in the plumbing revenues for the first quarter of 2008 versus 2007 comprises a 5% decrease in the number of jobs performed and a 6% increase in the average price per job. Drain cleaning revenues for the first quarter of 2008 versus 2007 comprised an 8% decline in the number of jobs offset by an 8% increase in the average price per job. The decrease in other revenues is attributable primarily to lower sales of drain cleaning products offset by increased revenue from the independent contractor operations.

The consolidated gross margin was 27.9% in the first quarter of 2008 as compared with 30.4% in the first quarter of 2007. On a segment basis, VITAS’ gross margin was 20.0% in the first quarter of 2008 and 22.8% in the first quarter of 2007. This margin decline is a combination of increased expenses related to admissions and increased costs for direct patient care labor. As part of its growth strategy, VITAS has expanded its investment in the admissions process. At the end of the first quarter of 2008, VITAS increased staffing of sales representatives, admissions coordinators and admissions nurses by 18%. This resulted in an additional $2.1 million of admission expense in the quarter and equates to 106 basis points of the decline in gross margin in the quarter. The remaining margin decline is due to an increase in direct patient care labor. This additional labor is a combination of salary rate increases for existing employees as well as excess staffing relative to current patient census and individual plans of care. In the first quarter of 2008, total field salary increases averaged 4.2% over the prior-year period which is largely commensurate with local market salary requirements. This is above the 3.0% inflation per diem increase VITAS received from CMS in October 2007. Over the past several years the CMS calculated inflation factor has been below the actual inflation on direct patient care costs, primarily wages. Historically, VITAS has been able to offset this inflation adjustment shortfall through scale in management systems and infrastructure. Management anticipates VITAS margins returning to more historical levels in the second half of 2008.

The Roto-Rooter segment’s gross margin was 45.8% in the first quarter of 2008 and 46.6% in the first quarter of 2007. The slight decline in gross margin is attributable to a $0.4 million aftertax charge for a settlement of litigation relating to a 2003 fire that, for unique technical reasons, was not covered by Roto-Rooter’s secondary insurance carrier.

Selling, general and administrative expenses (“SG&A”) for the first quarter of 2008 were $42.8 million, a decrease of $5.3 million (11%) versus the first quarter of 2007. The decrease is largely due to 2007 stock-based compensation expense of $5.4 million related to the LTIP. There was no such LTIP expense in the first quarter of 2008.

Interest expense, substantially all of which is incurred at Corporate, declined from $3.7 million in the first quarter of 2007 to $1.6 million in the first quarter of 2008 due primarily to the debt refinancing transactions completed in the second quarter of 2007. Other (expenses)/income-net decreased from income of $869,000 in the first quarter of 2007 to expenses of $1.2 million in the first quarter of 2008 related to realized and unrealized losses in the investments of deferred compensation plans held in trust.

Our effective income tax rate decreased from 38.5% in the first quarter of 2007 to 37.8% in the first quarter of 2008 as the result of R&D credits available on certain of our information systems technology developed by VITAS.


Sherry Warner

Good morning. Our conference call this morning will review the financial results for the first quarter of 2008, ending March 31st 2008. Before we begin let me remind you that the Safe Harbor Provisions of the Private Securities Reform Act of 1995 apply to this conference call. During the course of this call the company will make various remarks concerning the companies’ expectation, predictions, plans, and prospects that constitute forward-looking statements. Actual results may differ materially from those projected by those forward-looking statements as a result of a variety of factors including those identified in the company’s news release of April 24th and in various other filings with the SEC. You are cautioned that any forward-looking statements reflect managements current view only and that the company undertakes no obligation to revise or update such statements in the future. In addition, management may also discuss non-GAAP operating performance results during today’s call including earnings before interest, taxes, depreciation, and amortization or EBIDTA, and adjusted EBIDTA. A reconciliation of these non-GAAP results is provided in the company’s press release dated April 24, which is available on the company’s website at www.CHEMED.com. I would now like to introduce our speakers for today. Kevin McNamara, President and CEO of CHEMED Corporation; Dave Williams Executive Vice President and CFO of CHEMED; and Tim O’ Toole CEO of CHEMED’s Vitas Healthcare Corporation subsidiary. I will not turn the call over to Kevin McNamara.

Kevin McNamara

Thank you Sherry. Good morning everyone. Welcome to CHEMED Corporations First Quarter 2008 Conference call. I will begin with an overview of the quarter. I will then turn over the call to David Williams, CHEMED’s CFO. This will be followed by Tim O’Toole, CEO of our Vitas subsidiary for a discussion on some of our hospice metrics. I will then open this call up for questions. CHEMED consolidated revenue in the quarter totaled $285 Million and net income was $16.8 Million. This equate to diluted earnings per share from continuing operations of $.69. If you adjust for non cash items, or items that are not indicative on on-going operation, earnings per diluted share were $.73 in the quarter, which equals our prior year’s earnings. I’m disappointed with Vitas net income for the quarter. Specifically our field-based margins. As our ADC growth has moderated leaving just three additional staff per hospice team is putting pressure on our margins. Clearly we need to improve our ability to flex direct patient care labor on a daily basis to minimize inefficiencies. This tighter control of labor must be accomplished in an environment that ensures a high level of patient care. The logistics involved in tightly controlling labor on a real-time basis is complex. We currently admit over 15,200 patients and discharge at approximately 15,000 patients in a quarter. Our median length of stay is 13 days, which means half of our admits will require implementation of an extensive plan of care and will require significantly more visits per day than our average patient. In our hospice teams if we are over-staffed by as few as 2-3 FPE’s on any given day our margins will be negatively impacted by nearly 200 basis points. With that said it is imperative that we improve our consistency in managing labor and minimizing any over-staffing. This will involve improving our existing labor reports, as well as evolving the culture within the field to provide quality patient care with an efficient cost management. On a positive note, we had excellent admissions in the quarter, growing 7.8% to over 15,200 Admits and revenue growth of 7.9%. VITAS had revenue of $199 Million and generated income of $13.3 Million. Adjusted EBIDTA for Vitas totaled $23.6 Million in the quarter ,equating to an 11.9% margin. Gross Margin in the first quarter of 2008 was 20%. This is 257 basis points below the adjusted margins for the first quarter of 2007. This margin decline is a combination of increased expenses related to our strong admissions as well as increased costs for direct patient care labor. Vitas has expanded its investment in the admissions process, increasing spending $2.1 Million in the quarter. At the end of the first quarter of 2008, Vitas had 252 sales representatives, an increase of 17%, and a total of 432 Admissions Coordinators and nurses, an increase of 19% over the prior year period. Overall staffing and admissions process also increased 4.3% when compared to the fourth quarter of 2007. This increase in our admissions infrastructure caused a decline of 106 basis points in gross margin in the first quarter. The payback of this increased staffing generated over the next several quarters as the additional patient census remained in hospice for the subsequent quarters. The remaining margin decline is due to an increase in direct patient care labor. This additional labor expense is a combination of salary rate increases for existing employees as well as excess staffing relative to the current patient census.

In the first quarter of 2008 field salary increases averaged 4.2% over the prior year period which is largely commensurate with the local market salary requirements. This is above the 3.0% inflation per diem increase we received from CMS in October of 2007. Over the past several years the CMS calculated inflation factor has been below the actual cost inflation on direct patient care costs, primarily wages. Historically we have been able to offset this inflation adjustment shortfall to scale and in management systems and infrastructure.

We continue to refine the processes of scheduling direct labor to allow for more daily flexibility with the goal of insuring proper levels of staffing, notwithstanding length of stay and census fluctuations. This involves more efficient utilization of field-based labor management tools designed to meet and respond to hospice team staffing requirements. We have begun using some of these tools and expect more efficient labor management during the second quarter of 2008, with margins returning to more historical levels in the second half of 2008. We did not have any billing restriction related to Medicare Cap for the first quarter of 2008 operating activity. As of March 31st 2008, we have not accrued any Medicare billing restrictions for the 2008 or 2007 cap years. Of Vitas’ thirty five unique Medicare provider numbers, thirty provider numbers, or 86% have a cap cushion greater than 20% for the2008 cap year. Four provider numbers are between 10% and 20% and one provider number has a cap cushion of approximately 4%.

Roto-Rooter is being marginally impacted by the slow- down in the economy. Fortunately our business model is recession-resistant through a combination of emergency work that customers find difficult to defer as well as a cost structure that is extremely variable to the utilization of plumbing and drain cleaning technicians that are paid exclusively by commission. In the first quarter of 2008, Roto-Rooter had an 11% decline in aggregate call volume tracked in Roto-Rooters two centralized call centers. We were able to increase our call conversion rate to pay jobs which mitigated a portion of this call volume decline resulting in aggregate jobs declining 7%. There is also greater disparity in demand within the United States. The Southeast region has experienced a 14.1% decline in commercial jobs, while the Northeast had a modest 1.8% decline in commercial volume. Residential demand is also following a similar pattern in the Southeast with job count declining 10.1% while the remaining regions had experienced a job count decline ranging from 4.3% and 6.7%. We have adjusted our guidance for the remainder of 2008, taking into consideration current April 2008 run rate and factoring in a slight decline in demand.

Both Vitas and Roto-Rooter continue to operate fundamentally sound business models that we believe are well positioned to weather the current economy, although there are risk factors impacting both business segments we believe these risks are manageable. In addition, given our strong balance sheet and capital structure, a difficult economy may provide opportunities relative to our competition. With that I would like to turn this teleconference over to David Williams, our Chief Financial Officer.

David Williams

Thanks Kevin. Net revenue for Vitas was $199 Million in the first quarter of 2008, which is an increase of 7.9% over the prior year period. This revenue growth was the result of increased ADC of 3.4%, a Medicare price increase of approximately 3%, and a favorable shift in revenue mix from routine homecare to high acuity care. Average revenue per patient per day in the quarter was $186.67, which is 3.5% above the prior year period. Routine homecare reimbursement and high acuity care average $145.42 and $633.10 respectively, per patient per day in the first quarter of 2008.

During the quarter, high -acuity days of care was 8.5% of total days of care. Quarterly high- acuity days of care have averaged between 8.0% and 8.4% in 2007. Any shift in revenue mix will have a noticeable impact on overall revenue given the significant disparity in reimbursement per diems. However, given the relatively low profitability margin on high- acuity care, this favorable mixed shift had minimum impact on gross profit and net income in the quarter.

Selling, general and administrative expense for Vitas was $16.1 Million in the first quarter of 2008 which is an increase in 1.5% over the prior year. Adjusted EBIDTA totaled $23.6 Million, a decline of 9.3% over the prior year, and equates to an adjusted EBIDTA margin of 11.9%. During the first quarter of 2008, Vitas’ direct patient care margin for routine home care was 49.5%. This compares to 50.8% in the prior year quarter. Direct in-patient margins in the quarter were 19.3% which compares to 20.1% in the prior year. Occupancy over in-patient units averaged 80.7% and compares to 80.8% occupancy in the first quarter of 2007. In-patient margins have ranted between 15.9% and 20.1% over the past six quarters. Continuous care, the least predictable of all levels of care, had a direct gross margin of 16.5% in the quarter, which compares to 20% in the prior year. Continuous care margins have ranged between 16.5% and 20% over the past six quarters.

Now let’s turn to the Roto-Rooter segment. Roto-Rooter generated $87 Million in the first quarter of 2008, 3/10% higher than the $86 Million reported in the prior year quarter. Net income for the quarter was $9.1 Million. The first quarter net income includes $0.4 Million after-tax charge for settlement of litigation related to a 2003 fire that for unique reasons was not covered by Roto-Rooters secondary insurance carrier. Excluding this settlement, net income for the first quarter of 2008 declined approximately 6/10 of 1% over the first quarter of 2007. Adjusted EBIDTA in the first quarter of 2008 totaled $15.9 Million, a decrease of 2.7% over the first quarter of 2007, and equated to an adjusted EBIDTA margin of 18.4%. Job count in the first quarter of 2008 declined 7% when compared to the prior year period. Total residential jobs decline 6.4% and consisted of residential plumbing jobs decreasing 4.9%, and residential drain cleaning jobs declining 7.1% when compared to the first quarter of 2007. Residential jobs represent approximately 70% of total job count. Total commercial jobs declined 8.4% with commercial plumbing declining 4.9% and commercial drain cleaning decreasing 9.9% over the prior year quarter. Consolidated cash flow remains strong with CHEMED generating $40 Million of net cash provided from operating activities in the first quarter of 2008. Capital expenditures aggregated slightly less than $4 Million, resulting in free cash flow of $35.6 Million in the quarter.

Our 2008 Earnings guidance is as follows. Vitas is now estimated to generate four-year revenue growth from continuing operations, prior to Medicare cap, of 8-10%. Admission are estimated to increase 5-8%, and full-year adjusted EBIDTA margins, prior to any Medicare cap, is estimated to be 13-14% . EBIDTA margins are anticipated to improve sequentially throughout 2008, with an adjusted EBIDTA margin averaging 13.5-14% in the second half of the year. This guidance assumes that hospice industry receives a full Medicare basket increase of 3% in the fourth quarter of 2008. Full calendar year 2008 Medicare contractual billing limitations are estimated at $3.75 Million.

Roto-Rooter is estimated to generate revenue totaling $343 Million to $349 Million, basically flat with the prior year. This guidance assumes a second quarter sequential revenue decline of 3% resulting in forecasted revenue of approximately $83-85 Million in the second quarters of 2008, and assumes revenue of approximately $90-92 Million in the fourth quarter of the year. Adjusted EBIDTA margins for 2008 is estimated to range of 18.5-19.5%. Our effective tax rate is being increased to 39% in 2008, about 50 basis points higher than the prior year. This consolidated tax rate is being impacted by volatility in the stock market and its related impact on tax accounting for certain retirement plans.
Based upon these factors, and an average diluted share count of 24.2 Million shares, our estimate is that full year 2008 earnings per diluted share from continuing operations, excluding non-cash expense for stock options, and charges or credits not indicative of ongoing operations will be in the range of $3.05 to $3.20 per share. I am going to turn this call over to Tim O’Toole, our Chief Executive Officer of Vitas.

Tim O’Toole

Thank you David. Vitas generated 15,212 admissions in the first quarter of 2008. This was a 7.8% increase over the first quarter of 2007. April , 2008 continued to run strong, and are currently showing an increase of nearly 6% over April of 2007. Our discharge rate has begun to moderate in the first quarter of 2008, growing at a rate of 6.7%, 110 basis points below our admissions growth rate in the quarter. Over the past year we have significantly increased our resources dedicated to admissions. In an incremental basis this increased our field based cost $2.1 Million when compared to the prior year period. To a certain extent, a material uptake in our admissions rate puts some downward pressure on our current quarters’ margins. This is a result of our low median length of stay which is currently 13 days. What this means is that half of our admissions are discharged ,primarily through death, in less than two weeks. These patients are extremely ill and require significant resources to admit, establish a plan of care, and deliver such things as durable medical equipment, supplies, and meds on the first day of admission. In other words, an uptake in our admissions growth rate does put some pressure on margins. With that said, I am disappointed with our process of flexing patient labor to more closely match our daily change in patient census. Our need to manage labor effectively is critical to sustaining appropriate operating margins. Hospice teams that are over-staffed by as few as one or two employees can materially impact our margins. I am focused on improving the scheduling of direct labor to allow for daily flexibility with the goal of insuring proper levels of staffing, notwithstanding length of stay and census fluctuations. This involves more efficient utilization of field-based labor management tools designed to meet and respond to patient care staffing requirements. Vitas’ average length of stay in the quarter was 71.5 days which compares to 76.9 in the prior year quarter and 75.7 in the fourth quarter of 2007. This decline is related to our expansion in our admissions and has resulted in our median length of stay dropping one day to 13. Our days of care totaled 1,063,859 in the quarter. Routine home-care days increased 4.4%. In-patient days of care increased 7.7% and continuous care days increased 3.6%. We currently have three programs classified as start-ups. Three are licensed, two of which are Medicare certified. These start-up programs have an ADC of 37 patients with revenues of $311,000 and pre-tax operating losses of $485,000. These same programs had effectively 0 ADC and revenue with operating losses of $296,000 in the prior year quarter. With that I would like to turn the call back over to Kevin.

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