Good day ladies and gentlemen, welcome to the Chemed Corporation First Quarter 2016 Earnings Conference Call. [Operator Instructions]. I would now like to turn the conference over to Sherri Warner with Chemed Investor Relations. You may begin.

Good morning, our conference call this morning will review the financial results for the first quarter of 2016 ended March 31, 2016. 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. During the course of the call, the Company will make various remarks concerning Management's expectations, predictions, plans and prospects that constitute forward-looking statements. Actual results may differ materially from those projected by these forward-looking statements as a result of a variety of factors, including those identified in the Company's news release of April 28 and in various other filings with the SEC. You are cautioned that any forward-looking statements reflect Management's 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 EBITDA and adjusted EBITDA. A reconciliation of these non-GAAP results is provided in the companies press release dated April 28 which is available on the Company's website at Chemed.com. I would now like to introduce our speakers for today; Kevin McNamara, President and Chief Executive Officer of Chemed Corporation; Dave Williams, Executive Vice President and Chief Financial Officer of Chemed; and Tim O'Toole, Chief Executive Officer of Chemed's VITAS Healthcare Corporation subsidiary. I will now turn the call over to Kevin McNamara.

Thank you, sherry. Good morning. Welcome to the Chemed Corporation's first quarter 2016 conference call. I will begin with some of the highlights of the quarter and David and Tim will follow with some additional operating detail. I will then open up the call for questions. In the quarter, Chemed generated three $390 million of revenue, an increase of 3.6%. Consolidated net income in the quarter, excluding certain discrete items, increased 3.4% to $27.8 million. This equated to adjusted earnings per diluted share of a $1.62, an increase of 5.2%. As most of you are aware, on January 1, 2016, CMS implemented certain changes to the Medicare Hospice reimbursement per diem. This rebasing eliminated the single tier per diem for routine health care and replaced it with a two tiered rate with a higher rate for the first 60 days of a hospice patient’s care and a lower rate for day 61 and thereafter In addition, CMS provided for a service intensity add-on payment which provides for reimbursement of care provided by a registered nurse or social worker, for routine homecare patients within seven days prior to death. The reimbursement for continuous care in-patient care and respit care were not impacted by this rebasing. The two tiered national per diem rate for routine home care provides for per diem rate of approximately $187 for the first 60 days of patient is in hospice and $147 for period thereafter. These are national per diem rates and actually reimbursement is adjusted based upon variations in geographic cost of living. Rebasing is revenue neutral to hospice if it has a 37.6% of total routine home care days-of-care being provided to patients in their first 60 days of admission and 62.1% of total routine home care days if care provided to patients after the 60 days. Basically a 38% to 62% ratio. Historically, VITAS has had roughly at 29% to 71% routine home care ratio. As a result, this change in reimbursement has anticipated through to reduce our revenue of pre-tax profitability to roughly $16 million when compared to the prior reimbursement methodology. The rebasing impact on revenue in the current quarter was somewhat higher than anticipated. However, we review that quarterly historical pattern of routine homecare under 60 and over 60 days of care ratio and the first quarter of 2016 was within our historical pattern. VITAS anticipates a significant portion of the estimated $16 million reduction in revenue growth will be offset by increased efficiencies in 2016 and 2017 in the areas of non-bedside field operations and general administration. With that, I would like to turn this teleconference over to Dave Williams, our Chief Financial Officer.

Net revenue for VITAS was $278 million in the first quarter of 29016 which is an increase of $7.9 million or 2.9% when compared to the prior year period. This revenue comprises several factors that net to the 2.9%. The most significant of these factors are our Medicare reimbursement increase of approximately 6/10 of 1%, a 5.6% increase in average daily census offset by acuity mix shift which negatively impacted revenue by 1.8%.The last significant factor impacting revenue growth is the change in Medicare hospice reimbursement which negatively impacted revenue by 2.1%. VITAS did not have any adjustments to revenue related to the Medicare cap billing limitation in the quarter. This compared to $0.2 million of Medicare cap billing limitations reversed in the first quarter of 2015. At March 31, 2016, VITAS has 31 Medicare provider numbers, none of which has an estimated 2016 Medicare cap billing limitation. Of these 31 unique Medicare provider numbers28 of the provider numbers have a Medicare Cap cushion of 10% or greater for the 2016 Medicare capped area, two providers have a cap cushion between 5% and 10% and one provider number has a Cap cushion between 0% and 5%. VITAS generated an aggregate Cap cushion of $264 million during the trailing 12 month period. Our average revenue per patient per day in the quarter excluding the impact of Medicare Cap was $194.84 which is 3.5% below the prior year period. Routine homecare reimbursement and high acuity care average $160.92 and $702.52 respectively. During the quarter high acuity days of care were 6.3% of total days of care which is 66 basis points less than the prior year quarter. The first quarter of 2016 gross margin was 21.0% which is 14 basis point decline when compared to the first quarter of 2015. Our routine…

Thank you, David. Total average daily census in the first quarter of 2016 was 15,653 an increase of 5.6% over the prior year. If you exclude the three small programs we closed in the past year, our average daily census are unit for unit basis increased 6.7%. Our overall admissions are also somewhat distorted by the closing of these small programs. Total admissions in the quarter were 16,868 a decline of 2.3% on a unit per unit basis, admissions declined 7/10 of 10%. The slight admission decline is not spread evenly in the communities we serves. Florida, our largest state market, had overall admissions growth of 5.7%. However within the state of Florida individual communities with established programs had admissions which ranged from a decline of 6.4% to an increase of 10.3%. California our second largest market by state has decline in admissions of 4.3%. Within Florida, our established programs had admissions ranging from a decline of 20.1% to an increase of 15.2%. This type of local admission volatility is normal. Admissions are subject to a fair amount of volatility depending on a number of factors, some of which are within our speed of control and some involve factors completely out of our short term control. With that said, it’s our responsibility to educate the community and referral sources of the Medicare hospice benefit call on all appropriate referral sources and intake all appropriate terminally ill patients on a 24 hour x 7 day a week basis. During the quarter, the admissions generated from hospital referrals which typically represents over 50% of our admissions declined 2.1%. Home based referrals increased 2.4% nursing home admissions declined 12.1% and assisted living facility admission referrals declined 2.1%. Our per patient per day pharmaceutical cost, average $5.93 and they are 8.8% favorable to the prior year quarter. Medical equipment per patient per day cost in the quarter totaled $6.68 and compares to $6.41 in the first quarter of 2015. VITAS' average length of stay in the quarter was 83.7 days which compares to 79 days in the prior year quarter and 89.8 days in the fourth quarter of 2015. Median length of stay was 15 days in the quarter and compares to a median of 13 days in the prior year quarter. Median length of stay is a key indicator of our penetration into the high acuity sector of the market. Our Days-of-Care totaled 1,424,386 days in the quarter, an increase of 6.8%. This days of care growth rate is higher than our average daily census growth rate of 5.6% from a benefit of one additional care day due to 2016 being a leap year. With that I'll turn the call back over to Kevin.

Thank you, Tim. We will now open this teleconference to questions.

Thank you. [Operator Instructions]. Our first question comes from the line of Jim Barrett of CL King & Associates. Your line is now open.

Good morning. Tim, I think this may be a question for you. Could you give us an update in terms of specifically what the VITAS is doing in terms of cost reductions, productivity improvements to offset the impact of rebasing?

I refer it Jim and then I am going to turn it over to Tim. But let me say that when you get behind the numbers as important point which is probably a summary of part of the answer to your question that is that. The net effect is yes. We look at our quarter and we thought it was very solid, we did an analysis, this is great from a direct analysis standpoint, we did analysis and historical patterns of what we should expect in January 1 with the guidance to be split between the over 60 day and under 60 day, of course we can’t factor in, the effect, the split will have on demand and competition within our sector. And we saw that the fact that if the government is paying more for the under 60 day stays that it become more competitive in that regard and so we saw a deterioration in that comparison which cost us a little bit more money in the quarter. The good news is and this is where I turn it over to Tim which is really where your question is, and that is: we said how do we deal with pressures like that and the overall issue of the $16 million rebasing cost. Now to tell you the net effect when you look at the all-in-cost of hospice program expenses, they were 9/10th of percentage point that have been our expectations. So yes what I am saying, so that was enough to give us a really a very a solid quarter, which leads me into interim questions, Tim how did you achieve the 9% or 10% or more percent improvement over the expected hospice program essences?

Well, as you say Kevin and I mean the good news is, again we look in the first quarter being able to increase our EBITDA were somewhere in $5 million to $6 million of less revenue on the same expense load. So we were able to be effective and efficient in the quarter already. Of course we were preparing for this as we worked all of last year for it. So mainly, the ability to have our cost structure be reduced from productivity, it’s lot around being able to capture real time data and so when you have real time data, you can schedule more effectively and make sure you are completely efficient and processed. So for example when we have referrals coming now, they are coming into digital servers where human don’t intervene and they are tracked to make the right thing happened on a time basis, workflow system. So again trying to reduce the time when we have an opportunity to when we can actually visit with the patient and family and referral sources and meet their needs. So data capture is very-very important, so we can manage data and we are working on that for years. Of course 70% of our cost is around labor and having your data around your labor to schedule efficiently allows us to bring these costs down. The other areas we have to be very cautious and keep our eye on of course ancillary costs and those would be in the categories of pharmacy and medical equipment and supplies which of course we have per diem rate and if those costs go up we have margin problems. So as we noted in the talk here earlier, all of those costs went down year over year, just through really great work of the team and reaching out in the marketplace and using our strength in our size to have better negotiating power. So again our goal in the future is to be more effective, have a closer contact with the referral sources. In fact we're making some good breakthroughs right now on what the marketplace is calling interoperability where we're connecting through digital platforms directly to the systems of major hospital sources. So we're building those out and we see a benefit of that so and I'm encouraged as we see the quarter proceed, March was firmer than the early part of the month and we're doing well in April. So I am very confident that we can keep our cost in line and absorb some of these rate reductions that we've shown that and I hope that helps to answer and give you a little more detail Jim on your question.

It does Tim. Thank you and thanks Kevin. And Dave a question for you, I know the purchase of water remediation equipment was a reason to spend capital in ’15, can you tell us what your capital spending budget is for ’16 and whether water remediation is a significant part of that number?

There is a significance of that, I think with the CapEx we estimate to be in low to mid-30 million range, so I will call it 31 million to 34 million, a water restoration to be a part of that but not a significant piece. The best part relation to what high tee [indiscernible] replacement of a whatever equipment build out in inpatient units and administrative offices leases our rollover renews build out there. Kind of the usual dogs and cats.

And is that a good number possibly adjusted for inflation going forward in terms of what your steady rate capital spending should be?

Probably the only reason I would hesitate is every so often work orders put in the position of having to do a significant build out of construction, if there's nothing in a market that needs the storage equipment. VITAS has gone through and it is a community by community basis we are making a decision in terms of does it make sense to do a build out of an inpatient unit? One for disability within the community, that kind of goes beyond just one needs of the bed as well as they've been taking more expensive real estate located in better areas to also increase the visibility, those type of things tend to spike. The CapEx, but again on an average well board basis I’d say that low to mid 30 million is a good number. Ken, would you add to that?

Okay and actually Kevin one last question for you. Several years ago during the recession you discussed the fact that plumbers who had been working on new home developments were coming to your repair market. Has that reversed or has there be any change in that dynamic now that housing is partly recovered?

I think so. I think I'd say that the thing that is like the tsunami and since that time it has been really cut below if you look at the internet. If you look over a eight year period the percentage of rollover costs that come in over the internet are now approaching 60% and we see they're coming in on numbers only appear in the internet. It was more than reversed eight years ago as far as the percentage, probably the rate coming basically from yellow page numbers. You've got to remember that what's happened during that period is almost every major metropolitan and local we had a company owned operation. We were the longest standing advertiser with the biggest presence. The plumbing section started in almost every almost every city with two pages of advertisements and in several markets three pages. The situation now is that look at the internet and we do a great job, we show up in that list of five companies on the first page, we do advertising. But we're just one name in the group of five as opposed to having the first two or three pages of the section. Roto-rooter has been able to overcome that burden by doing a number of things including having a little less problem dealing with your new construction plumbers so I think Jim is yes I think we see that but there are other issues that Roto-tooter had to deal with the biggest one is that marketing issue having less dominant position in the first thing that a consumer looks at. Now the first thing they look at is the internet, not the yellow pages. So long winded way of answering your question I would say, yes we see that but with a much bigger factor a change in marketing which were recent done I think a very good job in dealing with.

Ok thank you again.

Thank you. I am sorry no further questions at this time. I would like to hand the call over to management for any closing remarks.

Okay, I was going to say one thing, I think what time we had no questions at the end of one of our meetings. I will just add one question that I know I will get because the last two days our site is down substantially, we had a very good quarter, the question I always get at this point is, am I missing something? It is something that came out and I didn’t see ultimately. And I guess what I'm saying is, that's the question I'm asking myself here and my best answer and I'll give Dave an opportunity to make comment too. I don't think so. I think that, there's an issue, we were happy with the results. I think that one comment which is that, Could be that yes but there's a missed on sales. And as Tim started you know said well, you have to make a few adjustments like we close three programs last year. So it’s a big point of unit to unit comparisons because again you get start following in yourself, we make too many of those. The second thing is, you got to remember that I think what again, which examine the data it looks like there's a more competition and for short stay patients. Our view is we do still what we've always done a great job getting short stay patients. We are getting over 50% of our admissions through hospital discharge planners, a little more competition for those to the extent that they're having in fact little bit out of our numbers. You remember that there is revenue dollars associated with those admits that we are not getting but fact of matter there is a not a lot of profit associated with it. You're not getting those patients that's why you don't see much effect on our census numbers or overall reported profit numbers. So bottomline is that they get their volatility in our stock price with volatility in the overall market but again we were very comfortable with the quarter and look for the rest of the year. But first I confident with myself and that’s when the answer to my own question but that will end the call and we will be [indiscernible] about three months. Thank you.

Ladies and gentlemen thank you for participating in today's conference. This does conclude today’s program, you may all disconnect. Have a great day everyone.