Why Chemed Shares Were Walloped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Chemed (NYSE: CHE  ) , the nation's largest for-profit hospice care provider, nosedived 24% after the company announced the receipt of a false claims action complaint by the U.S. government.

So what: According to the U.S. government complaint filed against Chemed in Western Missouri, since as early as 2002 the company may have submitted false claims to the Medicare program by billing Medicare patients for crisis care services when they weren't eligible, and admitting patients who weren't eligible for the Medicare hospice benefit based on their life expectancy. The lawsuit seeks monetary compensation and interest while Chemed insists it will defend the lawsuit "vigorously."

Now what: Get out the yellow caution tape! Until further notice, I'd consider Chemed completely off limits. Government lawsuits like this often end in settlements long before they go to trial, but any sort of settlement here could be a damaging blow to Chemed's reputation. Until we know more -- and it could be a while -- I feel you ought to stay far away from this murky situation.

Craving more input? Start by adding Chemed to your free and personalized watchlist so you can keep up on the latest news with the company.

While you can certainly make huge gains in hospice care providers like Chemed, the best investing approach is to choose great companies and stick with them for the long term. The Motley Fool's free report, "3 Stocks That Will Help You Retire Rich," names stocks that could help you build long-term wealth and retire well, along with some winning wealth-building strategies that every investor should be aware of. Click here now to keep reading.

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9/26/2016 4:02 PM
CHE $142.01 Up +0.72 +0.51%
Chemed CAPS Rating: **