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Chemed Corp (NYSE:CHE)
Q4 2020 Earnings Call
Feb 24, 2021, 10:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Chemed Corporation Fourth Quarter 2020 Earnings Conference Call. [Operator Instructions]

I would now like to hand the conference over to your speaker today, Sherri Warner with Investor Relations. Thank you. Please go ahead. Please.

Sherri L. Warner -- Director of Investor Relations

Good morning. Our conference call this morning will review the financial results for the fourth quarter of 2020 ended December 31, 2020. 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 this 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 February 23rd 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 Company's press release dated February 23rd, 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 Nick Westfall, President and Chief Executive Officer of Chemed's VITAS Healthcare Corporation subsidiary.

I will now turn the call over to Kevin McNamara.

Kevin J. McNamara -- President & Chief Executive Officer

Thank you, Sherri. Good morning. Welcome to Chemed Corporation's fourth quarter 2020 conference call. I will begin with highlights for the quarter and David, Nick will follow up with additional operating detail. I will then open up the call for questions. Operating during a pandemic has been exceptionally challenging for both of our business segments. Fortunately, VITAS and Roto-Rooter have shown incredible speed, flexibility, and focus to remain completely open and operate safely for the benefit of our patients, customers and employees. I believe Chemed's operational and financial performance this past year is a testament to the success of these efforts.

Our VITAS Healthcare segment continues to be directly impacted by the pandemic. Fortunately, the federal government, specifically HHS and CMS have been very supportive in terms of relaxing regulations, allowing the use of telehealth where appropriate and providing pragmatic flexibility in caring for our entire patient census.

The most complex issue facing VITAS over the past nine months has been the disruptive impact the pandemic has had on traditional hospice referral sources, which in turn has impacted our patient census patterns. Fortunately, the portions of the healthcare continuum have not -- certain portions have normalized and hospital referral admissions have significantly improved from low-admission rates experienced early in the pandemic. This is reflected in our second half of 2020 admission and census activity.

Our third and fourth quarter 2020 admissions increased 4.7% and 2.8% respectively. Normally, two sequential quarters of solid admissions growth would result in an increase in average daily census. However, despite the admissions growth, our average daily census declined 2.8% in the fourth quarter. This decline in census is a direct result of disruption in senior housing, which includes nursing homes and assisted-living facilities.

Senior housing is an important referral network for the hospice industry, given the fact that over 90% of all half of those patients are over the age of 65. Senior housing has seen a severe reduction in occupancy levels and continues to struggle even as hospitals and other key hospice referral sources have significantly recovered. Hospice referred admissions typically account for 50% of VITAS' total admissions and a significant portion of these referrals have very short length of stays. VITAS hospital referrals are returning to pre-pandemic levels. This is reflected in hospital generated admissions increasing 6.2% and 7.4% in the third and fourth quarters, respectively.

Nursing home hospice patients represented 14.7% of our fourth quarter 2020 census, a decline of 310 basis points when compared to the prior year. VITAS nursing home admissions decreased 22.6% in the third quarter of 2020 and declined 19.3% in the fourth quarter when compared to the equivalent prior year quarter. Nursing home base patients are -- referred to hospice earlier into a terminal prognosis and statistically have a much greater probability of being in hospice more than 90 days. This decline in nursing home admissions is a direct result of continued disruption in the senior housing occupancy.

According to data provided by the National Investment Center for Senior Housing & Care, COVID-19 continues to adversely affect senior housing occupancy, which reached another record low in October of 2020. Median length of stay in the fourth quarter of 2020 was 14 days, two days less than the prior year. This unusual decline in median length of stay is a result of a 7.4% increase in hospital referred admissions and a 19.3% decrease in nursing home admissions. The combination of which has had a material impact on our median length of stay.

The guidance we will provide later this call reflects this continued weakness in senior housing occupancy for the first half of 2021. We anticipate improvement in senior housing admissions in the second half of 2021 as senior housing patient mix and aggregate occupancy returns to pre-pandemic levels. Roto-Rooter operating results have been nothing short of exceptional during the pandemic. Strong residential plumbing and drain cleaning demand has been more than adequate to compensate for weakness from our commercial customers. The fourth quarter branch residential demand set all-time records.

Unit-by-unit residential revenue totaled $123 million in the quarter, an increase of 20.8% when compared to the prior-year quarter. Fourth quarter 2020 unit-for-unit branch commercial demand did decline to 9.8% when compared with the fourth quarter of 2019. This is a significant improvement when compared to the second quarter of 2020, which had commercial demand declining 29.1% and in the third quarter of 2020 with a commercial revenue decline of 11.6% when compared to the prior year.

Roto-Rooter generated fourth quarter 2020 revenue of $201 million, an increase of 10.2%. Consolidated revenue in addition to Roto-Rooter branch operations, includes independent contractors, franchise fees and product sales, as well as the Oakland acquisition completed in July of 2019 and the HSW acquisition completed in September of 2019.

With that, I would like to turn this teleconference over to David.

David P. Williams -- Executive Vice President and Chief Financial Officer

Thanks, Kevin. VITAS' net revenue was $332 million in the fourth quarter of 2020, which is a decline of 2.3% when compared to the prior year period. This revenue variance is comprised primarily of a 2.8% decline in days-of-care, a geographically weighted average Medicare reimbursement rate increase of approximately 2.4% and acuity mix shift, which then reduced the blended average Medicare rate increase approximately 255 basis points. The combination of a lower Medicare Cap and a decrease in Medicaid net room and board pass-through increased revenue growth an additional 64 basis points in the quarter.

Our average revenue per patient per day in the fourth quarter of 2020 was $198.33, which including acuity mix shift is a 7 -- is 7 basis points below the prior-year period. Reimbursement for routine homecare and high acuity care averaged $169.83 and $997.37, respectively. During the quarter, high acuity days-of-care were 3.4% of our total days-of-care, which is 62 basis points less than the prior-year quarter.

In the fourth quarter of 2020, VITAS accrued $2.5 million in Medicare Cap billing limitations. This compares to a $4.5 million Medicare Cap billing limitation in the fourth quarter of 2019. Of VITAS' 30 Medicare provider numbers, 23 of these provider numbers currently have a Medicare Cap cushion of 10% or greater. Four provider numbers have a cap cushion between 5% and 10%, one provider number has a cap cushion between 0 and 5%, and two of our provider numbers currently have a fiscal 2021 Medicare Cap billing limitation liability.

VITAS' fourth-quarter 2020 adjusted EBITDA, excluding Medicare Cap, totaled $78.7 million, which is an increase of 11.7%. VITAS adjusted EBITDA margin, excluding Medicare Cap was 23.5% in the quarter, which is a 306 basis point improvement when compared to the prior-year period.

For Roto-Rooter, Roto-Rooter generated quarterly revenue of $201 million in the fourth quarter of 2020, an increase of $18.7 million or 10.2% over the prior-year quarter. On a unit-for-unit basis, which excludes the Oakland and HSW acquisitions, completed in July of 2019 and in September of 2019, respectively, Roto-Rooter generated quarterly revenue of $183 million in the fourth quarter of 2020, which is an increase of 12.8% over the prior-year quarter.

Total branch commercial revenue in the quarter, excluding acquisitions, decreased 9.8%. This aggregate commercial revenue decline consisted of drain cleaning revenue declining 11.6%, commercial plumbing and excavation declining 8.9%, and commercial water restoration increasing 1%. Total branch residential revenue, excluding acquisitions increased 20.8% and this aggregate residential revenue growth consisted of residential drain cleaning increasing 17.1%, residential plumbing and excavation expanding 25.5% and our residential water restoration increasing 16.8%.

Now, let's turn to Chemed's full-year 2021 guidance. Historically, Chemed earning guidance has been developed using previous year's key operating metrics, which are then modeled and projected out for the calendar year. Critical within these projections is the understanding of traditional pattern correlations among key operating metrics.

Once we complete this phase of our projected operating results, we would then modify the projections for the timing of price increases, changing in commission structure, wages, marketing programs, and a variety of continuous improvement initiatives that our business segments plan on executing over the year. This modeling exercise also takes into consideration anticipated industry and macroeconomic issues outside of management's control but are somewhat predictable in terms of timing and impact on our business segments' operating results.

With that said, our 2021 guidance should be taken with a recognition that pandemic will continue to materially disrupt all aspects of our healthcare system and general economy to such an extent that future rules, regulations and government mandates could materially impact our ability to achieve this guidance.

Statistically, our VITAS patients residing in senior housing are identified as hospice-appropriate earlier into their terminal prognosis and at a much greater probability of having a length of stay in excess of 90 days. Hospice patients referred from hospitals, oncology practices and similar quarter referral sources are generally more acute and they have a significantly lower probability of length of stays 60 to 90 days.

According to data released by the National Investment for Senior Housing & Care, COVID-19 continues to adversely affect senior housing occupancy, which as Kevin mentioned earlier, had another record low in October of 2020. This reduced occupancy in senior housing has had a corresponding reduction in VITAS nursing home admissions. Nursing home patients represented 14.7% of the VITAS fourth quarter 2020 patient census, which is our 310 basis point reduction when compared to the prior-year quarter.

VITAS anticipates continued weak occupancy and corresponding weak referrals from senior housing for the first half of 2021. This guidance anticipates senior housing will begin to normalize to pre-pandemic occupancy starting in the second half of the calendar year 2021.

Based upon the above discussion, VITAS' 2021 revenue prior to Medicare Cap is estimated to decline approximately 4% when compared to the prior year. VITAS' average daily census in 2021 is estimated to decline approximately 5% and full-year adjusted EBITDA margin prior to Medicare Cap is estimated to be 19.4%. And we are currently estimating $10 million for Medicare Cap billing limitations in calendar year 2021. Roto-Rooter is forecasted to achieve 2021 revenue growth of approximately 5% to 6% and Roto-Rooter's adjusted EBITDA margin for 2021 is estimated to be 26%.

Based upon this discussion, the 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 $17 to $17.50. This 2021 guidance assumes an effective corporate tax rate and adjusted earnings of 24.7%. And this compares to Chemed's 2020 reported adjusted earnings per diluted shares of $18.08.

I'll now turn this call over to Nick Westfall, President and Chief Executive Officer of VITAS Healthcare.

Nicholas M. Westfall -- Executive Vice President

Thanks, Dave. In the fourth quarter, our average daily census was 18,718 patients, a decline of 2.8% over the prior year. As Kevin discussed earlier, this decline in average daily census is a direct result of the disruptions across the entire healthcare system that impacted traditional admission patterns in the hospice since March.

While certain healthcare sectors have shown improvement in the admission patterns, referrals from senior housing, specifically nursing homes and assisted-living facilities, continue to be negatively impacted. It is important to note, in the fourth quarter, we saw the sequential decline of senior housing segments, specifically nursing homes and ALFs moderate to actually show a slight improvement as compared to the 2020 third quarter total admissions for the senior housing segment. ADC growth is expected to normalize in the second half of 2021 as we return to pre-pandemic referral patterns across all sectors of the healthcare industry.

In the fourth quarter of 2020, total admissions were 17,960, this is a 2.8% increase when compared to the fourth quarter of 2019. In the fourth quarter, our home-based pre-admit admissions increased 9.2%. Hospital-directed admissions expanded 7.4%. Nursing home admins declined 19.3% and assisted-living facility admissions declined 14.7% when compared to the prior year quarter.

Average length of stay in the quarter was 97.2 days, this compares to 95.2 days in the fourth quarter of 2019 and 97.1 days in the third quarter of 2020. Our median length of stay was 14 days in the quarter, which is two days less than the 16-day median in the fourth quarter of 2019 and equal to the third quarter of 2020.

Before I turn this call back over to Kevin, I wanted to again thank our entire VITAS team for their continued commitment and perseverance to provide high quality care in every community we serve across the country. Needless to say, 2020 was an unprecedented year where our organizational flexibility, leadership and commitment to our patients, their families, our referring healthcare partners, and one another was tested unlike anything we've ever experienced. I couldn't be more proud of every VITAS team member who stepped up to these challenges to help provide access and incredible care, while producing these results for our shareholders. Our entire team will continue to be out in the communities we serve, collaborating safely with our local healthcare partners to successfully identify and navigate patients and their families onto the hospice benefit during this unprecedented time.

With that, I'd like to turn this call back over to Kevin.

Kevin J. McNamara -- President & Chief Executive Officer

Thank you, Nick. I will now open this teleconference to questions.

Questions and Answers:

Operator

[Operator Instructions] Your first question is from Frank Morgan with RBC Capital Markets.

Frank Morgan -- RBC Capital Markets -- Analyst

Good morning. I guess, I want to start on the guidance here, some of the puts and takes in the guidance. And I'm curious when you talk about a recovery in the second half of the year, are you saying that this -- the admission patterns, the current admission pattern starts to turn positive. But then from a -- from an ADC standpoint, I guess after some period, how long does it take you to recover to feel the whole -- assuming admission patterns normalize in the second half of the year? And once again, just trying to figure out the cadence here and for the quarters of this year and then also kind of what that means going into the next year? First -- that's my first question.

David P. Williams -- Executive Vice President and Chief Financial Officer

Yeah, Frank, and this is Dave. That is the wild card, it is not just when the improvement start, it's the pace of the improvement and when we get to what we call pre-pandemic occupancy in mix levels. So we anticipate that starting in the second half of 2021 and by the end of the year we think it should substantially improve and normalize, but it could drift into 2022 slightly.

But the reality is, when we take in a nursing home patient today, it's still in terms -- the majority of those people will still pass away pretty quickly and it really takes two or three quarters before you get the statistical outlier. So that's just a long way of saying is, you're right, it will develop through the second half of 2021 normalizing and we anticipate the substantial portion of 2022 is going to be call it a pre-pandemic mix levels.

Kevin J. McNamara -- President & Chief Executive Officer

Frank, another way of saying that it's pretty much shored for us at this point is one thing that we look at is, the patients that are with you 180 days or longer, that comes from the group of patients that have been with you 90 to 180 days. And that group is -- of course, comes from the group that has been with you longer than 60 days. Those are the things we're watching and to the extent that each group is shored up largely by referrals, expanded referrals from the senior housing sector.

That's when we'll have better visibility, to be honest with you, and we won't be comfortable that we've returned to normal until our long stay patient numbers are where we had been running. And so, to the extent that we will say, it's a process that is really suggesting. That's what we're going to be watching over the next couple of months and if those -- call it the lower elements of the days in the program of those groups have solidified, we're fairly certain then they will mature into the -- a certain percentage will mature at the next level and that will have the salutary effect on ADC. So it's something hard to -- at this point, it's a bit of a guess. But it's something that we do feel we'll have visibility into as it is in fact happening.

Nicholas M. Westfall -- Executive Vice President

Frank, one other quick comment that's embedded inside of the narrative is, as we continue to look at our ADC levels and become a good partner with it, obviously there is -- without stating the obvious, there is external factors, whether it's vaccination rates, new resident or potential new residents and their families comfort and confidence with safety in vaccination rates inside of those facilities.

The reason why we are stating we're also comfortable when it swings back and as Dave alluded to, it's just timing and velocity is, while the pandemic has highlighted the benefit of the ability to -- when you can care for patients at their home, which is at the core of home care and at the core of hospice, the other thing that is -- that gives us confidence there is always going to be a continued need and role for the senior housing industry, specifically nursing homes because there just flat out aren't enough caregivers to go out and deliver care at individuals' residential homes for the period. And I think that's the important thing to note as we feel confident that occupancy levels may moderate, but they will continue to come back as the pandemic subsides.

David P. Williams -- Executive Vice President and Chief Financial Officer

In fact, the one thing I also want to say, we might leave it, call it, I would say. It's any comparison though to 2020 is fraught with peril. I mean, at the beginning of 2020, we gave guidance of -- but it was a range, but let's say $16.20 a share, I mean that -- we thought that was going to be a very solid year of course we didn't know the pandemic was coming. And when that happened through a lot of the forces we made reference to, we've heard $18.08, OK. Obviously a lot of that -- I mean, a good portion of that was things that the hard to talk about sustainability had relaxation of sequestration for a longer period and in 2020, we have relax -- the temporary relaxation of various regulations by the regulatory bodies.

But the way we look at it is in smoothing and saying, we ignore -- yeah, we like the cash we got, we -- our earnings, of course, are cash. We have the earnings, we zig when we had the zig and zag and when we had the zag and we had a real kind of blow-out year in 2020. But what we really look at it in the businesses, we are an $13.96 of adjusted basis in '19, we were looking to earn $16.20 and the midpoint of our range for next year is $17.25.

So we look at -- I mean, keep in mind Roto-Rooter and VITAS are two pretty basic predictable businesses. The problem is, the pandemic made VITAS less predictable in two respects, positively and what the government did to keep hospices in business and negatively on what happened to the nursing homes. So I mean, you get where the nursing homes, not only were occupancy levels down, VITAS employees weren't allowed on sites for weeks time in Florida. So those things tend to have the lingering, lagging effects, which we're dealing with, but overall, it's -- we've been very satisfied with the net effect of the both our company's operations during this unusual period.

Frank Morgan -- RBC Capital Markets -- Analyst

Got you. Maybe another one for Nick. You mentioned the vaccinations, have you seen any -- at this point, is there any anecdotal evidence, are you seeing any kind of changes and I mean presumably most nursing homes now have vaccinated their population and I'm assuming most of their system learning as well. But have you seen any early signs where you've got large vaccination rates or is being completed that you're -- are you starting to see a change there?

Nicholas M. Westfall -- Executive Vice President

Yeah, I think as of right now, and obviously there is a -- we're pulling it not only on a macro level from fact-based and sources but also anecdotally on a market by market basis, we are seeing encouraging signs related to it. So I think as of this morning, there is roughly 65 million doses or so that have been distributed across the United States and then many of those on the targeted population you were referring to.

We do see signs of optimism obviously every market, every facility whether their residents or whether their employees in that facility are having different experiences with adoption rates. But all in all, the combination of vaccinations as well as those nursing homes or ALFs, the pandemic has also highlighted a differentiation in hospice providers that I'm optimistic, we've been able to take advantage of and hopefully, we will continue to pull that relationship through and what I mean by that is high quality, but also safe.

So all of our infection disease protocols, the safety the PPE that our folks are wearing in the education that we've even provided and are currently providing across certain state segments, I think has hopefully helped to elevate the brand. And so we are -- I feel confident in us being a good partner with all of those institutions across the entire country in 2021 and beyond.

David P. Williams -- Executive Vice President and Chief Financial Officer

Yeah, Frank, I would say is -- we will declare the nursing homes returning to normal beyond making sure all the nursing home employees are vaccinated as well as the residents. When visitation returns to pre-pandemic rules, when the entire family and grandchildren can visit their grandmother who just went into a nursing home, when those visitations are allowed, we think that will be the last obstacle to returning to normal occupancy. No one is going to put their grandmother in a nursing home if visits are not allowed or extremely restricted. So we think that will be the last hurdle for normalcy.

Kevin J. McNamara -- President & Chief Executive Officer

And another metric, you can look at, Frank, is we mentioned in passing, but it's a big number for us, median length of stay. We'll have a pretty good sense of things will return to normal when that number goes back to 16 or 17. In parts of the third and fourth quarter, it was as low as 12. So that's the proof that's in the pudding.

Nicholas M. Westfall -- Executive Vice President

For specific months.

Frank Morgan -- RBC Capital Markets -- Analyst

Got you. One last one and I'll hop back in the queue. Another modeling, just to clarify, no buybacks built into this guide and obviously, the stock has been in the process of reacting, is down another 3% today, but maybe just any thoughts around buybacks going forward from here? Thanks.

David P. Williams -- Executive Vice President and Chief Financial Officer

We continue to think buybacks are an excellent use of our free cash flow and we anticipate pursuing that throughout 2021.

Kevin J. McNamara -- President & Chief Executive Officer

Yeah, and we have a lot of wherewithal to pull those off. Let's put it that way.

Frank Morgan -- RBC Capital Markets -- Analyst

Thank you.

Operator

Your next question comes from Joanna Gajuk with Bank of America.

Joanna Gajuk -- Bank of America -- Analyst

Thank you. So here, off -- first off, couple of follow up questions. So when you talk about the senior housing occupancies, you said that you expect this to begin to normalize starting in second half. And I guess you were talking about which started more like just admission patterns. Well, how should we think about the actual census growing because I guess your guidance were down 5% for the year, obviously, this worsened in Q4. So I guess if you can just talk about the cadence here and kind of should we expect kind of the census level itself to kind of bring it back to closer to normal by the end of this year.

Nicholas M. Westfall -- Executive Vice President

So Joanna, the -- yes, we were responding to Frank's original question related to it of timing, pace, and velocity, particularly with that senior housing segment. It's going to impact days of care with a degree of lag to it, no different than it has historically, so as we think about the year and obviously, we don't provide quarterly guidance, we've built in certain timing assumptions in that specific segment that if they come true, we will see the traditional admission in ADC tag -- ADC lag if the general mix of admissions, which I want to go back to at a macro level still is positive, even with the declines in that senior housing segment return to normal.

What we'll see is, how big of a lift up we get from the senior housing footprint coming back and how much of the hospital, but also the physician office referral business, which has performed sequentially and on a year-over-year basis on a positive level, how much of that continues to pull through as well. So it would be back -- the census component would be back-loaded in terms of some of the growth potential for the latter half of 2021.

Joanna Gajuk -- Bank of America -- Analyst

Okay, so then...

Kevin J. McNamara -- President & Chief Executive Officer

We make reference to it in the guidance as far as what we think for the year.

Joanna Gajuk -- Bank of America -- Analyst

Right.

David P. Williams -- Executive Vice President and Chief Financial Officer

But certainly the leakage happens in the first half of the year in terms of census and then we start recovering from there, Joanna.

Joanna Gajuk -- Bank of America -- Analyst

Right. So in your forecast, you have from your own kind of assumption in terms of progression of occupancy improvements and these other settings in terms of nursing homes and senior housing and are you expecting one to do better than the other setting?

Nicholas M. Westfall -- Executive Vice President

I don't know if we can speculate as to which one would do better or not. It also gets to the definition that the senior housing has a lot of other segments outside of just nursing home and ALFs inside of it and as we're interacting with all those various segments with it, I think some had been impacted more than others. The nursing home ones, the one we're really focused on. The assisted-living communities when you get to vaccination rates, one could theoretically make the argument, they would have -- would be earlier to recover because by definition inside of there, it gets to the potential patient and their family member being comfortable with one another accessing it more than a nursing home, which is more restricted due to the higher acuity need and skilling need of those residents inside of that setting.

Kevin J. McNamara -- President & Chief Executive Officer

And Frank suggested one thing, there is a couple of elements. One element is you might say, what -- why our occupancy levels for these different parts of senior housing down. They're down for a couple reasons. One, there was a preferred -- a presumed unsafety associated with them, think of the New York nursing homes that they were hot beds of new coronavirus infection.

As Frank suggested with vaccination levels, in many respects, the outer elements of that should be alleviated. Another very significant impact on us, as Nick said, is focused on was the rules and the fact that if you had someone who was -- if you have a family member that was considering a nursing home option or assisted-living care option, but knowing day one when they moved in, there would be no visiting -- no visitation allowed, that was a severe impediment to a new admit to the senior housing.

To the extent, those rules are being softened, this took changes. I mean, the question is what is the new normal? There are still limitations, not everyone is vaccinated. Even the CDC's rules with regard to behavior by groups of people, 100% of whom have been vaccinated are still different than they were before. So we're still talking about what the new normal is.

But having said that, I mean, the -- keep in mind, there is a couple aspects of why our referrals are down from nursing homes and why nursing homes -- and this is when we kind of lost occupancy. There is a couple of factors, those factors are being alleviated at different rates, but to the extent that what we always say internally is, there is a reason for the existence of the nursing and living -- assisted-living care sector. It performs a very essential function and it's not to be ignored and we're fairly confident this -- that will return to a -- at least a new normal and we'll take advantage of that, but it's very hard.

Your question really goes to the timing and the predictability and predicting of it for modeling sense, I understand that. We're just saying, we don't have the visibility yet, but as I was suggesting to Frank Morgan, there are aspects of our business that are predictable and we will be seeing elements of that. That is a good classic example to the extent that we see our median length of stay drifting up to the extent that we see our percentage of patients who are in the 90 to 150-day group. To the extent we see those numbers drifted up, it will help us give you, the modelers, more visibility.

Joanna Gajuk -- Bank of America -- Analyst

That's right, so yeah. I understand the uncertainty, but I just -- the other part...

Kevin J. McNamara -- President & Chief Executive Officer

We've given...

Joanna Gajuk -- Bank of America -- Analyst

Right.

Kevin J. McNamara -- President & Chief Executive Officer

That now.

Joanna Gajuk -- Bank of America -- Analyst

Right. All right.

Nicholas M. Westfall -- Executive Vice President

One clinical data point, it gives a sign of optimism, it was just released over the weekend. The CDC came out and they were reporting on vaccinations to long-term care residents, roughly a million residents vaccinated between mid-March and mid-January and talking about not only the safety, but the adoption component of it. That's all encouraging, not only for the country, not only for that segment, but also for us as we think about the consumption habits as well as the elevation of safety and that could be a leading indicator into certain things, but at this point, we're just being -- pretending to be a good partner and being there to support those facilities and the residents inside of there as each one returns to whatever its new definition of normal is going to be and that's heavily dependent state by state as well.

Joanna Gajuk -- Bank of America -- Analyst

Right. I guess my other part of the question is something you mentioned and I don't think you quantified it, but -- so you said the admissions from hospitals actually accelerated, was up 7% and I guess it was up from a 6% growth in third quarter. But what was the community setting and physician kind of admission pattern this quarter versus last quarter...

Nicholas M. Westfall -- Executive Vice President

We lump it...

Joanna Gajuk -- Bank of America -- Analyst

Year-over-year growth rate?

Nicholas M. Westfall -- Executive Vice President

Yeah. We lump it into the homebase setting and so for this quarter, it was up 9.2% that setting was for the third quarter of pulling out here, in the second, but it was up as well, third quarter it was 18.3%. The point being is, as patients may not be accessing those facilities, they're going to a specialty physician or another primary care physician, we're there to continue to support that referring segment depending on whether the patients are traversing to healthcare systems.

Kevin J. McNamara -- President & Chief Executive Officer

And the -- it's not surprising to us. Let me just tell you that -- give you like one minute and say that. If a patient is in, let's say in nursing homes or in some setting, but I'm going to focus on nursing home for a minute, where they're very familiar with the hospice benefit that they see other people being provided that benefit on a daily basis. They're in the super elderly class, they are being -- they have been told by their doctor that their situation is terminal.

And if the disease runs its normal course, it would -- 51% chance that the -- that they would be discharged on a terminal basis. The effect of that is that people tend to get in hospice earlier and when you're in hospice earlier, the patient and the whole family realize that rushing somebody to the hospital when there turn for -- when there is a turn for the worse is not what's indicated.

Well, if you're not in a nursing home and your home and you haven't been exposed to the benefit of hospice and you have a turn for the worse that same patient who had he been in a nursing home, might have been in the hospice three months earlier and never rush to a hospital at that point. Well, given the fact those patients aren't in those settings, their home, there is a turn for the worse, they're rushed to the hospital, there is nothing they can do and that becomes a hospital -- it becomes an admission -- as hospital-referred admission to us, the only promise is by three months later than we would have otherwise -- we would have gotten it.

So yes, if the patients -- a good portion of them, they're not in a nursing home, they end up being home and then they end up with that hospital stay prior to coming to under our care, which is one of the reasons is that, that we -- that hospice exists because -- to save the government money that could prevent that last not helpful hospital visit that bills to be incurred. So yeah, we expect -- but a long way of saying it is, yes, when -- we'd expect hospital-based admits to go up under this scenario.

Nicholas M. Westfall -- Executive Vice President

So Joanna, last comment to reinforce Kevin's, is not only the hospice benefit but the way in which we operate at VITAS. We're able to respond to whatever setting the patient presents themselves, whether it's a physician office, hospital nursing home in a timely quick manner and if they're eligible for the hospice benefit, bring them on and care for them, whether it's in a nursing home, an ALF or at their house. And so, that diversity, flexibility that I referenced in my prescribed remarks is really what has allowed us to continue to navigate this pandemic successfully in our communities we serve.

Joanna Gajuk -- Bank of America -- Analyst

All right. Makes sense because that's what I was getting of it. So I guess there is some offsetting effect of more admissions from these added settings, though it sounds like they come with obviously -- and a potentially lower -- a shorter length of stay. But are you actively pursuing these other referral sources, like the physicians, primary care or specialists?

Kevin J. McNamara -- President & Chief Executive Officer

Absolutely. So we've always pursued educated supported a defer -- a diverse referral base in every market in which we operate for exactly that reason because every patient journey is slightly different depending on where they are presenting and our goal is to help educate all those referring healthcare partners as to how to help identify a potentially hospice eligible patient and where we can be there to help from an education awareness even advanced care planning goals of care, etc. to prepare that patient and family for making the right decision for them.

Joanna Gajuk -- Bank of America -- Analyst

Right, and I guess to just wrap it up on the hospice side, so I have a question that got over. But on the hospice side, so we talk about obviously all these pressures and revenue guidance implies revenue decline this year, year-over-year, but the margin guidance, it's better than what we were expecting the 19% -- above 19% is actually much above the pre-pandemic levels or that -- the margin back then was 18%, I guess, call it 2019. So kind of can you talk about how sustainable is that margin, is this the way to think about it, the 19% margin for that business?

David P. Williams -- Executive Vice President and Chief Financial Officer

Well, part of that shift, Joanna, is we're doing more routine homecare and less high acuity care, which has a differential margin, that helps significantly as well as there is still roughly about $6 million of relax sequestration in Q1 of 2021. So when you compare to the 2019 margin, that's also improved. So it's those two factors that are contributing. Nick, anything more on that?

Nicholas M. Westfall -- Executive Vice President

No, I mean it's -- we referenced in the last quarter's conference call, no different than we have in every year -- 2021 and every year from this point forward and for all historical years from an operational standpoint, we will always continue to balance out our labor needs against our care needs and the anticipated increase not only in patient flow but also patient days-of-care. And so that goes into it as well. And the group did a fantastic job of balancing that out throughout the pandemic. Just to remind everyone, we did not furlough, we did not lay off a single individual inside of the organization and we were able to achieve the operating results we posted for 2020.

Joanna Gajuk -- Bank of America -- Analyst

Okay, that's helpful. And on the Roto-Rooter side as some of the question, I guess with this margin outlook for 26% essentially was slightly up year-over-year and that's also much higher than the pre-pandemic level. So it's -- what's driving that better margin and is that 26% kind of sustainable going forward?

David P. Williams -- Executive Vice President and Chief Financial Officer

The short answer is, yes, we think so. What's resulting in the margin increase and you really started them, you saw the margin increasing over seven years ago, primarily because the increased revenue from water restoration. And what happens is we have -- we already have the branch infrastructure set up. So although water restoration, all these other jobs have the same rough margin as everything else, since we don't have much in the way of increased infrastructure costs, more of the contribution margin for the incremental revenue drops to the EBITDA line.

So it happened with water restoration and it's also happening just overall, the increased revenue we're enjoying doesn't come with any increased infrastructure cost. So again, more of the contribution margin for that increased revenue is dropping to the EBITDA line and we expect that to continue. Some of the things that really helped 2021 in terms of increased margin that we're not anticipating continues would be, for example, healthcare costs for both VITAS and Roto-Rooter were abnormally low as people avoided seeing the doctor during the pandemic. That help the margins a little bit on as well in 2020 and we didn't anticipate that continuing. But it all got dialed in, higher revenue was contributing to the maintaining the margins.

Joanna Gajuk -- Bank of America -- Analyst

All right. And the final question on cash flow. Obviously, you mentioned a very strong cash flow, so kind of how should we think about the cash flow for this year and the capex, because it sounds like you've been opening up couple of these, the no-gos and you plan on more. It sounds like in Florida this in-patient unit, so can you give us a sense of operating cash flow and then, also capex including growth capex outlook for the year? Thank you.

David P. Williams -- Executive Vice President and Chief Financial Officer

Yeah, certainly what -- so what I would say in terms of the cash flow in 2020 for the calendar year is artificially high. One of the reasons, for example, there was $40-some odd million of the CARES Act money that we took as lost revenue that didn't have any cost attributed to it. So on a pre-tax basis that was pure cash flow. In addition, we had about a little under $40 million of deferred payroll taxes for the Chemed consolidated, so we don't have to pay the employer a portion of payroll taxes until half of that gets paid in December of 2021, the other half in December of 2022. So that spiked cash flow another $40 million, say, roughly.

And then, you add of course sequestration which is real, but we don't expect that to continue, that spiked cash flow another $18 million. So really, take away, call it by the $110 million or so out of the 2020 cash flow. I think it's safe to say our free cash flow is really our adjusted earnings per share. So if you take between $17 and $17.50, take 17 million in the quarter as the midpoint at 16.5 million shares you're talking, free cash flow in the neighborhood of just north of $300 million, we expect depreciation and amortization run between $58 million and $60 million in 2021. We expect capex to be running between $55 million and $60 million in 2021.

So our free cash flow earning characteristics haven't changed. We don't have any net debt or as of this morning, we're sitting on a net cash of like $220 million. So I'd say, if you really want to say available of -- if you look at the cash on our balance sheet of $200 plus million or $300 plus million of free cash flow, we have $500 million of cash flow to play with in terms of share repurchase and other investment opportunities and we fully intend to put that to work if we're able to in 2021.

Joanna Gajuk -- Bank of America -- Analyst

Okay. Thank you so much for the color.

Operator

I'm not showing any further questions at this time. I would now like to turn the call back to Kevin McNamara for any closing remarks.

Kevin J. McNamara -- President & Chief Executive Officer

Well, the only closing remarks, I just wanted to thank everyone for their kind attention and it was an unusual year in 2020, but we look forward to returning as soon as possible to business as usual. Thank you.

Operator

[Operator Closing Remarks]

Duration: 51 minutes

Call participants:

Sherri L. Warner -- Director of Investor Relations

Kevin J. McNamara -- President & Chief Executive Officer

David P. Williams -- Executive Vice President and Chief Financial Officer

Nicholas M. Westfall -- Executive Vice President

Frank Morgan -- RBC Capital Markets -- Analyst

Joanna Gajuk -- Bank of America -- Analyst

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