Market Insider

For-Profit Hospices: Next in Medicare Mash?

In recent days home health care companies—notably Amedisys , Gentiva and LHC Group , have been whacked after a Senate staff report slammed them for allegedly gaming the Medicare system.

Adam Gault | Getty Images

That prompted me to wonder what other areas of healthcare could be susceptible to the government’s Medicare mash.

That’s for-profit hospices, which were the focus of an Office of Inspector General reportin July .

Enter Chemed, which gets about 70 percent of its revenue from for-profit hospices, which in turn get 90 percent of their revenue from Medicare; the rest comes from Roto-Rooter. (Really!)

It’s the closest thing to a for-profit hospice pure-play; Gentiva is next, but it gets most of its revenue from home-health care.

After the report came out, Chemed’s stock tumbled , but the company responded in an earnings conference call—not sounding overly worried, in large part because the OIG appeared to zero in on hospices within nursing homes. “We don’t have that issue at all,” CEO Tim O’Toole said. “We are very comfortable with where we sit.”

Maybe, but given the number of subpoenas the company has received in recent years, it has received a “high risk” rating from Disclosure Insight, which rates companies based on five-years worth of various disclosures.

Here’s the twist: For years home-health cares skeptics didn’t think the government would seriously crack down on the Medicare allegations. Then came the Senate staff report.

Could the same thing happen to for-profit hospices?

If there’s anything I’ve learned, it’s not to ever try to forecast what Congress, courts or federal agencies will do.

But this much is certain: The for-profit hospice industry is in the line of fire, and that means Chemed is, too. Worth watching.

By the way, if you were watching Street Signs on CNBC today, you saw me stumble when I was doing my Herb on the Street segment on this story. The prompter screwed up. (Talk about embarrassing—well, not as embarrassing as when I went on to knock my microphone off…)

Questions? Comments? Write to

Follow Herb on Twitter:

For more stock ideas, go to CNBC's Stock Blog

CNBC Data Pages: