VITAS is healing while Roto-Rooter leaks
- VITAS is the larger business, with $420.0 million of Q1 2026 net revenue and 3.1% year-over-year growth.
- Roto-Rooter is stabilizing, but Q1 2026 net revenue still fell 0.9% as residential and commercial revenue declined.
- Core residential plumbing and sewer and drain revenue grew for the first time since Q4 2022, a real green shoot.
- The main bear case is paid search, since free search leads fell almost 16% and paid ads made up 53.4% of leads.
- Chemed looks balanced, not obvious: VITAS is improving, Roto-Rooter margins are under pressure, and valuation is not a clear bargain.
Hospice strength meets search-cost pain
Chemed's story improved after Q1 2026. VITAS, the hospice business, beat expectations and raised full-year guidance. It also looks like the Florida Medicare Cap issue from 2025 is mostly behind it. The Medicare Cap is a limit on how much Medicare will pay a hospice provider for a group of patients over a year.
The bull case is simple. VITAS keeps adding care capacity, grows patient days, and uses new Certificates of Need, or state approvals needed to open or expand hospice service in some markets. In Q1 2026, VITAS net revenue reached $420.0 million, up 3.1%, with days-of-care up 2.2%. That is steady, not explosive, but it is moving in the right direction.
The bear case sits mostly inside Roto-Rooter. The plumbing brand finally showed life, with residential plumbing and residential sewer and drain revenue both growing for the first time since Q4 2022. But the way customers find Roto-Rooter has changed. Free leads from Google search fell almost 16%, and paid advertisements made up 53.4% of total leads. That can keep margins lower even if sales recover.
The next test is the second half of 2026. Investors should watch whether Roto-Rooter can keep core plumbing volume growing and whether centralized billing lifts revenue per water restoration job. If those do not work, VITAS may not be enough to make the whole company look better.
Two service businesses, two rulebooks
Chemed makes money through two wholly owned subsidiaries. VITAS provides hospice and palliative care, mostly paid through Medicare. Roto-Rooter provides plumbing, drain cleaning, excavation, water restoration, and related services to homes and businesses.
VITAS grows when it serves more patient days, hires enough clinical staff, earns Medicare rate increases, and expands into new regions. In Q1 2026, VITAS grew days-of-care by 2.2%, helped by a geographically weighted average Medicare reimbursement rate increase of about 2.6%. The weak spot is regulation, because Medicare rules and audits can change economics quickly.
Roto-Rooter has a more consumer-driven model. Management typically targets 5% to 6% long-term top-line growth, helped by annual price increases and housing demand. The problem is that demand now costs more to capture. Search engine changes and customer use of AI platforms can make marketing more expensive and less predictable.
Chemed also returns capital through buybacks and dividends, but the balance sheet moved a bit more levered in Q1 2026. Long-term debt rose by $91.2 million, mainly due to acquisitions and stock repurchases. The company still said it had about $313.3 million of unused credit available at March 31, 2026.
Care beds and clogged drains
VITAS routine homecare
This is the core hospice service, delivered where patients live. It was $371.1 million of Q1 2026 VITAS revenue before cap and other adjustments.
VITAS inpatient and continuous care
These are higher-acuity hospice services for patients who need more intense care. Continuous care revenue fell 26.4% in Q1 2026, so mix can move results.
Hospice expansion through CONs
Certificates of Need are state approvals that can limit new competitors and open growth paths. Execution on newly awarded CONs is part of the bull case.
Roto-Rooter plumbing
Plumbing is a core Roto-Rooter service for homes and businesses. Q1 2026 plumbing revenue rose 7.7%, helped by price and service mix.
Roto-Rooter drain cleaning
Drain cleaning is a high-recognition service tied to urgent customer needs. Q1 2026 drain cleaning revenue rose 0.3%, with price and mix offsetting lower job count.
Roto-Rooter water restoration
Water restoration can be attractive when jobs bill cleanly, but it is under pressure. Q1 2026 water restoration revenue fell 11.7%, and insurers are using AI to challenge billing.
VITAS carries the mix
Segment shares use Q1 2026 service revenues and sales from Chemed's Form 10-Q for the three months ended March 31, 2026. VITAS was $420.0 million and Roto-Rooter was $237.5 million of the $657.5 million total.
What could break the story
Paid-search margin trap
High impact · High oddsRoto-Rooter depends more on paid leads because free search leads fell almost 16% after Google algorithm changes. Paid advertisements made up 53.4% of total leads in Q1 2026. If this is permanent, revenue can grow while margins stay squeezed.
Water restoration billing pushback
Medium impact · Medium oddsInsurance companies are using AI to review water restoration bills line by line. That raised write-offs in 2025 and remains a headwind. Centralized billing is meant to improve revenue per job, but the fix still needs proof.
Hospice reimbursement and audit risk
High impact · Medium oddsVITAS depends heavily on Medicare, so CMS, the Medicare regulator, matters. The Florida Medicare Cap issue looks mostly solved for 2026, but hospice remains a politically sensitive area. Fraud campaigns aimed at unrelated rogue providers can still bring wider scrutiny to the sector.
Roto-Rooter volume false start
Medium impact · Medium oddsThe quarter showed a green shoot, but the base is not fully healthy. Overall Roto-Rooter net revenue still fell 0.9% in Q1 2026, and branch residential revenue declined 1.5%. If job counts keep falling, price increases may not be enough.
Consumer and cost pressure
Medium impact · Medium oddsRoto-Rooter can be hurt when consumers delay non-emergency work. Chemed also flagged inflation, tariffs, fuel prices, and other macro pressures as items that may hurt future sales and profitability. The company does not expect a material negative effect for the rest of fiscal 2026, but 2027 planning is still under review.
In one breath
What does Chemed Corporation do?
Chemed owns two main businesses: VITAS Healthcare and Roto-Rooter. VITAS provides hospice and palliative care, while Roto-Rooter provides plumbing, drain cleaning, excavation, and water restoration services.
Is Chemed more healthcare or plumbing?
By Q1 2026 revenue, Chemed is more healthcare. VITAS made up about 64% of service revenues and sales, while Roto-Rooter made up about 36%.
Why is Roto-Rooter a problem for Chemed?
Roto-Rooter is facing higher marketing costs because free search leads are down and paid ads are a larger share of leads. Water restoration billing is also under pressure as insurers use AI to review claims more closely.
What is the key thing to watch next for Chemed?
Watch whether VITAS keeps growing patient days without a new Medicare Cap problem. Also watch whether Roto-Rooter can hold the recovery in plumbing and drain revenue while improving margins.