VITAS Healthcare has righted its ship when it comes to Medicare payment cap liabilities, paving the way for a brighter 2026.

The hospice provider, a subsidiary of Chemed Corp. (NYSE: CHE), accrued $6.1 million in Medicare Cap billing limitation in Q3 2025, compared to $2.2 million accrued in the third quarter of 2024. Of that amount, $4.6 million is associated with VITAS’ Florida operations. The remaining $1.5 million is associated with all other VITAS programs, with a concentration in California.

However, the company voiced confidence that its cap liability would fall in Fiscal Year 2026. Underlying this prediction was an effort by VITAS to increase admissions resulting from hospital referrals, as opposed to other settings.

“Management continues to believe there will be no Medicare cap billing limitation related to our Florida program in 2026,” Chemed CEO Kevin McNamara said in a Q3 earnings call. “The initiative to admit a higher percentage of hospital based admissions has gained traction, and we anticipate that to continue.”

An analysis by VITAS indicated that a target proportion of admissions from hospitals ranges between 42% to 45%, according to President and CEO Joel Wherley. In the third quarter of 2025, this ratio reached 44.5%, which represents a “high water mark,” he said.

Wherley recently took the helm at VITAS following the departure of previous CEO Nick Westfall. During the earnings call, he lauded the company’s gain of a Certificate of Need (CON) for a new location in Pinellas County, Florida.

“I’m excited about the opportunity to lead VITAS into its next chapter. The new CON in Pinellas County is a significant opportunity for VITAS,” Wherley said. “We will continue to put our best foot forward when applying for these new CONs in the state of Florida, we will continue to focus on providing the best possible care to our patients and their families. That focus will be coupled with getting back to the basics of ensuring that we grow the business responsibly while effectively managing the Medicare cap.”

The hospital-based admission strategy does come with some margin compression because it drives a higher volume of shorter length-of-stay patients. But VITAS has worked to offset this by boosting efficiency with labor management and other countermeasures.

Founded in 1978, VITAS provides hospice and palliative care across 15 states. The company’s largest geographic footprint spans several counties throughout its home state of Florida.

The company’s net patient revenue rose 4.2% year over year to $407.7 million. VITAS also saw a 2.5% average daily census increase to 22,327 patients. Admissions rose 5.6% to 17,714.

“We are very encouraged by the strategies we put in place, the steps that we have taken, the moderation of the average length of stay from a discharge perspective, and all of the initiatives that we have put into place to mitigate any concerns going forward with cap, which then puts us in a position where we can be agile and responsibly get back focusing on census growth in those markets,” Wherley said.