Good morning ladies and gentlemen, and welcome to the CHEMED Corporation first quarter 2008 conference call. My name is Jeheyda and I will be the coordinator for today’s call. Please note that today’s call is being recorded. All lines have been placed on mute to prevent any background noise. After the speakers remarks there will be a question-and-answer period. I will not like to turn the call over to Ms. Sherry Warner with CHEMED Investors Relations. Please proceed.

Good morning. Our conference call this morning will review the financial results for the first quarter of 2008, ending March 31st 2008. Before we begin let me remind you that the Safe Harbor Provisions of the Private Securities Reform Act of 1995 apply to this conference call. During the course of this call the company will make various remarks concerning the companies’ expectation, predictions, plans, and prospects that constitute forward-looking statements. Actual results may differ materially from those projected by those forward-looking statements as a result of a variety of factors including those identified in the company’s news release of April 24th and in various other filings with the SEC. You are cautioned that any forward-looking statements reflect managements 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 EBIDTA, and adjusted EBIDTA. A reconciliation of these non-GAAP results is provided in the company’s press release dated April 24, which is available on the company’s website at www.CHEMED.com. I would now like to introduce our speakers for today. Kevin McNamara, President and CEO of CHEMED Corporation; Dave Williams Executive Vice President and CFO of CHEMED; and Tim O’ Toole CEO of CHEMED’s Vitas Healthcare Corporation subsidiary. I will not turn the call over to Kevin McNamara.

Thank you Sherry. Good morning everyone. Welcome to CHEMED Corporations First Quarter 2008 Conference call. I will begin with an overview of the quarter. I will then turn over the call to David Williams, CHEMED’s CFO. This will be followed by Tim O’Toole, CEO of our Vitas subsidiary for a discussion on some of our hospice metrics. I will then open this call up for questions. CHEMED consolidated revenue in the quarter totaled $285 Million and net income was $16.8 Million. This equate to diluted earnings per share from continuing operations of $.69. If you adjust for non cash items, or items that are not indicative on on-going operation, earnings per diluted share were $.73 in the quarter, which equals our prior year’s earnings. I’m disappointed with Vitas net income for the quarter. Specifically our field-based margins. As our ADC growth has moderated leaving just three additional staff per hospice team is putting pressure on our margins. Clearly we need to improve our ability to flex direct patient care labor on a daily basis to minimize inefficiencies. This tighter control of labor must be accomplished in an environment that ensures a high level of patient care. The logistics involved in tightly controlling labor on a real-time basis is complex. We currently admit over 15,200 patients and discharge at approximately 15,000 patients in a quarter. Our median length of stay is 13 days, which means half of our admits will require implementation of an extensive plan of care and will require significantly more visits per day than our average patient. In our hospice teams if we are over-staffed by as few as 2-3 FPE’s on any given day our margins will be negatively impacted by nearly 200 basis points. With that said it is imperative that we improve our consistency in…

Thanks Kevin. Net revenue for Vitas was $199 Million in the first quarter of 2008, which is an increase of 7.9% over the prior year period. This revenue growth was the result of increased ADC of 3.4%, a Medicare price increase of approximately 3%, and a favorable shift in revenue mix from routine homecare to high acuity care. Average revenue per patient per day in the quarter was $186.67, which is 3.5% above the prior year period. Routine homecare reimbursement and high acuity care average $145.42 and $633.10 respectively, per patient per day in the first quarter of 2008. During the quarter, high -acuity days of care was 8.5% of total days of care. Quarterly high- acuity days of care have averaged between 8.0% and 8.4% in 2007. Any shift in revenue mix will have a noticeable impact on overall revenue given the significant disparity in reimbursement per diems. However, given the relatively low profitability margin on high- acuity care, this favorable mixed shift had minimum impact on gross profit and net income in the quarter. Selling, general and administrative expense for Vitas was $16.1 Million in the first quarter of 2008 which is an increase in 1.5% over the prior year. Adjusted EBIDTA totaled $23.6 Million, a decline of 9.3% over the prior year, and equates to an adjusted EBIDTA margin of 11.9%. During the first quarter of 2008, Vitas’ direct patient care margin for routine home care was 49.5%. This compares to 50.8% in the prior year quarter. Direct in-patient margins in the quarter were 19.3% which compares to 20.1% in the prior year. Occupancy over in-patient units averaged 80.7% and compares to 80.8% occupancy in the first quarter of 2007. In-patient margins have ranted between 15.9% and 20.1% over the past six quarters. Continuous care, the least…

Now is time for us to consider questions from the assembled multitude.

Your first question comes from the line of Darrin Lehrich with Deutsche Bank. Please proceed.

Thanks. Good morning everyone. A few questions on Roto-Rooter and a few questions on Vitas. As far as Roto-Rooter goes, I guess I need to know if you could comment a little further on call volume in April and what you are seeing at the present time. Just to give us a feel for the outlook there, and how closely you are gauging call volume. Tim O’Toole: We don’t expect call volume to change appreciably. The current run-rate of April is actually above what our guidance has it so sales are running stronger than our guidance. But given the volatility we have seen, and the impact I would say the recession is having, we are conservative. So basically April is running a little stronger than our guidance and we are anticipating a 3% drop in the second quarter of 2008 for Roto-Rooters revenue over the first quarter. But without a doubt if the recession runs extremely severe or it spreads well beyond the West and the South it could impact Roto-Rooters numbers b but we are not seeing that in April

Ok, and just as far as your geographic dispersion, I know you have commented on the West and California and Florida having this exposure, can you give us a sense for your footprint and your revenue concentration in maybe broad geographic swaths just to help us have a feel for that? Tim O’Toole: Let me just say this. We don’t have much of a presence in California. That’s a tough market, it just turns out that several of our multi-location franchisees exist in California. Basically, most of the major metropolitan areas east of the Mississippi is where we are, and then west of the Mississippi, we have a presence but it is a little more scattered. Clearly the concentration is Northeast, Southeast, and Midwest.

And Darrin if you go to our website and Chemed.com and look under industrial presentations, we keep our presentation that is updated and you will actually see a map that has the footprint of company-owned territories in the United States. Some of those are owned and operated, some of those are independent contractors, but you will see where the concentration is. And you will see a significant concentration in the state of Florida.

Sure. And then, Tim I want to get your perspective on the down-turn. Is it your sense that people are deferring things, is it more do-it-yourself? Can you just give us a little bit of a feel of what you think is going on out in the field with Roto-Rooter? Tim O’Toole: I will tell you that my sense of it is that it is deferral, and something that definitely happens on the commercial side. To the extent that you have new construction starts at a stand-still, you have a big influx of plumbers on the commercial side. They can’t really make a dent on the residential side, you see those on the commercial side. They are just putting in bids, feet on the street. There is no question in markets we have where there has been a lot of new construction we see a lot of increased competition on the commercial side. They can’t go out and get a bigger yellow page ad, so it’s not as big effect on the residential side as we have indicated there is a residential decline when things get tough. We call that internally the Home Depot effect. And that is people that if money is more of an issue they look for cheaper alternatives, and one of the cheaper alternative is to go to a Home Depot and get involved in what they call an “assisted repair”. Then you can rent a drain-cleaning machine, you can do minor plumbing work with some assist from the salesperson at Home Depot, and a call to one of their help lines. We think that’s what is going on in the residential side. But again, given the nature of the repairs, we don’t think it is a “stacking up”. There is some deferral when it comes to major plumbing activity but with regard to the decline in drain care work, obviously that’s gone. We are comfortable with the Roto-Rooter business in that the decline of 11% in call volume and jobs only down 7% I would say it shows some good work by the Roto-Rooter people. It’s anecdotal but I will tell you what the reports from many of our 500 franchisees , they are telling us that jobs are down between 10-15%. So, it’s pretty broad and we hammering away at the commercial side of the business and for the current time all that effort is allowing us to somewhat hold our own there, but we think we will be better positioned when the economy turns.

All right. And them, switching to Vitas, obviously the labor issues cropped up here. Several times over the last two years, seems to be somewhat of a systemic issue within Vitas. One question I have is philosophically do you view labor management in Cincinnati different than they do in Miami, is there a disconnect between how you think that organization should be performing?

I’ll start to answer it then turn it over to Tim. Let me start by saying, I will give you our thought process. Obviously it is an issue, it is an 800 pound gorilla when you are talking about where all the expenses are in Vitas. It is a service business, it is a labor expense. Historically, they have had a few blips, but they have responded pretty quickly when the labor number has gotten out of line. I will give you a good example. October of last year we saw labor numbers that were very similar to what we saw in the first three months of this year. There was a strong reaction both in Cincinnati and Tim and his people. The margins and labor expense in November and December were very good which really closed out the year for Vitas. They were over budget, had all things said and done a very good year last year. The January number came out, it was a bad labor number, there are some issues in the first year with unemployment taxes that made January not necessarily a harbinger for the future, but it was still worrisome. February came out and it was just as bad, and I can tell you that at that point there has been an about-face totally with regard…there’s not disconnect between Cincinnati and Vitas but I think that everyone is pulling on the same side of the oar to do number one as we made reference to in our presentation a change in the culture at Vitas, an insistence on using some of the labor managing tools that already exist with development of a few others. And if you ask me if I want to summarize everything that we have been doing, I would say this- that…

Ok. I’ll jump back in the queue. Thanks guys.

You’re next question comes from the line of Dawn Brock of J.P. Morgan. Please proceed.

Good morning. Very quickly just kind of following up on your comments Tim on the fluctuation on the shorter stay patient mix. This is kind of opposite of the trend we saw in 2007. So I think my question is, what is driving this shift back, and how does this impact the patient mix expectation and the average length of stay expectation for 2008? Tim O’Toole: We’ve seen a little bit of an increase in stay over the last four years, increasing every year. And again it is a function of managing your Medicare cap. So when you go in the market, most of the markets are very competitive, there is market growth out there and long-term there is huge growth in the demographics, but when you go after trying to take market share, and trying to find every referral source, and as we have tried to find new referral sources some of the way the business works is sometimes you get some of the patients that maybe should have been on hospice for two months but because they are not fresh with you, they are new referral sources, maybe they are referring it a little late in the process. There is no doubt in my mind that when you see patients that are on hospice service for two weeks probably 9 out of 10 of them should have been on hospice for a couple of months. It’s a little bit of our aggressive strategy of finding a strong selling effort, penetrating all markets and all referrals, and that mix will work its way through and I think longer term we are not going to see this increase. It’s stable and longer term we will see our average length of stay increase from this level of 71 days. It may not in the next quarter. But longer term it should be longer.

And Dawn with regard to that, I think you have to say what is going on in the medical reviews, and virtually every long-stay patient is reviewed, bounced at least once, subject to appeal, and we win those, but it has an effect on referral sources and the organization and to the extent that we went through a period where we had a significant increase in discharge of long length of stay patients. We are through that. We are now in a very comparable comparisons. When you have discharges of a very unusual number of long length of stay patients that in a sense artificially drives your average length of stay up because the average length of stay is calculated on discharge patients. To get to your question, do we think what is the outturn of a day, based on your estimate as far as our average length of stay? It was 71 this quarter, what do you see the trend in that?

And we will basically assume no change in length of stay, but Kevin’s is right in that. From the third quarter 2006 to the fourth quarter we saw a spike in our length of stay, calculated from discharge patients, and that spike is attributed to the FMR’s and the fact that we did have an increase in our log discharge for extended prognosis. So I would argue that artificially inflated the length of stay for really four or five quarters. Now in the first quarter of 2008 we see the exact opposite. We are seeing a drop in our live discharge for extended prognosis but because we had a really ,really nice uptake in our admissions, both sequentially and over the prior year this is a greater percentage of our discharge patients with 13 days or less has artificially deflated that length of stay. So really over the last four quarters it was artificially deflated and this quarter it was lower than it should be. So we think it will moderate somewhere around a 73 day period once we continue with this higher admissions trend, and we start lapping it, and we’ll see a stabilization in the length of stay. Tim O’Toole: And the bottom line is we were fairly happy, all things considered, with our average daily census and our increase in revenue for the quarter. That was the least of our problems.

Understood. Quickly , from the competitive landscape, what are you seeing? Is one of the drivers behind the increasing admissions staff competition from charitable organizations? A lot of the non-profits in certain regions? What are you seeing right now as far as the Mom and Pops and the pressure on them from Cap?

Well, I’ll turn it over to Tim. I will say this, that the best indication that you can have is on the political side. We are hearing from our lobbyists that senators and representative are being deluged with commentary from the not-for-profits and the smaller hospices that things are very tight and the budge neutrality factor must be fought at the battlements, that they cannot stand for a reduction in the increase in October. So we from that perspective we are hearing that they are doing a lot of complaining on the political side. I think that what we are doing is that we want to increase our admissions, so it is not that we are doing it purely defensively, but we are taking the offensive. We want to increase it. But it’s always tough. As these organizations start struggling, they start calling all the referral sources and start crying poor, and saying you have to help us out, but with why we are spending more on the admissions front is we want to take market share. It’s not purely defensive, as we have eluded to in the presentation, the payoff when you get more patients, 9 out of 10 of them live less than six months. They are fairly low margin, and a lot activity involved in treating those patients. It is not until you get the statistical outliers adding up that you get the payback for those. But Tim, do you have any comments? Tim O’Toole: As far as the competition, there are no big changes out there. We don’t see a reduction in the number of players. We look at each market that we serve in a global situation, and one of the bigger trends in the industry is the hospital based palliative care program. They are maybe keeping certain people in the hospital a little longer through that effort, but our strategy is that we are working with many of them and they become a referral source to us at the appropriate time. One thing you have to remember in this business is that obviously your competition is curative care. And people are aggressively seeking curative care with some of the new treatments in cancer. It hasn’t changed the landscape at all. But that is always an issue that is out there. We think over time that hospice gets more ingrained into peoples minds as it is always, they compare that with more of an educational outlook as compared to an emotional one and we do very well long term. No big change in the marketplace. We have competition in each market and it’s really a local market situation rather than an overall in the country,

Ok, and one last thing. This is going to be further depth into a question that was asked initially about the potential disconnect on the labor side, and I am curious, and maybe I’m just missing it, you talk about one of the reasons for the increased expenses is excess staffing, but volumes are up and admissions are up, so it would seem as though the additional staff would actually be utilized. You would have a higher utilization of the staffing. I’m not quite understanding what I would consider maybe a disconnect there, or maybe I’m just not getting it. Tim O’Toole: The answer to your question is about 106 basis points of margin is associated with increased admission coordinators and nurses. So that is the number $2.1 Million in additional spending in the quarter. That is there. We meant to do that. We hope that the pay back for that would be shorter, and we gave guidance, but it hasn’t been – we’ve been swamped a bit by the shorter stay patients. By increased utilization, by people having things to do, being needed, however, when you compare, on a team-by-team basis, and too many of the teams, when you compare them to 12 months ago, 6 months ago, the cost per patient for these teams to care for this patient is up by double digits in too many instances. In other words we have identified inefficiencies, and I’ll just say Dawn that with regard to the type of changes we have made, that is pushing out inefficiencies, over the last couple of weeks we have reduced labor expense on a weekly basis in excess of $200,000 a week. I’m focused on the inefficiency side. We’ve identified a number of other areas where it looks like we should be able to make similar progress. It’s very clear in our mind that a significant element of the labor problem is inefficiency. We’ve already begun to address it and we hope to be able to say we are addressing it not with a band-aid but with permanent changes in the way labor is managed and assigned on a team-by-team basis. We’ve already seen the progress. How much progress are we looking for? I would say we are half way there coming up with efficiencies that we think have to be achieved. Our presentation says we will be achieving those this quarter. We are off to a fast start, we think we are going to be there the second half of the year. This is a quarter where we are expecting to make great headway.

This question has come up a number of times, and to put it in perspective, there has been an fundamental evolution and shift over the last four years at Vitas. Our footprint has gotten significantly bigger, we have expanded a lot more programs, and particularly in the small and medium sized programs we have probably close to doubled the number of hospice teams. Average daily census forecasts slowed. We’ve always had stranded labor at any given time in a hospice team. But now we have a lot more hospice teams, that are growing a lot slower, a much bigger footprint with small and medium programs, and again a small and medium program has less opportunity to shift labor between hospice teams when they are only running three hospice teams versus nine in a large program. So as Vitas has grown and changed its footprint, the potential for more stranded costs in a hospice team in any given day over staffing has increased. That’s why to a great extent it was harder to get things back in the bottle every time labor flared up, which led up to an epiphany that we need to fundamentally change the way we schedule labor because of what I call this flare-up of over staffing. So it’s an acknowledgement of managing labor differently, recognizing average daily census is slowing, and there’s more pockets of stranded labor because we are dealing with almost 200 hospice teams, versus four years ago we had less than 100 hospice teams. That’s the acknowledgement of the changing of the environment.

Ok, that’s helpful. Thank you.

Your next question comes from the line of Eric Gommel with Stifel Nicolaus & Company. Please proceed. Eric Gommel- Stifel Nicolaus & Company: Good morning. I think Dave you just touched on the thing that I was going to ask about and that is they ADC growth. You would say that part of the issue maybe with the labor may also be related to slowing ADC growth overall? Is that one way to characterize it?

Yes, certainly if you go back from four years and three years ago to today, that is right. The slowing ADC growth and a lot more hospice programs and a lot more provider numbers, the potential for a flare-up is greater, and again a flare- up in a small program in Detroit, you can’t manage that against two other hospice teams if you don’t have two other hospice teams. Tim O’Toole: Let me give you another example. A Texas program that has a relatively significant decline in census. The first thing is the client census, the full time equivalents have to be reduced. That type of action presents us with something that Vitas has never dealt with before, and that is the danger of a mixed shift between home health care workers and nurses. One of the things being covered in that branch is their FTE’s were reduced appropriately but it was the mix shifted and there were more home health care aides released than there were nurses, with a view that the census will come back and the nurses are harder to get, we’ll cut, we just won’t cut as severely with the nursing staff. That has a dramatic effect on the labor cost in that branch, or to the team where the cuts were being made. That mix shift is something Vitas never had to deal with previously, and that pops up when overall your census is growing a few percents as opposed to 12%. That is the type of thing they are dealing with the first time. But a team can’t go seven days now without getting a lot of attention if that type of situation is developing. We’re handling it on a slot basis, each team that seems to be out of whack. I think we’re…

Again, it’s hard to get your arms around it because some of it is rumor. Some of it is said behind the scenes. By all indications CMS it appears that CMS is following directive from the White House in terms of trying to hold back on all entitlement programs, both Medicaid and Medicare. They are making a statement and they are taking a wide range of trying to hold reimbursement. One of which of course is the budget neutrality factor, by all indications they intend to put out at some point in the Federal register a phase-out of a portion of our historical inflation index of the budget neutrality factor that would work out to be in theory 4.5% reduction phased in over three years of our basket increase. Or about 140-150 basis points a year for three years. We’ve also seen indication out of Washington that both Democrats and Republicans are severely resisting this administrative process of taking away reimbursement of some very important healthcare benefits to Medicare beneficiaries and Medicaid beneficiaries. So without a doubt there is a struggle going on in Washington, Metpak certainly reported on average of hospices losing money in the provider based, hospital based, and not for profit, so this will take them further under water. And hospice by the latest Duke study saves the government money and politicians recognize it is poor politics to severely harm this type of health care plays. But there does seem to be a battle going on. If the budget neutrality factor is phased out over three years, that would theoretically, if we didn’t do anything to adjust our structure, cost us $.05 a quarter, $.20 a year starting in the fourth quarter of 2008. We also think there are serious questions legally whether CMS could take administratively, confiscate inflation that we’ve received, that Congress mandate we receive over the last ten years, but it appears to be a risk factor that is out there. Eric Gommel- Stifel Nicolaus & Company: Thank you.

Your next question comes from the line of Adam Feinstein with Lehman Brothers. Please proceed.

Thank you. Just real quick. Two questions. Not to beat a dead horse here, but in terms of the additional staffing related to admissions, I understand the reasons behind it, but I don’t know why you wouldn’t have known about it when you established guidance previously. So just curious in terms of why that caught you off guard. Tim O’Toole: We did we realize we are doing this. It’s a factor that given the fact that it was successful but it resulted in a higher number of short-stay patients the expenses associated with those patients caught us a little off guard, let’s put it that way. When you look at our discharges versus our admits they only differ by 200 for the whole quarter. We expected a little more bump in census from them which would then have covered those costs, but when you have a declining creek it shows a lot of stumps. We had that activity without the census to cover it. It was an additional decline in margin. We didn’t raise the admission coordinator and nurse numbers inadvertently. We did that intentionally, but there wasn’t the “rise in creek” that would have covered that. It’s not an excuse, but where did the extra expense come from?

And that is exactly right. It was up 18% over the prior year, 4% sequentially, and we’re just reconciling the difference in margin from this year versus a year ago, not using it as an excuse, because at the end of the day our miss is due to having too much labor in the field primarily related to patient care. This is just reconciling where margins came from.

Very helpful. Ok, and a follow up question about CMS. One of the other overhang issues in the regulatory front has been more scrutiny over hospice patients are treated in nursing homes, some recent literature out of Medpak talking about that. Just curious, your thoughts there, do you anticipate changes and your exposure to those patients?

We do look at routine home care, we look at nursing home and non-nursing home routine care patients, and Medpak’s understanding of hospice has actually grown light years over the past twelve and eighteen months. Primarily because Vitas has provided to MedPak information on hundreds of thousands of patients and how hospice is working on visits, ,both nursing homes and non-nursing homes. MedPak has a greater appreciation for Medicaid patients in a nursing home, basically the reimbursement is now covering largely the roof, the meals, and the bed and we provide the health care. As opposed to a double dip. They recognize there are greater efficiencies to treat multiple patients at a single site but they have evolved their thinking relative to nursing home versus non-nursing home patients. I think they are always going to be taking a tough look at this issue, but I think they have a greater understanding that it’s not a “double dip”.

Ok. Thank you very much.

Your next question comes from the line of Jim Barrett of C.L. King Jim Barrett- C. L. King & Associates, Inc.: Good morning. I have one question at this point. Dave, your revenue guidance for Q4, for Roto-Rooter, does that implicitly imply an improvement in the macro economic environment, or is there some specific actions being taken by Roto-Rooter to start growing the business again?

Great question. That is exactly right, the fourth quarter of Roto-Rooter, that includes the high end of what we typically see in seasonality relative to it. It’s also related to the fact that we have relatively low numbers in Q2 and Q3. But we think that some of these deferred jobs do materialize, I am hoping it will be earlier than Q4,but still very optimistic we are going to get a nice bump relative to the “holiday activity”, but even if we are in a recession I expect a big chunk of that holiday activity will still happen. I think I am very conservative on the guidance. I have a fair amount of movement downward within the range we have given. That is probably the only area of aggressiveness I have, potentially maybe 1 to 2 points sequential growth Q3 to Q4. I think there is a solid basis for anticipating it. Jim Barrett- C.L. King & Associates: Thank you very much. Operator Your next question comes from the line of David Larsen with Cohen. Please proceed

Hi, how is the April call volume trending for Roto-Rooter? I think it was down 11% in Q1. How is April doing? Tim O’Toole: I think we said earlier, we don’t have that number sitting here at the desk. But I will say that the report was running that it was similar to March. So, not worse, not better. Based on our estimates our sales are a little bit better than we had built into our guidance. So the Roto-Rooter would suggest one of two things- that calls have improved slightly, or that our conversion rate has improved slightly from our normal predictive mechanism.

That’s helpful. And then, of the $2.1 Million in admission expense, do you have a rough percentage breakdown of how much of that was for sales reps, versus admissions coordinators and nurses? Tim O’Toole: It’s pretty similar between sales and admissions. Admission nurse category is up a little higher than the salesman category.

But you would almost expect them to be within the same mix ratio. They get paid about the same.

You had made a comment that labor expense was down $200,000 a week from recent initiatives? That sounds very impressive to me. If I think about that on a quarterly basis that is around $2.4 Million a quarter, right? Should we expect labor costs to come down $2.4 Million in Q2? Tim O’Toole: That’s the run rate and that would be very similar to our goals, yes.

And in our anticipation to get things down to normal we need about twice that. We need more like $400,000 over a 13 week quarter.

You would need twice that? Tim O’Toole: Comparing that to our goal, obviously if our revenue is higher….

Well let’s put it this way. In the third quarter we expect the comparison to the first quarter weeks to be different by about $400,000.

Ok.

We’re already there with half of it, that is really by the last week of March in the first quarter. So, we’re going to show good improvement in the second quarter and our plan is to be there or beyond for the entire third quarter. And long term through brute force, Tim O’Toole and his team is bringing labor back now, and then in the process we are re-engineering the process to avoid it in the future. So really there are two things going on. Immediately just trying to draw down labor expense, and put better tools in the field, and have a better process to keep them from happening in the future. And that’s the late 2008-2009 long-term benefit.

OK, and just one last question here. Are you basically eliminating staff? Are people being laid off? Is that how you’re lowering your expenses, or are they paid per visit or something like that?

It’s the former. They could be part time or salaried but basically we have what number of terminations in this quarter Tim? Do you have that number? Tim O’Toole: Probably about 120 at this point. It’s a combination of terminations of your staff, and utilizing less overtime because you do a better job of scheduling the people you have, doing a better job in the decision between a salaried person and a per diem person, and doing a better job of using an appropriate mix of skilled and non-skilled to not let it drift. The mix is not bad, so it’s a multitude of issues.

We run about 25-32% turnover depending on the category. And taking advantage of that natural turnover to reign in costs.

Ok, sounds like the $2.1 Million, that’s sort of an investment to increase your sales activity. You are trying to basically secure referral sources. Now with the people you are letting go, that $2.4 Million to date, that’s sort of the people in the field, the nurses doing the work?

That’s correct- and home health care aides.

And home health aides, OK. So, it’s not like spend that $2.1 Million and then you let half of them go, it’s sort of the strategy is taking time to roll out.

That’s right. If anything, we’re still continuing to be successful, there’s no reason why we wouldn’t continue to increase our sales reps and admission personnel to the extent that we felt we were getting bang for that buck.

Ok, and then the increase in the admissions staff was not to meet existing demand, it’s to increase that in the future?

That’s correct.

Ok, I think that pretty much answers my questions. Thank you.

Your next question comes from the line of Sean Daly with THM Holdings. Please proceed.

Hi, good morning. Given the stocks performance, and I think you’re doing a nice job in a difficult environment, but the reality of the situation is the stock has performed quite poorly the last year- does the board from time to time review the way the company is structured with the two very, very different businesses and would shareholders be better served selling one of the businesses and re-investing in the other and paying shareholders a special dividend or something of that nature?

Over the last four years we have gotten this question virtually any time a group of shareholders get together. The real answer is historically and even to this day, we don’t think we are putting any limitations on valuation based on the disparate nature of the two entities. We think that to the extent that there are advantages when you have a business that is almost 95% dependant on the government to pay the bill, it is reassuring to lending services to know that you have a subsidiary whose cash flow is more than sufficient to pay the debt service on any reasonable amount of debt. The real answer to your question is, if we thought that we were facing some limitation of value, or a reduction in value based on the unusual nature of….

You’re trading at less than 10x your current guidance, so….

Not due to a discount due to disparate operations, that’s due obviously to excess labor in Vitas and the overhang of what will reimbursement look like at the end of this year and next year. Tim O’Toole: We had a bad quarter. I mean the multiple of the F&P 500 at this point is probably 12. That has more to do with the capital markets that anything going on within our business.

I’m not trying to be argumentative, but it’s two extremely different businesses, and…. Tim O’Toole: I’ll give you a normal issue. Our basis in Roto-Rooter is less than $100 Million. There are all sorts of limitations, there’s no tax-free spin-off possibility because you have to own Vitas for five years and have you, but basically it would be a taxable transaction, even after five years it would be taxable shortly after the spin-off. But the tax bill, selling Roto-Rooter for any reasonable amount would be such that to get back to even we would have to have a use of proceeds, there would be a significant diminution in total value of the holding.

And that would be the same as if you separated the two entities into two different publicly traded companies?

That is correct.

OK Tim O’Toole: What you are really suggesting is a tax free spinoff of one of the two entities. Technically cannot do that, for a period of another year and a half or so, and then as I mentioned, and even if we did that, Roto-Rooter was a separate publicly owned company at one point where we owned 60% of it and it traded at a big discounted value, just because it was kind of an orphan company. From what we would have anticipated a week after we did that, someone would make an offer closer to the real value of the company, and it would be a taxable transaction at that point, for all holders.

And what would preclude the sale of the hospice business?

Same thing. You could sell it, but it would be a taxable transaction, it couldn’t be a tax free spin-off for the same period of years.

Well thanks very much.

Your next question comes from the line of Gene Vaught with Cardinal Capital Management. Please proceed.

Gentlemen, somewhat along the same lines, obviously the stock is somewhat down today. Your free cash flow was reasonably good in the quarter. I saw Dave that you did buy stock in the first quarter but relative to your stated objective of acquisitions given that you know the job in front of you does it make sense that you guys might continue to buy stock aggressively at these levels?

Yes it does, at these levels. It’s a pretty good deal, from our prospective. We are more likely to buy stock at this level.

You had indicated roughly $100 Million of free cash flow as being reasonable for 2008. Does that really change a great deal based on your new forecast?

Well basically our cash flow and our EPS are one and the same. Nothing really sticks to our balance sheet.

OK.

What we’ll do is 305-320 in cash flow as well.

CapEx for the year, Dave?

CapEX is pretty well equal to depreciation, so that’s how it works out that way.

OK. Thank you very much.

At this time we have no more questions and I will turn the call back to management for closing remarks.

Well this has been a pretty long call already. And we’ll attempt to have better results next quarter for you. And thanks for your kind attention.