Good day, ladies and gentlemen. Thank you for standing by and welcome to Chemed Corporation third quarter 2021 earnings conference call. At this time, all participants are on a listen only mode. After the speakers presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press the star, then the one key on your touchtone telephone. Please be advised that today's conference may be recorded. If you require operator assistance, please press star then zero. I would now like to hand the conference over to your speaker host today, Sherri Warner with Investor Relations. Please go ahead.
Good morning. Our conference call this morning will review the financial results for the third quarter of 2021 ended September 30th, 2021. 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 October 28th 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 October 28th, 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.
Thank you, Sherri. Thank you, Sherri, for your services over the years. This is Sherri's retiring at the end of the year, and this is her last introduction to a quarterly conference call, but we do want to thank her for all her efforts. Good morning. Welcome to Chemed Corporation's third quarter 2021 conference call. I will begin with highlights for the quarter, and Dave and Nick will follow up with additional operating detail. I will then open the call up for questions. Our third quarter 2021 operating results released last night reflect very solid performance for both VITAS and Roto-Rooter. On a go-forward basis, I would like to share with you some of the macro issues we are dealing with as we approach the end of the second year of the pandemic. For VITAS, the most important issue we are managing is labor.
Staffing of licensed professionals has been exceptionally challenging to ensure an adequate mix of licensed healthcare workers on a market-by-market basis. This is particularly challenging during the pandemic as we deal with dynamic fluctuations in patient census in every market. Turnover within our licensed staff remains above our pre-pandemic rates, but we are seeing indications of normalization as we continue to expand our hiring and retention initiatives in many markets. Beyond managing our staffing levels, we are observing increasing pressure on salaries and wages. To date, we've managed these pressures with increased paid time off or PTO. We view it as inevitable that healthcare wages will increase if we continue to have a nationwide and systemic imbalance in supply and demand for licensed healthcare professionals. Fortunately for VITAS and the hospice industry, there is a natural hedge against the inflationary pressures on costs, specifically labor.
The annual increase in the Medicare and Medicaid hospice reimbursement rates is based primarily on inflation in the hospital market basket as measured by the federal government's Bureau of Labor Statistics. Typically, the annual inflation measured as of March 31st is used to determine the following October 1st reimbursement increase. This should give the hospice industry a reasonable stability in operating margins in an inflationary environment, albeit with a six-month lag from the inflation measurement to the actual reimbursement increase. The second critical challenge for VITAS is the continued disruption to senior housing occupancy and delayed hospice referrals. Our recent admission data suggests senior housing is in the process of recovery. Pre-pandemic, nursing home-based patients represented 18% of our total average daily census or ADC. The nursing home ADC ratio hit a low of 14.3% in the first quarter of 2021.
In the second quarter of 2021, nursing home-based patients increased 60 basis points to 14.9%. In the third quarter of 2021, our nursing home patients represented 15.6% of our total ADC. Our updated 2021 guidance anticipates sequential improvement in senior housing-based patients in the fourth quarter of 2021, with acceleration in senior housing admissions anticipated in 2022. For Roto-Rooter, our most significant challenge has been to increase manpower. We've expanded technician manpower by 8% in 2021. However, based on our current demand levels, we continue to remain understaffed in many of our markets. Technician compensation plays a role in recruiting new employees as well as retention of our existing employee base. Our average 2021 technician and field sales force compensation is over $81,000 per year.
Most of our technicians are paid on a commission basis on revenue generated. As a result, pricing for our services is a critical component in increasing technician wages. We anticipated passing through inflationary price increases in all our markets in the fourth quarter of this year. Demand for plumbing, drain cleaning, excavation, and water restoration services remain at record levels. I wanna give additional color on the depth and breadth of this increase in demand. Let's compare Q3 2021 revenue to Q3 2019, excluding the HSW acquisition, which was completed in September 2019. Under this unit-for-unit comparison, residential services have experienced incredible growth. In aggregate, residential branch revenue increased 46.2% over this two-year period.
On a service segment basis, residential plumbing revenue increased 37.1%, drain cleaning expanded 36%, excavation increased 65.6%, and water restoration increased 48.1%. Commercial demand has been more challenging, however. Commercial revenue has experienced a significant recovery since the 40% decline in commercial demand noted in April 2020. Overall, commercial revenue declined 3.1% over this two-year period. On an individual service segment basis, commercial plumbing service declined 4.9%, drain cleaning expanded 1.8%, excavation declined 10.2%, and water restoration increased 7%. We anticipate continued strengthening in commercial demand in the fourth quarter of 2021, as well as throughout 2022. Over the past 20 years, the country has faced 9/11, the Great Recession, and now a global pandemic.
In each of these crises, Roto-Rooter remained operating and materially increased market share, revenue, and operating margin. Just as important, post-crisis, Roto-Rooter held on to these increases in revenue, market share, and margins. Roto-Rooter is well-positioned post-pandemic, and we anticipate continued expansion of market share by pressing our core competitive advantages in terms of brand awareness, customer response time, 24/7 call centers, and internet presence. With that, I would like to turn the teleconference over to Dave Williams.
Thank you, Kevin. VITAS' net revenue was $317 million in the third quarter of 2021, which is a decline of 5.8% when compared to the prior year period. This revenue decline is comprised primarily of a 5.3% decline in days of care, partially offset by a geographically weighted average Medicare reimbursement rate increase, including the suspension of sequestration of approximately 1.2%. Our acuity mix shift had a net impact of reducing revenue approximately $3 million or 0.9% in the quarter when compared to the prior year revenue and level of care mix. The combination of Medicare cap and other contra revenue changes negatively impacted revenue growth an additional 80 basis points. VITAS accrued $100,000 in Medicare cap billing limitations in the quarter.
This compares to $4.1 million reversal of Medicare cap billing limitations in the third quarter of 2020. Of our 30 Medicare provider numbers, 27 of these provider numbers currently have a Medicare cap cushion of 10% or greater. One provider number has cap cushion between 0% and 5%, and two of our provider numbers have a fiscal 2021 Medicare cap billing limitation liability. Roto-Rooter generated quarterly revenue of $221 million in the third quarter of 2021, which is an increase of $30.1 million or 15.7% when compared to the prior year quarter. Roto-Rooter's branch residential revenue in the quarter totaled $151 million, which is an increase of $22.2 million or 17.2% over our prior year period.
This aggregate residential revenue growth consisted of drain cleaning increasing 11.7%, plumbing expanding 17.4%, excavation increasing 14.1%, and water restoration increasing 28%. Roto-Rooter branch commercial revenue in the quarter totaled $52.3 million, which is an increase of $4.7 million or 10% over the prior year. The aggregate commercial revenue growth consisted of drain cleaning increasing 17.6%, plumbing increasing 9.3%, and commercial excavation declining 1.3%. Water restoration also increased 9.4%. Now let's turn to Chemed on a consolidated basis. During the quarter, we repurchased 350,000 shares of Chemed stock for $164 million, which equates to a cost per share of $467.80.
As of September 30th, 2021, there was approximately $148 million of remaining share repurchase authorization under this plan. Chemed restarted its share repurchase program in 2007. Since that time, Chemed has repurchased approximately 15.2 million shares, aggregating approximately $1.7 billion at an average share cost of $113.04. Including dividends over the same period, Chemed has returned approximately $1.9 billion to shareholders. We have updated our full year 2021 guidance as follows. VITAS' 2021 revenue prior to Medicare cap is estimated to decline approximately 5% when compared to the prior year period. Average daily census in 2021 is estimated to decline 5.5%.
Our full year adjusted EBITDA margin prior to Medicare cap is estimated to be 18.8%. We're currently estimating $6.6 million for Medicare cap billing limitations in calendar year 2021. Roto-Rooter is forecasted to achieve full year 2021 revenue growth of 17.3%. Roto-Rooter's adjusted EBITDA margin for 2021 is estimated to be between 28.5% and 29%. Based on the above, full year 2021 adjusted earnings per diluted share, excluding non-cash expense for stock options, tax benefits from stock option exercises, costs related to litigation and other discrete items, is estimated to be in the range of $19-$19.20.
This compares to our initial 2021 adjusted earnings guidance per diluted share of $17-$17.50. This revised 2021 guidance assumes an effective corporate tax rate on adjusted earnings of 25.1%. This compares to Chemed's 2020 reported adjusted earnings per diluted share of $18.08. I'll now turn this call over to Nick Westfall, President and Chief Executive Officer of our VITAS subsidiary.
Thanks, Dave. In the third quarter, our average daily census was 18,034 patients, a decline of 5.3% over the prior year, and a 0.2% increase when compared to the second quarter of 2021. This year-over-year decline in average daily census is a direct result of pandemic-related disruptions across the entire healthcare system since March of 2020. Our hospital-generated admissions have largely normalized to pre-pandemic levels. Referrals from senior housing, specifically nursing homes and assisted living facilities, continue to be disrupted. During the third quarter, we've seen admission stabilization and pockets of improvement in senior housing admissions. However, it remains too early to accurately project the pace and timeline for senior housing admissions to fully return to pre-pandemic levels. In the third quarter of 2021, total VITAS admissions were 17,598.
This is a 1.9% decline when compared to the third quarter of 2020 admissions, and a 4.5% sequential increase when compared to the second quarter of 2021. In the third quarter, on a year-over-year basis, our hospital-directed admissions declined 0.8%. Total home-based pre-admit admissions decreased 8.3%. Nursing home admits declined 0.2%, and assisted living facility admissions declined 8.6%. When you compare our third quarter, third quarter 2021 admissions to the second quarter of 2021, we generated solid sequential improvement, with hospital-directed admissions improving 2%, total home-based pre-admit admissions increasing 16.3%, nursing home admits expanding 8.9%, and assisted living facility admissions increasing 5% sequentially. Our average length of stay in the quarter was 96 days.
This compares to 97.1 days in the third quarter of 2020 and 94.5 days in the second quarter of 2021. Our median length of stay was 13 days in the quarter and compares to 14 days in the third quarter of 2020 and is equal to the second quarter of 2021. Before I turn this call back over to Kevin, I wanted to thank our VITAS team members for their ongoing commitment and all-hands-on-deck approach throughout the third quarter and all of 2021 as we continue to successfully navigate the daily challenges Kevin spoke about earlier on the call. With that, I'd like to turn this call back over to Kevin.
Thank you, Nick. I will now open this teleconference to questions.
Our first question coming from the line of Joanna Gajuk with Bank of America.
Good morning. Thank you for taking the question here. First, I guess on the hospice segment on VITAS, in terms of the better margins this quarter, and the guidance implying that margins are actually expected to maybe improve in the fourth quarter. Can you talk about, you know, what's driving that, especially in the context of, you know, the broad-based labor shortage, labor pressure?
Yeah. Joanna, the primary difference between the third quarter and the fourth quarter is October 1st, the Medicare price increase takes effect. That's a primary driver related to the marginal increase that has always occurred, you know, going back forever from the third quarter to the fourth quarter. All the other dynamics we spoke about regarding labor pressure, managing through it, you know, all those will continue through and are, you know, identified not only in our fourth quarter, but will be forecast when we release our 2022 projections.
In terms of you managing the labor pressure, can you flesh out for us what steps did you take or are you taking that allows you to keep this very favorable retention rate given we're hearing a lot about a lot of turnover. I guess in that context it also seems like you do not really rely on contract labor. Can you talk about whether there's any change there? Thank you.
Yeah, sure. From a retention and a turnover perspective, as Kevin alluded to in his remarks, we're still running at turnover rate that's higher than our pre-pandemic levels. It's something that we are absolutely continuing to focus on and improve upon. You know, I obviously pay attention to the numbers everybody else references with it. You know, we're dialed in and focused on continuing to try to improve that, and where our level is today is not where we want to be. We wanna continue to improve it. As it relates to continuing to manage through, you know, inflationary wage pressure as well as all sorts of other inflationary pressure related to it, the team's done a fantastic job and would expect us to continue to do a fantastic job.
with that being said, we're being very intentional and focused on a market-by-market, community-by-community basis to respond appropriately for specific staff and specific staffing levels. When needed and when necessary, we're also looking for opportunities for offsets to that inflationary cost, whether it's becoming more efficient or thinking through how we wanna structure the way in which we're servicing that market. The team's done a fantastic job in the third quarter and for the last, you know, 19 months with that. You know, it is the number one thing we are doing on a day-to-day basis, and it's what I refer to in terms of the all hands on deck, everybody rolls up their sleeves, and let's continue to navigate through this.
If I can follow up, when you talk about wage pressure in some markets, seems like you have to respond appropriately. Can you give us kind of sense of the magnitude of things? What wage inflation do you expect next year in terms of, you know, year-over-year, overall increases that you would implement?
Joanna, we're still assessing the impact of all of those pressures, so we're really not prepared to project that out for next year at this time.
Okay. 'Cause what I was getting at with that is, yeah, the margins are very strong, you know, this quarter and into next quarter, then I guess sequestration is coming back next year. Just thinking, you know, high level, I understand that you're still walking through the numbers and projections. You know, can you, I guess maybe, refer to your prior comments about normalized margins for VITAS post-pandemic of 17.5%-18%? So given all these things and this variability and expectations, do you expect, you know, to be, you know, in that range or below that range, for next year?
If you go back to the last full year we had before the pandemic started disrupting things, that was the range of adjusted EBITDA margin we were generating. Our expectation is post-pandemic in a normalized environment, and you can debate when that happens. This is 2022, start of 2023. Whenever that normalization of senior housing occupancy, hospital occupancy, referrals, and all the mix is normalized, that's that 17.5%-18%, which also is predicated on us running about a 4%-4.5% of our days of care are high acuity. When that happens, that's still uncertain to us.
We thought up until the variant started raging this country or really globally, we really thought Labor Day 2021 would have been the beginning of true accelerated pace of normalization. Obviously, that's been pushed off into next year. I'm not trying to be evasive by any means, but we don't know the
We're guessing.
We're guessing when will normalization occur? It's clear 2022 is gonna be impacted by the pandemic still. At this point, to forecast out margins and impacts on wages, it's too early. How much of the wage pressure right now, say, for outside contracting services is transitory versus permanent? That's all unknown. What will be the level of our licensed healthcare professionals in terms of that supply for the needs of the country? If people return to the workforce who've exited, who were in those positions pre-pandemic, things will return to normal quickly. If we see a shortage of staffing, then it's gonna put wage pressure.
It really starts with, and this is just summarize what Dave said, the pandemic has laid bare one very clear fact: all admits are not equal, you know. To the extent that the most important admit source that is, you know, senior housing, was so disrupted and directly disrupted by the pandemic, just totally upended the hospice market. You can't dig yourself out just by getting hospital admissions. The thing that in Nick's presentation that is most hopeful is the fact that that referral source seems to be coming back fairly strongly. That is a rising tide that lifts all metrics, let's put it that way.
As far as the timing and pace of that, as Dave said, you know, we'll do a little bit, you know, deeper dive on it as we go through the budget process the next month and a half. When we give guidance in February, when we release annual earnings, we'll have guidance that's based on that budget. At least at that point it'll be a guess, but it'll be an educated guess. At this point, we haven't gone through the process.
That's right. It's a bottoms-up approach, Joanna. The ranges you were referencing are very unique on a market-by-market basis and on a discipline-by-discipline basis as well, based upon all the factors going on in states and communities.
Okay. Thank you. I guess I'll go back to the queue.
Now, next question coming from the line of Frank Morgan with RBC Capital. Your line is open.
Good morning. Just thinking about your different buckets of referral sources, you know, given the uncertainty around the recovery, the timing of the recovery and normalization, is there any thought about just kinda strategically rethinking the balance of your referral sources? Does it make sense to, you know, allocate resources to some of these other areas, or is it just still too attractive to stick with the, you know, the senior housing, the long-term care, and the assisted living segment?
Frank, this is Nick. You've hit on a key piece that we have moderated on throughout the course of 2021 very intentionally. As Kevin alluded to, and it's something we talk about internally, you know, our mission, you know, all lives are created equal, but where we're deploying our time and really trying to extend relationships has really intentionally shifted as Kevin alluded to. We are off and executing. You can see some of that inside of the third quarter. You know, some of the third quarter compared to the second quarter inside of my comments that I mentioned as well, and would anticipate that continuing, you know, for the rest of the year and into 2022.
Frank, as you can imagine, you know, when the cap year starts October 1st, VITAS is going hell-bent for election for admits in every market to build cap cushion. Okay. It's almost, you know, when we talk about reallocating resources, it's always hard to take resources away from, let's say, the hospital market because those are fertile source of admits, which you never know how many you need. It's, as Nick said, you know, to the extent that that picture becomes clearer during the course of the year, it's clear more resources are put to the areas that are more likely to lead to expanded stay.
Frank, the only other comment that drives towards that, and it's been consistent throughout the pandemic. When you think about an environment where we continue to have staffing pressure, not only from our admission teams responding, but from our care teams, you know, we need to be much more selective and intentional around where we're allocating our time because, you know, I'll use the metaphor of the phone ringing to equate to our sister firm at Roto-Rooter. The phone's ringing off the hook in terms of demand for hospice-appropriate referrals on a market-by-market basis. We're really just ensuring we are prioritizing our time and responding and building relationships on a market-by-market basis.
Got you. I guess the margins held up remarkably well considering the wage pressure. Is productivity? I mean, how much of that's productivity? Is there any change in, you know, visits per case per week? Or is there anything else in there that's driving that? Maybe some color about specifics on the use of contract labor and how does that affect productivity?
Yeah. Absolutely, productivity has increased. You know, would anticipate us looking for all opportunities not only from a productivity perspective, but also from an efficiency perspective. When I reference efficiency, what I mean is ensuring we are either eliminating or streamlining all activity that would have taken our team members in an administrative function, not in a patient-facing function, and trying to make those as efficient as possible. We measure productivity based upon the time they're at the bedside, and that's continued to increase. It was already part of our strategic initiative, right? For the last few years, but we have just continued to accelerate and push that, and that's helped us.
You know, in the same regard, we need to continue to retain our team members, and we've been successful in our ability to recruit. You need to be able to recruit and hire and retain, and that will continue to stabilize our staffing levels on a go-forward basis. For contract labor, we use it selectively. The biggest impact on contract labor inside of certain states is, you know, our continuous care deployment for our select disciplines. It is very competitive, particularly with some, you know, extreme pricing and wage inflation. We've been very selective so that we're not out just, you know, paying contracted rates that, you know, is a losing proposition from a hospice perspective because those rates are heavily influenced by hospital systems and other organizations.
You know, if it goes up 300%, we're not gonna be renewing, you know, those contracts obviously. You know, it's not a huge influence. You know, we don't use a ton of contracted labor, but it really just impacts our continuous care service line, for the most part.
Gotcha. Last one, maybe a Dave question or an everybody question. When you think about, sort of the return of the sequestration next year, could you kinda remind us what the gross impact there is, and then maybe the net of your expected market basket update? On the market basket update, can you talk a little bit about how long you think it takes for that to catch up and reflect all the labor pressures that you're seeing? Thanks.
Yeah, the sequestration and just round numbers, call it $6 million a quarter or $24 million is the benefit, maybe slightly less than that. That would be a significant headwind if they put sequestration back in place January 1st.
Which we haven't given up on, by the way.
This is scheduled to sunset, but there is some talk about it being extended, the benefit. That's probably, you know, the biggest headwind we have for next year.
For the pricing market basket impact is 2.2%, Frank, what we're anticipating.
Your question, the Bureau of Labor Statistics measures the inflation by CBSA, Core-Based Statistical Area. Basically, they use the information from April 1st through March 31st is the measurement, and then the following October 1st is when that rate increase actually gets put in place. Really, from the full measurement period, which ends March 31st, then six months later, that goes into your reimbursement increase, and that's the lag Kevin referred to in his prepared remarks earlier. About a six-month lag where you could see margins squeeze next year if this inflation in wages isn't transitory, but it's permanent, and that's the issue we're currently addressing now. In the end, these things tend to work its way out.
The industry is in a pretty good position where the government acknowledges how labor-intensive we are, and the increase we get is based upon hospital wages for these licensed professionals. There really should be a hedge, but with a six-month lag.
For next year, for the October 1st.
Long term, Dave, I know, you know, obviously things are changing by the minute, but on a longer term basis, in the budget blueprint, there's a lot of money being suggested for nurses and hospice nurses.
Yeah, there are actually talks of as much as $20 billion going towards training for hospice-licensed personnel. Now, this is the framework analysis, which seems a little fluid at the time, but without a doubt, we see strong indications that the government continues to invest in the hospice industry.
Well, realizes the pricing pressures.
Yes. Frank, any additional follow-up, Frank?
Okay. I think that is the last question in the queue?
Are we done?
We do have a follow-up from Joanna of Bank of America. Joanna, your line is open.
Yes. Thank you. I guess I just wanna move to the Roto-Rooter segments, because I guess the strength there, you know, continues to be impressive, both on the top line and bottom line. Can you talk about kind of the margin situation there? I mean, I guess it's, you know, the opposite of what we just discussed in terms of Medicare rate increases, how you have to wait for this to play out. Well, here, I guess, can you talk about your ability to put prices in the market? I guess you mentioned inflationary price increases you plan for Q4. Can you give us a sense of the magnitude of, you know, those increases that you might consider?
Yes, we do have pricing power within the Roto-Rooter business within that industry. If you define the industry as same day, next day, predominantly emergency plumbing and drain cleaning services. We have the pricing power, and we price based on market by market, procedure by procedure. What we pass through in a price increase for plumbing is different than drain cleaning and different lines within those segments. We can't give you anything more granular, Joanna, because we're still developing it. We absolutely will pass through inflation increases, if not inflation plus a little bit more, because frankly, that's the way our technicians get increases in their wages. Our employees are feeling the pressures of inflation in terms of fuel, housing, all those costs that are going up significantly at 5%-6%.
They're paying those fees to feed their family, put fuel in their trucks that they predominantly own. That's why they're more receptive to price increases, and our employees are very comfortable selling the price increases to our customers because that's how they earn their money. That's how their wages go up. The exact amount of the increase, we'll do a weighted average analysis at the end of the year, and we'll give you more color in early 2022 on those increases.
One comment I'd like to make before leaving margins at Roto-Rooter. It's what we've observed is, generally speaking, historically, we've developed, you know, our fixed costs to support the plumbing and drain cleaning business, which was the first business. We've seen over time, as we've added substantially to the ancillary services, that is the excavation, the water restoration, that has significantly leveraged, you know, our margins and, you know, to the point where it's. I mean, I thought I used to think 20% was good. Now we're pushing 30%. It's that strength, you know, and the reason we're seeing that improved margin is, of course, the addition of those services.
You gotta remember that when there's strength in the underlying core business, that comes from those fixed costs. The rest are add-ons with very, you know, very little acquisition costs for the business. You know, to the extent that the underlying core business is strong, we know that the service lines of the other businesses will continue to be strong and then support that margin. The margin has increased, I guess, by saying, not by just taking price increases. The focus has been more on the leverage of not just the cost of the fixed business, but the underlying core businesses in and of itself.
Kevin brings up a key point on that, Joanna. It's not that the margins for water restoration and excavation are so high. Quite frankly, they're not that much materially different than our core business. As Kevin pointed out, after those costs, we don't increase the cost to operate a branch at all or certainly not materially. More of that incremental revenue and what I'd call raw contribution margin just drops straight to the EBITDA line. The growth in revenue is really resulting in the accelerated EBITDA margin increase.
Thank you. Two follow-ups on this last point, in terms of adding these ancillary services that allows you to leverage, you know, some of these branch level costs. Are there other, additional ancillary services that might make sense to add or you kind of already cover all the bases there?
We keep trying and, you know, we have at least, you know, one additional service that, you know, we're testing out and seeing if we can't find, you know, the winning formula. You know, over the years, we've tried just about every service that involves having a person or a technician in a truck going out to, you know, make emergency service on a consumer. You know, we've had successes, we've had failures, but we continue to look at that. In fact, water restoration really came about following a new look at it. We said, "Look, we're gonna forget all the former failures and look at everything, you know, with fresh eyes." That's where, you know, Roto-Rooter came up with the water restoration really from that process.
That process is ongoing, where we're saying, "Look, we've tried pretty much everything, but let's continue to look for something we could throw into this very powerful." I mean, again, when I talk about Roto-Rooter, you know, it's big in a very scattered industry, and so it has a lot of advantages on the internet. It's got a great service mark and, you know, again, we keep turning the pancake over. Again, I wouldn't from an analytical standpoint or an analyst standpoint, I wouldn't say. Again, the way we would get involved in it would be, you know, slow, methodical. I wouldn't think that any of those projects that I'm vaguely referring to are likely to reflect earnings or sales over the next year or two.
No, I understand. Yeah, I was just curious whether there are considerations, so it's good to hear there are some. My other follow-up was in terms of the Roto-Rooter, I guess, staffing level. You clearly increased your manpower nicely, I think you said 8% this year. I think I wanna say you said something about the demand level, you know, in some markets at least it feels like there's some understaffing there. Can you talk about that, whether it's more difficult to find manpower to provide the services and how do you expect this to play out into next year?
Without a doubt, if we could grow manpower, we could expand our revenue base even more significantly. The type of people we're looking for are self-starters as well, because typically our technicians own their own work truck, and that-
Which is an issue. We can't get vans now.
That has been an issue as well. Without a doubt, the pandemic has made hiring more difficult. Retention is fine, but hiring is more difficult, and it's a market-by-market issue. Again, we suspect as we get the pandemic behind us and we see an increase to more full employment in that key age category of people between 30 and 50, which is our sweet spot, we expect to see manpower expanding as the pandemic wanes in 2022.
Let's put it this way. The phone is ringing. The service technicians are making more money. $81,000 as an average is a high watermark.
That's an average among all of our technicians in the field. If you actually look at the folks with three or more years of seniority with us, the number is even higher. We offer an incredibly viable career path for tradespeople who don't feel this obligation to go to college, but wanna work with their hands. We have a very viable training program.
We can give them a career with great retirement benefits. There's a lot selling, but it's hard to find people who are willing to get their hands dirty in this day and age. We've been very successful in the past. A little bit of a limitation during the pandemic, but we're still pleased with the 8% growth in manpower, and we certainly look at 2022 as an opportunity to further expand our manpower. We don't kid ourselves. Right now in this environment, it's exceptionally difficult.
Definitely good to hear about, you know, successes there to get people, you know, I guess, involved in these jobs. There's definitely demand. Last question on Roto-Rooter. HSW, I guess we haven't really talked about how things are going there because obviously things were skewed with the pandemic. Any updates, you know, in terms of, you know, that transaction and your plans in those markets to make some changes? Thank you.
Okay. I can respond. Top line, you know, we're happy with it. When we make a purchase, we submit to our board a request for capital authorization. We make various projections justifying the expenditure of funds. Let me say that we're running ahead of those projections, so it's been a good one for us from a financial standpoint, you know. That is despite the fact, as we've talked about it had a significant commercial, you know, aspect to its business as opposed to, you know, our typical Roto-Rooter branch that's more residential. Right, you know, shortly after the acquisition, the pandemic closed a lot of types of commercial establishments that they would call on.
With that, even with that, and with the transition to a normalized Roto-Rooter branch, they've done well. There's still an upside, a big upside associated with them. They're in some great, very populous markets. You know, that's gonna be a significant part of the growth of Roto-Rooter over the next several years, undoubtedly. Yeah, it's. They're going well. Anything you'd want to say on that question about HSW, Dave?
No, I'd say, like, if you'd told us the pandemic was gonna hit, I would have said there's no chance of hitting those RCA projections. The Roto-Rooter management team did a phenomenal job of, quite frankly, accelerating some of the changes at the HSW locations or many of them during the pandemic. They took advantage of the disruption to accelerate improvement. I would say all of the locations with the exception of two were exceptionally pleased with, and the other two are works in progress. In aggregate, they're now exceeding our expectations.
Definitely good to hear that. My very last question on the Chemed level in terms of capital deployment priorities, including you spent a good chunk of your cash flow this quarter and your cash, I guess, on share repurchase. Kind of, how do you think about capital deployment going forward? Thank you.
I'd say we're staying with the same thesis we have on capital deployment. We love to do acquisitions, but acquisitions compete with share repurchase on a risk-adjusted return basis. We still look at share repurchasing as a macro item having a better return for lower risk for shareholders. We are always looking at acquisitions. We just don't pull the trigger because share repurchasing is more attractive. We look at that on a regular basis. I would even say it's more often than quarterly. It's a constant conversation with the board as well. We anticipate continuing with the dividend, of course, and a methodical increase into that dividend and share repurchasing.
We're not opposed to putting cash on the balance sheet, but at the current share price, we consider our free cash flow yield exceptionally attractive in an environment where Libor is at nine basis points.
Not only that, implicit in what Dave's saying is one of the big advantages of both Roto-Rooter and VITAS is they're very good cash-generating operations. You know, the real question comes down to, like any company, how you best use that advantage. It's been pretty clear, as Dave mentioned, you know, since we purchased VITAS, we've taken $1.7 billion and returned it to the shareholders. You know, it's not tied up in goodwill of questionable acquisitions. You know, there's a lot of very accepted theories of value, and that is the value of an asset is determined by what it returns to the owner. We've had very substantial returns that we can demonstrate.
Thank you for that color, and thanks for taking all the questions.
Thanks, Joanna.
I'm showing no further questions at this time. I would now like to turn the call back over to Mr. Kevin McNamara for any closing remarks.
Thank you. We're pleased with the quarter, the results, and thank you for your kind attention.
Ladies and gentlemen, that does conclude our conference call today. Thank you for your participation. You may now disconnect.