UPDATE 1-RESEARCH ALERT-Deutsche Bank cuts Chemed to hold

(Recasts; changes source; adds details, share movement)

May 19 (Reuters) - Deutsche Bank downgraded hospice care provider Chemed Corp (CHE.N) and questioned the company's ability to achieve its 2008 outlook as it struggles to manage labor costs and faces a proposal by the U.S. Medicare insurance program for the elderly to cut reimbursement for hospice facility wages.

Analyst Darren Lehrich, who cut his rating on the stock to "hold" from "buy," also said Chemed's Roto-Rooter drain cleaning and plumbing services business will hurt results longer than currently expected in the wake of the U.S. economic downturn.

In late April, the U.S. government's Centers for Medicare and Medicaid Services (CMS) proposed eliminating a wage adjustment for hospices that it says is outdated.

CMS's proposal could shave off about 20 cents to 30 cents a share a year from Chemed's earnings, Deutsche Bank's Lehrich said.

Lehrich cut his price target on the company's stock to $39 from $44 and reduced his 2008 earnings estimate for Chemed to $2.97 from $3.11.

Last month, the company had forecast 2008 earnings from continuing operations of $3.05 to $3.20 a share.

Eight analysts on average expect earnings of $2.99 a share, excluding special items, according to Reuters Estimates.

Shares of the Cincinnati, Ohio-based company fell 7 percent to a low of $32.80, before paring some of their losses to trade down $1.35 at $33.77 Monday afternoon on the New York Stock Exchange. (Reporting by Suzannah Benjamin in Bangalore; Editing by Pratish Narayanan)