UnitedHealth Group posts $6.6B in Q2 profit amid COVID-19 care deferrals

https://www.fiercehealthcare.com/payer/unitedhealth-group-posts-6-6b-q2-profit-amid-covid-19-care-deferrals?utm_medium=nl&utm_source=internal&mrkid=959610&mkt_tok=eyJpIjoiTldOaVpEUTJOMk0yTWpNNSIsInQiOiJJcFROOCtmWDU4TEhnT0FkTFFCTHZmRHpVWHBJV015M0QzQSswV3llT2liQzFsXC9wM1VYXC8yT2xsREdQVVh1WnhvNHk3TEdHNEtrTlZcL2s5WXlWZXZVMjR1TUdPZEgrNnVPOTVuYUNJSVo5VmFhT05XQlZYYmlJTHE2ekhwZENDdCJ9

The outside of UnitedHealth Group's headquarters

UnitedHealth Group reported $6.6 billion in profit for the second quarter, beating Wall Street projections.

That’s also a significant increase in profit compared to the second quarter of 2019, where the healthcare giant brought in $3.3 billion, according to its earnings report (PDF) issued Wednesday.

UnitedHealth’s mid-year profits sit at $10 billion, compared to $6.8 billion in the first half of 2019.

The insurer also reported $62.1 billion in revenue for the quarter, an increase year-over-year but a number that fell short of analysts’ expectations. UnitedHealth brought in $60.6 billion in revenue in the second quarter of 2019.

Through the first half of 2020, UnitedHealth has earned $126.6 billion in revenue, up from $120.9 billion in the first six months of 2019.

The insurer attributes the unexpectedly high profit to large amounts of care deferral due to the coronavirus pandemic and said it’s likely to see that offset in future quarters as elective procedures and other services resume.

In the earnings release, CEO David Wichmann touted the company’s efforts to combat the pandemic in the second quarter.

“Our 325,000 dedicated team members, including the 120,000 clinicians serving on the front lines of care, have tirelessly responded to COVID-19 with agility, innovation and compassion,” Wichmann said in a statement.

“We moved swiftly to assist the people we serve and their care providers, including the provision of $3.5 billion in proactive voluntary customer assistance and accelerated care provider funding. We remain committed to taking further actions to address any future imbalances as a result of the pandemic,” he said.

Though COVID-19’s full impact on finances remains unclear, UnitedHealth maintained its full-year earnings guidance of between $15.45 and $15.75 per share.

 

 

 

 

Consumer confidence declines as COVID surges

https://mailchi.mp/86e2f0f0290d/the-weekly-gist-july-10-2020?e=d1e747d2d8

 

Just as consumer confidence was approaching pre-COVID levels in early June, cases began surging in many parts of the country. The graphic below shares highlights from a recent Morning Consult poll, which found reduced consumer confidence in participating in a range of activities, like dining out or going to a mall.

The poll also showed a significant consumer divide based on political affiliation, with Republicans’ confidence levels for many activities being twice that of Democrats. It remains to be seen whether the current surge will result in consumers pulling back on healthcare utilization the way they are beginning to for other activities.

A coalition of healthcare organizations is urging consumers to continue social distancing but “stop medical distancing”—in hopes that the new surge will not lead patients to avoid needed medical care. While cell tower data at thousands of hospital facilities suggest volumes may be stalling again, we anxiously await the latest national data on outpatient visit and elective procedure volumes.

We’d predict the surge will exacerbate consumer discomfort with “waiting” in healthcare settings—urgent care clinics, emergency departments and the like—though we’d expect the reduction in utilization to be less severe and more regionally varied this time around. 

Let us know what you’re seeing!

 

 

 

 

Texas and Arizona ER doctors say they are losing hope as hospitals reach capacity

https://www.cnn.com/2020/07/08/us/emergency-room-doctors-coronavirus-capacity/index.html?utm_source=Sailthru&utm_medium=email&utm_campaign=Issue:%202020-07-08%20Healthcare%20Dive%20%5Bissue:28354%5D&utm_term=Healthcare%20Dive

Texas and Arizona ER doctors say they are losing hope as hospitals ...

As concerns over the capacity of hospitals resurface amid surging Covid-19 cases, two emergency room doctors say they worry about where the pandemic could take them next.

Dr. Mina Tran, an emergency room doctor in Texas, said 70 to 80% of her patients have been admitted with upper respiratory or coronavirus complaints.
In Arizona, which saw its lowest-ever number of available ICU beds Tuesday, Dr. Murtaza Akhter told Lemon so many patients are coming in that he is already having to make tough decisions over resources.
“I’m trying not to be an alarmist. I’m an emergency physician — we’re prepped for this. Dr. Tran and I both trained very hard for this. But we can’t just build beds overnight. We can’t just hire staff overnight. And like I said, our numbers are only increasing,” he said. “It’s only going to get worse and that’s the scary part.”
With a rise in hospitalization rates across the US, doctors like Akhter are reporting waiting lists for ICU beds and having to decide who will be admitted for treatment and who will not.
Surges in hospitalization and infection rates have followed larger crowds gathering in newly reopened public spaces. Every state has started their plan to reopen, and 35 are currently seeing more new cases reported compared to last week.
Tran applauded Texas Gov. Greg Abbott closing down bars once again but said she does think the state was too quick to open back up.
While many states have paused or rolled back reopening in light of a resurgence of cases, Akhter said seeing individuals continue disregard safe practices as his emergency room treats coronavirus patients makes him feel like he is “losing hope.”
“I’m going through shifts making some very tough decisions and then I’m driving home and seeing people who are clearly not distancing, having their Fourth of July celebrations, being in big congregate settings, and it feels like what I’m doing is futile,” Akhter said. “I don’t know what more people need to hear.”
And California and Florida are feeling the strain as well.
In Florida, where cases have surged, ICUs at 56 hospitals have reached capacity. And California’s hospitalizations were at an all-time high on Tuesday with nearly 6,000 coronavirus patients.

 

 

 

Providence, Humana back ad campaign urging patients to stop ‘medical distancing’

https://www.healthcaredive.com/news/providence-humana-back-ad-campaign-urging-patients-to-stop-medical-distan/581172/

Dive Brief:

  • A coalition of providers, payers and other healthcare organizations on Tuesday launched an ad campaign to encourage patients not to put off important care during the COVID-19 pandemic.
  • The announcement encourages people to continue social distancing but not “medical distancing” by putting off routine care or avoiding checking on concerning symptoms. That could be either through telemedicine or an in-person visit.
  • The campaign will be on TV, in print and across social media. The 11 organizations behind it include Providence, Humana, Baylor Scott & White, LabCorp and Walgreens.

Dive Insight:

While some hospitals in hotspots in Texas, Florida, California and Arizona have had to once again put off non-emergency procedures, providers in other areas of the country are trying to ramp up regular patient volumes as the number of positive cases eases.

Surveys show, however, that people are wary of returning to the doctor’s office, either because they worry about exposure to the novel coronavirus or have lost coverage to help pay for care.

The new ad campaign seeks to ease these concerns. No dollar figure was attached to the plan, which advertising agency MullenLowe U.S. took on pro bono. It follows an ad the American Hospital Association launched in May to ensure the public facilities are still available for non-COVID-19 care.

Since the pandemic’s onset in the United States, health officials have been concerned about the short- and long-term consequences of routine and preventive care being delayed or put off entirely. Chronic diseases that are caught early can be managed more easily and less expensively.

Also, research shows even some crucial services aren’t being sought even for issues such as strokes and heart attacks. In April, emergency room visits nationwide dropped more than 40%, according to the Centers for Disease Control and Prevention.

Public health experts are also beginning to fear vaccinations may be avoided, which could cause trouble with the upcoming flu season.

For providers the reduction in patient volumes has meant a major revenue loss. Some patient volume has been recaptured, but that rolled back again in recent weeks with hospitals in large states like Texas and Florida again reaching capacity with a COVID-19 surge.

At the end of June, hospital traffic in Arizona, New York and Texas was down week over week, according to an analysis from Jefferies.

Primary care has particularly suffered. Visits to medical offices were down nearly 60% in March and April, meaning losses to those practices could top $15 billion this year, according to a recent Health Affairs study.

The ad campaign stresses that providers have guidelines in place to keep patients safe, such as isolation of those suspected of having COVID-19 and increased virtual options.

“While we understand the fears that many people have around contracting the virus, our country’s medical facilities have adopted CDC guidelines and best practices and even telemedicine options to make your visit as safe as possible to prevent the spread of the virus,” Humana CMO William Shrank said in a statement. “The intent of the campaign is to let people know that protecting yourself against getting this virus does not need to come at the expense of your overall health.”

 

 

 

 

Meeting growing consumer demand for “care anywhere”

https://mailchi.mp/7d224399ddcb/the-weekly-gist-july-3-2020?e=d1e747d2d8

 

While COVID-19 provided a big push for doctors and health systems to rapidly expand telemedicine visits and other kinds of remote patient interactions, many report that they are now seeing telemedicine visits decline sharply, as in-person visits return.

While it’s natural to be glad that “things are returning to normal”, backing off virtual care is short-sighted, as recent experiences have set new expectations for patients. Survey data shows consumers like using telehealth services, both because they’re more convenient (65 percent) and help avoid COVID infection (63 percent)—and 51 percent say they would continue using them after the pandemic ends.

We’re increasingly convinced that virtual physician visits are just one part of a continuum of care that can be delivered in the convenience and safety of the patient’s home. The graphic below highlights the range of consumer-focused virtual care solutions, from asynchronous chat interactions all the way to hospital care delivered at home.

Health systems that can deliver “care anywhere”—an integrated platform of virtual services consumers can access from home (or wherever they are) for both urgent needs and overall health management, coordinated with in-person resources—have an unprecedented opportunity to build loyalty at a time when consumers are seeking a trusted source of safe, available care solutions.

 

 

Hospitals in new COVID-19 hot spots face delicate balancing act with elective surgeries

https://www.fiercehealthcare.com/hospitals/hospitals-new-covid-19-hotspots-face-delicate-balancing-act-elective-surgeries?mkt_tok=eyJpIjoiT1RJMlpqWTNPREJtTmpGaSIsInQiOiJ0enNDdXU5R0ZEdUJmSE1GcXl5UHd4VjdcL1FQcWE3ckN2YmhLVUhnazNFNlhUOEdLQndTcnRnXC9TbWNzWDhZMW5KWEhtMUxJRDRFdG1uXC84NGVhTHZ5QklGK0Fyc2dadXVcL0phNWFaVGY1SGlVVzN6NFRxVlRLOE9mRmdHR2VmdDgifQ%3D%3D&mrkid=959610

Hospitals in new COVID-19 hot spots face delicate balancing act ...

Some hospital systems located in states that are seeing huge spikes of COVID-19 are continuing to perform elective procedures and developing strategies to avoid a total shutdown.

The experiences of hospitals in states such as Florida and Arizona could inform how systems will handle new surges of COVID-19 cases, especially if a second surge of the virus arrives in the fall. Hospitals have been reticent to shut down surgical procedures, which are pivotal to their bottom line and also impact patient care.

“We are not turning it all the way off,” said Marjorie Bessel, M.D., chief clinical officer for Banner Health, referring to elective procedures. “Our surgeries are needed and medically necessary and people need to have those surgeries done.”

The 28-hospital system has a large footprint in Arizona, which is experiencing a major spike in cases. Bessel said 45% of Arizona COVID-19 patients are in a Banner Health facility.

Like many states, Arizona’s governor required hospitals to shutter elective procedures to ensure there is enough capacity and personal protective equipment (PPE) for COVID-19 patients. The governor lifted the shutdown May 1, and Banner has slowly ramped up delayed or canceled elective procedures.

“We attempted to reduce the backlog of people who had been waiting or wait-listed,” Bessel told Fierce Healthcare. “We didn’t quite get back to full normal operations, but we got close.”

That progress has been hindered now as COVID-19 cases soar in the state.

But instead of doing a full shutdown, Banner is implementing a tiered and step-wise approach to surgeries.

“One of the things that we are going to try is to do surgeries for patients that don’t need an inpatient stay,” Bessel said. “We are gonna try that and see how that works for us.”

The system is also tightly monitoring the patients that need an intensive care unit stay after their surgery. Banner can transfer patients to other facilities to ensure it has enough capacity.

“We look at our [patient] census almost hourly throughout the day and the night and make these adjustments to best meet the needs of those in the community,” she said.

Tampa General Hospital in Florida resumed elective procedures back in early May and is still performing surgeries as COVID-19 cases rise. The hospital told Fierce Healthcare that it treats COVID-19 patients in a “negative-pressure unit that is separate from other areas of the hospital.”

The hospital has 81 of these rooms and 100 hospitals and has a surge plan to adjust capacity when necessary.

Another important factor for hospitals is to communicate with patients about what is going on. Tampa General, for instance, issued a release on when it is appropriate to go to the emergency room and outlined the procedures for screening patients of COVID-19 to assuage fears.

Hospitals’ own internal processes have also gotten better amid the COVID-19 pandemic.

“In the operating area, COVID-19 has made us more efficient,” said Michael Zinner, M.D., CEO of the Miami Cancer Institute, which is part of 11-hospital system Baptist Health South Florida. “It has taught us how to move things out of the general operating room into ambulatory and more efficient in the turnovers. It has taught us how to adapt.”

Some states could decide to shut down elective procedures again, which is a move Texas has decided to make in four counties in the state.

Getting and keeping enough PPE

One of the key reasons that states ordered hospitals to shut down surgeries was to preserve enough PPE for COVID-19 care.

But hospital systems say they are in a better place now in terms of PPE than they were at the onset of the pandemic, when a buying spree caused hospitals to fight among each other to get supplies.

“We are a heck of a lot better than we were two months ago,” Zinner said.

He added that Baptist Health even bought a stake in a domestic PPE manufacturer, a move Banner Health made as well.

“Besides the current spike, we were preparing for what we think will be a surge in the fall,” Zinner added.

Another important development for hospitals now is there are guidelines for how to reprocess PPE.

“We have found ways to reprocess some PPE safely so you can reuse it without losing efficacy and take it through a decontamination procedure,” said Michael Calderwood, M.D., an epidemiologist at Dartmouth-Hitchcock Medical Center in New Hampshire.

He pointed to using ultraviolet light and hydrogen peroxide as among methods facilities can use to reprocess their supplies.

The type of PPE that is used in surgeries is also sometimes different than the equipment used to treat COVID-19 patients, Bessel said.

“They use a procedural mask for most of the cases, while the masks in shortage has been the N-95 respirators,” she said.

 

 

 

Moody’s: Patient volume recovered a bit in May, but providers face long road to recovery

https://www.fiercehealthcare.com/hospitals/moody-s-patient-volume-recovering-may-but-providers-face-long-road-to-recovery?mkt_tok=eyJpIjoiWmpjeVlXVTRZV0l5T1RndyIsInQiOiJLWWxjamNKK2lkZmNjcXV4dm0rdjZNS2lOanZtYTFoenViQjMzWnF0RGNlY1pkcjVGcFwvZFY4VjFaUUlZaFRBT1NRMGE5eWhGK1ZmR01ZSWVZWGMxOHRzTkptZVZXZmc5UnNvM3pVM2VIWDh6VllldFc3OGNZTTMxTDJrXC8wbzN1In0%3D&mrkid=959610

Moody's: Patient volume recovered a bit in May, but providers face ...

Patient volumes at hospitals, doctors’ and dentists’ offices recovered slightly in May but lagged well behind pre-pandemic levels, according to a new analysis from Moody’s Investors Service.

In all, the ratings agency estimated total surgeries at rated for-profit hospitals declined by 55% to 70% in April compared with the same period in 2019. States required hospitals to cancel or delay elective procedures, which are vital to hospitals’ bottom lines.

“Patients that had been under the care of physicians before the pandemic will return first in order to address known health needs,” officials from the ratings agency said in a statement. “Physicians and surgeons will be motivated to extend office or surgical hours in order to accommodate these patients.”

Those declines narrowed to 20% to 40% in May when compared to 2019.

Emergency room and urgent care volumes were still down 35% to 50% in May.

“This could reflect the prevalence of working-from-home arrangements and people generally staying home, which is leading to a decrease in automobile and other accidents outside the home,” the analysis said. “Weak ER volumes also suggest that many people remain apprehensive to enter a hospital, particularly for lower acuity care.”

The good news:  The analysis estimated it is unlikely there will be a return to the nationwide decline of volume experienced in late March and April because healthcare facilities are more prepared for COVID-19.

For instance, hospitals have enough personal protective equipment for staff and have expanded testing, the analysis said.

For-profit hospitals also have “unusually strong liquidity to help them weather the effects of the revenue loss associated with canceled or postponed procedures,” Moody’s added. “That is largely due to the CARES Act and other government financial relief programs that have caused hospital cash balances to swell.”

However, the bill for one of those sources of relief is coming due soon.

Hospitals and other providers will have to start repaying Medicare for advance payments starting this summer. The Centers for Medicare & Medicaid Services doled out more than $100 billion in advance payments to providers before suspending the program in late April.

Hospital group Federation of American Hospitals asked Congress to change the repayment terms for such advance payments, including giving providers at least a year to start repaying the loans.

Another risk for providers is the change in payer mix as people lose jobs and commercial coverage, shifting them onto Medicaid or the Affordable Care Act’s (ACA’s) insurance exchanges.

“This will lead to rising bad debt expense and a higher percentage of revenue generated from Medicaid or [ACA] insurance exchange products, which typically pay considerably lower rates than commercial insurance,” Moody’s said.

 

 

 

Re-examining the delivery of high-value care through COVID-19

https://thehill.com/opinion/healthcare/502851-examining-the-delivery-of-high-value-care-through-covid-19#bottom-story-socials

Re-examining the delivery of high-value care through COVID-19 ...

Over the past months, the country and the economy have radically shifted to unchartered territory. Now more than ever, we must reexamine how we spend health care dollars. 

While the COVID-19 pandemic has exposed challenges with health care in America, we see two overarching opportunities for change:

1) the under-delivery of evidence-based care that materially improves the lives and well-being of Americans and

2) the over-delivery of unnecessary and, sometimes, harmful care.

The implications of reallocating our health care spending to high-value services are far-ranging, from improving health to economic recovery. 

To prepare for coronavirus patients and preserve protective equipment, clinicians and hospitals across the country halted non-urgent visits and procedures. This has led to a substantial reduction in high-value care: emergency care for strokes or heart attacks, childhood vaccinations, and routine chronic disease management. However, one silver lining to this near shutdown is that a similarly dramatic reduction in the use of low-value services has also ensued.

As offices and hospitals re-open, we have a once in a century opportunity to align incentives for providers and consumers, so patients get more high-value services in high-value settings, while minimizing the resurgence of low-value care. For example, the use of pre-operative testing in low-risk patients should not accompany the return of elective procedures such as cataract removal. Conversely, benefit designs should permanently remove barriers to high-value settings and services, like patients receiving dialysis at home or phone calls with mental health providers.   

People with low incomes and multiple chronic conditions are of particular concern as unemployment rises and more Americans lose their health care coverage. Suboptimal access and affordability to high-value chronic disease care prior to the COVID-19 pandemic was well documented  As financially distressed providers re-open to a new normal, hopeful to regain their financial footing, highly profitable services are likely to be prioritized.

Unfortunately, clinical impact and profitability are frequently not linked. The post-COVID reopening should build on existing quality-driven payment models and increase reimbursement for high-value care to ensure that compensation better aligns with patient-centered outcomes.

At the same time, the dramatic fall in “non-essential care” included a significant reduction in services that we know to be harmful or useless. Billions are spent annually in the US on routinely delivered care that does not improve health; a recent study from 4 states reports that patients pay a substantial proportion (>10 percent) of this tab out-of-pocket. This type of low-value care can lead to direct harm to patients — physically or financially or both — as well as cascading iatrogenic harm, which can amplify the total cost of just one low-value service by up to 10 fold. Health care leaders, through the Smarter Health Care Coalition, have hence called on the Department of Health and Human Services Secretary Azar to halt Medicare payments for services deemed low-value or harmful by the USPSTF. 

As offices and hospitals reopen with unprecedented clinical unmet needs, we have a unique opportunity to rebuild a flawed system. Payment policies should drive incentives to improve individual and population health, not the volume of services delivered. We emphasize that no given service is inherently high- or low-value, but that it depends heavily on the individual context. Thus, the implementation of new financial incentives for providers and patients needs to be nuanced and flexible to allow for patient-level variability. The added expenditures required for higher reimbursement rates for highly valuable services can be fully paid for by reducing the use of and reimbursement for low-value services.  

The delivery of evidence-based care should be the foundation of the new normal. We all agree that there is more than enough money in U.S. health care; it’s time that we start spending it on services that will make us a healthier nation.

 

 

 

Recovery of medical staffing firms will lag behind hospitals, analysts say

https://www.healthcaredive.com/news/recovery-of-medical-staffing-firms-will-lag-behind-hospitals-analysts-say/580171/

COVID-19 Triggers Cash Need, Lenders Tighten Reins | PYMNTS.com

Dive Brief:

  • Though U.S. hospital staffing companies are slowly beginning to recover from the COVID-19 shutdown and corresponding drop in revenues, that rebound will lag behind hospitals.
  • Recovery of giants like ER staffing firm Envision and AMN Healthcare, which has the largest network of qualified clinicians in the U.S., will be hindered as hospitals prefer to keep their own staff employed over external contractors amid a recession.
  • The “pace of recovery will not be linear,” and depends on the mix of service lines and geography, S&P Global analysts said in a Thursday note. Analysts also expect hospitals to aggressively renegotiate rates and terms with staffing companies later in the year, which could depress margins even more in the long-term.

Dive Insight:

The collapse in patient volume following stay-at-home guidelines implemented earlier this year has had a well-documented effect on provider finances. Hospitals and doctor’s offices prepared for an influx of COVID-19 patients as lucrative elective procedures declined and revenues imploded.

At the nadir in April, anesthesiology services were down 70%, radiology down 60% and ER visits down 40%, S&P said. Analysts expect tentative recovery in May and June, but no return to pre-pandemic volume until mid-2021.

The dramatic reduction slashed the revenues and cash flows of staffing companies, though the worst is likely over. At the beginning of the pandemic, staffing companies and hospitals alike took preventive measures like furloughing nonessential and back-office workers, extending vendor payment terms, aggressively collecting old receivables and onboarding doctors to telehealth. Many have kept up adequate frontline capacity too, despite uncertain demand.

The economy saw some small gains in May as furloughed employees began to trickle back to work. But the increase in health services employment that month came largely in dental health workers and physician offices. Hospitals shed another 27,000 jobs.

Hospitals will likely fill staffing needs internally, bringing back furloughed or laid off employees first as operations slowly improve, before turning once again to medical contractors.

“Given the extended disruption, a looming recession, and possible lasting changes to health care providers, credit metrics will be much weaker than what we had previously expected for nearly all staffing companies,” analysts wrote. “Some staffing companies, particularly those that are highly leveraged, may face very significant liquidity pressures for several months. It is possible not all will be able to withstand the sharp decline.”

S&P Global has taken a number of negative rating actions on staffing companies since late March.

Envision and anesthesiology firm ASP Napa, both rated ‘CCC’ with a negative outlook, have the greatest potential for a default. Envision, owned by private equity firm KKR and one of the largest U.S. physician staffing firms, is reportedly considering a bankruptcy filing as it struggles with $7 billion in debt.

Knoxville, Tenn.-based Team Health and clinical practice management firm SCP Health have enough liquidity to chug along for several more months of lower-than-normal volumes, while AMN and Utah-based CHG Healthcare Services are both in more solid positions to weather the pandemic, S&P said.

But professional outsourced staffing businesses, like anesthesiology and radiology, should recover more quickly, and many firms have gotten financial support from lenders and private equity backers. Team Health, for example, approved a senior secured term loan from its PE sponsor, Blackstone, which covers interest payments in April through mid-May.

Liquidity was also helped by the passage of the $2.2 trillion CARES relief legislation late March.

Several staffing companies have reportedly received grants from the $100 billion allocated by the legislation for providers, along with no-interest loans from accelerated Medicare payments, sparking questions over whether companies backed by cash-rich private equity firms need the funds.

 

 

 

 

Moody’s: US healthcare system rebounds from COVID-19 in May, but a bumpy road lies ahead

https://www.healthcaredive.com/news/moodys-us-healthcare-system-rebounds-from-covid-19-in-may-but-a-bumpy-ro/580152/

Banks rating downgrade: Moody's changes outlook on Indian banks to ...

Dive Brief:

  • A Moody’s Investors Service report on Thursday suggests that the U.S. healthcare industry is on the rebound from COVID-19, but recovery will likely to slow and uneven. Moreover, the report expressed concerns that regional flareups of coronavirus could majorly set back the return to normal volumes.
  • Investment firm Jefferies affirmed those worries in hospital traffic data shared Friday, noting “a sharp reversal” in hotspot state Arizona. Analysts tracked “record lows” in Arizona’s hospital traffic last week, down from what was thought to be the trough in April and sagging below May recovery amid a significant uptick in COVID-19 cases and protests.
  • “Whether states can continue their recovery even as cases increase, as we’ve seen in [Texas] and others, or if the recent reversals in [Arizona, Illinois,] etc. become more widespread is a trend to watch in coming weeks,” Jefferies analysts wrote.

Dive Insight:

Large sections of the healthcare sector all but shut down during the spring as the coronavirus led to nationwide shelter-in-place orders. However, as states and municipalities slowly reopen, so are the doors for hospitals, ambulatory surgical centers, clinics and other integral components of healthcare delivery.

As a result, Moody’s reported “considerable sequential improvement” during May. For example, while for-profit hospitals saw surgery volumes drop as much as 70% in April compared to the same period in 2019, May volumes were down about 20% to 40% compared to last year’s. Hospital-operated ambulatory surgical centers saw an 80% to 90% drop in April volumes, but only a 30% to 40% drop in May.

However, Moody’s noted that the “path to normalized volumes are not linear.” It also pointed out that emergency room care volumes, which dropped as much as 60% in April, have yet to really rebound, as they still appeared depressed as much as 50% in May.

“This could reflect the prevalence of working-from-home arrangements and people generally staying home, which is leading to a decrease in automobile and other accidents outside the home. Weak ER volumes also suggest that many people remain apprehensive to enter a hospital, particularly for lower acuity care,” the Moody’s report said.

The firm also noted that “the shape of recovery will vary by state, region and service line, reinforcing the importance of diversification for credit quality among healthcare service providers.”

However, Moody’s believes that the darkest days of March and April are behind much of the healthcare sector. It noted that most providers have stockpiled appropriate personal protective equipment and have reconfigured their offices, waiting rooms and other infrastructure to protect the health of both patients and employees.

Traffic data from 3,300 U.S. hospitals, tracked by Jefferies via mobile device pings, indicates that compared to January 2019 levels, national traffic lows of 43.7% in mid-April improved to 63.3% by early June.

But state-by-state analysis reveals some parts of the country are trending backwards. Arizona fell to a new low of 28.5% last week after hitting 51.5% on May 20. The analysts also reported Illinois hit its own new low on June 7.

While Moody’s did express some concern about regional outbreaks, it concluded that the precautions already taken “make it less likely that the U.S. would once again shut down all non-elective care across the nation if there is a second wave of coronavirus infections.”

Moody’s did express some concerns about hospital finances, but noted that for-profit hospitals “have unusually strong liquidity” due to payouts from the CARES Act and other government-sponsored financial relief programs.

Medical device firms should be prepared for a long and uneven recovery, according to Moody’s. The dental and orthopaedic sectors “will see a greater than average impact from consumers’ inability to pay for procedures or their unwillingness to engage with the healthcare system.” Moody’s forecast “a gradual, uneven pace of recovery,” with pre-tax earnings to decline as much as 30% in 2020 compared to 2019, while revenues will shrink around 10%. It expects that earnings will rebound in 2021 to 2019 levels.

Companies that operate in discretionary sectors will be hit harder as they rely on patients able to meet large deductibles or co-payments or to pay for related procedures entirely on their own. Moody’s noted that a large number of these procedures are performed in acute care hospitals with the assistance of robotics, but hospitals may be more conservative in their robotics investments given new budget constraints.