Digital Health

Postponed Care Means Bad News for Payors

United Healthcare

The pent-up-demand narrative is back on the menu. Speaking at Goldman Sachs’ Global Healthcare Conference, the CEO of UnitedHealthcare’s Medicare business Tim Noel said that costs are on the rise due to elevated demand for outpatient procedures.

  • “We’re seeing that more seniors are just more comfortable accessing services for things that they might have pushed off a bit like knees and hips.”

That quip sent shares of UnitedHealth Group sliding over 6%, wiping out roughly $29B from the healthcare giant’s market capitalization in one of its largest single-day drops in years.

  • United now expects its Q2 medical loss ratio (percentage of spend on claims versus premiums collected) to be moderately above its full year forecast (82.1% to 83.1%).
  • The stocks of other major Medicare players took a pretty significant sympathy dive, with CVS (-7%) and Humana (-11%) getting the worst of it.

Why is this important? Payors have been enjoying a lull in surgery expenses due to hospital-wary patients postponing care during the pandemic, but that trend might be reversing.

  • Although several surveys have suggested that some of these skipped appointments are lost for good, United’s comments show that Medicare patients are getting back on track.

That’s good news for hospital operators and medical device companies, whose revenue is closely tied to surgery frequency.

  • Shares of hospital operators Tenet Healthcare and HCA Healthcare each jumped on the news, while joint replacement and implant manufacturers like Stryker and Zimmer Biomet climbed around 4%.

The Takeaway

Investors are listening closely for any signs of increased payor costs as patients start catching up on postponed care, and United’s role as the bellwether for the group means that even off-the-cuff comments at conferences are heard loud and clear. While the extent of the pent-up-demand remains to be seen, United seems to think the pressure could start shifting from hospitals to payors in the second half of the year.

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