What to expect from the payer, the provider

The third quarter has been a tumultuous time for the country and the health sector, especially for providers as COVID-19 cases have skyrocketed with hospitalizations.

The impact will become evident in future earnings reports, as payers and providers alike release third quarter results in the coming weeks. The intense volume of COVID-19 patients will likely influence third trimester winners and losers.

The persistent prevalence of COVID-19, especially in parts of the country, has again disrupted the operations of many providers. Exhausted to capacity with COVID-19 patients, some hospitals have been forced to delay elective procedures once again to free up resources. In mid-September, Intermountain Health in the west alerted patients to the break in procedures at 13 of its hospitals, and AdventHealth in Florida was operating within similar limits as of mid-July.

For suppliers, this could mean a big blow to their bottom line.

“The upward trend in total medical costs is a major investor concern for managed and at-risk providers. The high cost of labor is a major investor concern for traditional providers,” said Cowen analysts in a recent note, adding that they expect mixed results for the quarter.

Not all vendors should suffer financial blows in the midst of the uproar.

HCA is a top pick to beat third-quarter earnings expectations, Cowen analysts said. In July, HCA raised its forecast for the full year as it expected demand for care and services to continue throughout the year.

For their part, payers could see their profits increase if they paid for fewer health care episodes either because of forced delays or after members postponed care on their own as cases increased. , a trend evident throughout the pandemic.

One potential bright spot is that the current wave of COVID-19 may have reached its peak. Nationwide cases and hospitalizations have declined in recent weeks.

In late September, the Cleveland Clinic’s own projections showed hospitalizations approaching a peak, signaling volumes in Ohio were about to peak before entering their own slowdown, on par with national trends.

The drop in cases is probably a welcome sign for nurses who say they are exhausted and exhausted. Labor shortages will be a key issue to watch in the third quarter. Hospital operators say labor expenses are on the rise as they have had to turn to costly agreements with outside agencies to fill shortages and offer significant enrollment bonuses to recruit and retain the patient. staff.

For payers, a return to more normal non-COVID-19 volumes may also mean a return to pre-pandemic profit levels. Last year, insurers posted record profits as many patients postponed treatment.

Insurers kept an eye on usage. An increase in care due to pent-up demand could increase medical claim rates, an important measure of an insurer’s care expenses.

SVB Leerink analysts expect COVID-19 use for the third quarter to be “well above” levels seen in the first half of the year. The trend could signal problems for Cigna, the most risky insurer in the near term, as the company expected direct costs of COVID-19 to drop in the second half of the year, SVB Leerink analysts said in a note. recent.

“We believe that the markets in which [Cigna] operations left 3Q21 with 32% higher COVID use than [the first half of the year]”, according to the SVB Leerink memo.

UnitedHealth Group, an industry barometer, kicked off earnings season Last week. UnitedHealth’s insurance business, UnitedHealthcare, reported an MLR of 83%, slightly lower than analysts’ expectations but higher from the third quarter of last year due to widespread deferred care amid the pandemic.

Overall, UnitedHealth Group posted strong financial results for the third quarter and raised its guidance for the full year.

This week, Anthem, Tenet and HCA are expected to release their third quarter results. Healthcare Dive will be monitoring profits closely, stay tuned for further coverage.

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