Healthcare earnings this week: A primer
As earnings season kicks into high gear this week, major healthcare players are taking center stage.
Payer highlights include Aetna, Anthem and Cigna, with Medicare Advantage numbers critical to watch.
HCA will kick off the public hospital operator earnings on Tuesday while athenahealth provides a glimpse into health IT on Thursday.
Here's a preview:
Aetna (Jan. 30)
Aetna has made headlines since its Q3 earnings release, most notably its $69 billion merger deal with CVS Health. Aetna will not host earnings conference calls while the deal is still pending.
Last quarter, Aetna reported net income increased 39% to $838 million in comparison to 2016.
Despite the $1 billion break-up fee the company owed Humana after their failed merger and losses in the individual market, Aetna saw strong earnings growth in 2017, increasing its full-year earnings-per-share (EPS) projections for 2017.
The insurer grew market share in the Medicare Advantage space last year. With more baby boomers aging into Medicare, this product line will be a valuable piece for any payer’s portfolio. Competition is heating up as Bright Health, Clover Health and Devoted Health are all looking to make a name in the space.
The failed Humana merger was all about MA plans. To lessen antitrust concerns, Aetna and Humana both entered into agreements to sell MA plans to Molina Healthcare, which had been expected to gain about 290,000 MA members in 21 states. Even with the potential sale, a federal judge blocked the pending merger, stating the deal would "substantially lessen" competition in the MA markets.
Aetna has long had its sights on the MA market and won't likely stray from the plans.
HCA (Jan. 30)
Hospitals spent 2017 desperately trying to guard their forts by looking to build outpatient access points as inpatient admissions softened.
HCA is a case in point.
“We clearly want the lower acuity business somewhere in our system,” HCA President and COO Samuel Hazen stated in the Q2 earnings call. “That's why we're investing heavily in urgent care, and we continue to invest in freestanding emergency rooms, because it allows us to develop a relationship with our patients and ultimately integrate them inside the HCA system."
However, the company remains bullish on inpatient. Hazen in a Q3 earnings call noted “we've seen some saturation, if you will, of development in certain outpatient elements that have slowed that issue down.”
The company continues to bank on long-term inpatient demand to grow around 2% as the U.S. population ages.
Last quarter did see a slight increase in admissions but hurricanes in Florida and Texas resulted in a $140 million blow to the company’s financials. Admissions, adjusting for the hurricanes’ impact, were consistent the first half of the year.
Of note, HCA stock has enjoyed a three-month growth period since late October.
Investors will be watching admissions data to see if HCA’s strategy is paying off.
Anthem (Jan. 31)
Anthem has been under fire in recent months for a trio of controversial coverage policies. Still, since its last financials release, the company’s stock has hit an all-time high.
The policies in the spotlight aim to tamp down on unnecessary ED visits and expensive imaging services.
Last August, Anthem said it would no longer pay for advanced imaging performed in an outpatient setting, an effort to push patients to less expensive care service facilities. In a similar vein, the company is reviewing emergency department services in select states with an eye to reduce unnecessary visits.
Lastly, Anthem will on March 1 cut reimbursement in select states by 25% when patients bill for a procedure and an evaluation and management (E/M) service visit on the same day.
Eleven physician and patient advocacy groups, including the American College of Emergency Physicians and the American College of Radiology, have called on the insurer to rescind these policies.
Last quarter, Anthem beat profit expectations and increased its yearly forecast.
Still, the customer mix should be watched as it lost 130,000 members in Q3 compared to Q2, though FY 2017 membership numbers were up overall. The payer pulled out of many of the individual Affordable Care Act markets but is also interested in expanding Medicare Advantage offerings.
Wednesday will be a chance for the company to address its membership strategy.
Cigna (Feb. 1)
In line with the other major insurers, Cigna also posted strong Q3 results, fueled by enrollment.
All the payers are working against rising medical costs, but low healthcare utilization can help balance their payouts. Many are looking to vertical integration of services and new consumer-facing technology offerings to help maintain brand loyalty and build new revenues.
Cigna is building upon the principle of "personalization" for the consumer in hopes to deepen customer relations.
The mobile app myCigna can help a customer search deductible expenses and coverage details.
President and CEO David Cordani argued during the Q3 earnings call that personalization and integration help drive growth. He pointed to the company’s medical and pharmacy integration options, which allow customers to be "more active in health coaching and case management programs than those engaged in medical-only benefits.”
Medicare Advantage is a hot topic among payers, but Cigna only recently re-entered the market. Cordani earlier predicted the growth in that area will be lower than the market average this year.
Cigna was suspended by CMS from selling such plans in January 2016 due to deficiencies in the company’s appeals and grievances processes. The company was allowed to re-enter the market last June.
But senior management is already looking ahead. “And as we look to 2019 and beyond, we see some really attractive growth opportunities, both in existing markets…[and] opening new markets for 2019 and beyond,” Eric Palmer, EVO and acting CFO at Cigna, said on the Q3 earnings call.
Thursday will be a chance to get an update on new market growth strategies.
athenahealth (Feb. 1)
Public health IT company stocks, including Cerner, Allscripts and McKesson, have been building after the buzz of Meaningful Use sales wore down around late 2016. The companies are dipping into new products and microservices to gain respective market share.
2017 was a busy year for the 21-year-old health IT company athena.
The Watertown, Massachusetts-based company made strides to reformat its product platform and add services to its athenaNet platform.
"The company made it most of the way through a major flipping of the script from 'it's about the product' to 'it's about the platform,'" CEO Jonathan Bush told Healthcare Dive earlier this month.
One new service for athenaOne clients is an open appointment calendar that acts like Open Table. The idea is any consumer can search for and schedule an appointment on the network.
Still, the company weathered headwinds last year as well.
Athena has been tight-lipped on the activist investor activity but maintains Elliott’s investment does not change its strategic direction.
During the Q3 call, Bush said market in a post-Meaningful Use era contributed to a slowing growth rate but expects to achieve $100-115 million in pretax expense savings by the end of 2018.
Bush also said the company is reallocating resources to gain market share.
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