January 16, 2011

Slowdown In Use Of Healthcare Services Expected In 2011

Americans used medical services more at the end of 2010, but analysts say that they are likely to hold back on healthcare spending again in the coming months.

FAF Advisors analyst Tim Nelson told Reuters that although signs are hopeful for some healthcare companies, he does not see a rebound until later in the year.

"Right now we're seeing hospital visits down and prescriptions down so there's no reason to believe things will improve from here in the near-term," Nelson said. "This is a second-half phenomenon, not a first-half."

Gary Ellis, chief financial officer of top medical device maker Medtronic Inc, told Reuters this week that he sees signs Americans have been returning to the doctor.

Executives at the JPMorgan conference predicted a modest increase in healthcare consumption this year, but many said that a rebound would be slow and fragile.

Aetna Inc. Chief Financial Officer Joseph Zubretsky told Reuters that he is planning for a slightly higher trend in 2011 from 2010.

"We believe the economy made the consumer hide, closed their purse strings, not engage in commercial activity, which caused a downward trend ... during 2010 that will not recur in 2011," Zubretsky said.

A Kaiser Family Foundation monthly survey found that just over half of Americans put off medical care because of the cost in December 2010.  One in four said their household had trouble paying medical bills over the past year.

Zubretsky said that the industry is embarking on a period of "normalized utilization."

"I'm not sure what normal means anymore, but clearly the inflection point in 2009 was aberrant and abnormal," he told Reuters. "And we also believe that the softness the industry experienced in 2010 was equally as abnormal."

CEO Wayne Smith of Community Health Systems told the conference that he did not expect admissions to rise much in 2011 from 2010.

However, Stryker CEO Stephen MacMillan provided a more positive outlook for its businesses in 2011.  He also said that growth in the spinal market will be in the low single-digit percentage range.