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Americans to avoid doctor again in coming months
January 14, 2011 / 7:18 PM / 7 years ago

Americans to avoid doctor again in coming months

SAN FRANCISCO (Reuters) - Americans stepped up their use of medical services at the end of 2010, but are likely to hold back on healthcare spending again in the coming months.

While many Americans postponed nonessential procedures and skimped on medications in the last two years as unemployment remained high and insurance premiums rose, some of that resolve softened in the fourth quarter.

But the increased spending was largely seasonal. People are more likely to cram in doctor visits toward the end of the year once they meet their annual insurance deductibles, which can cost hundreds to thousands of dollars each year and are reset on January 1.

Pent-up demand, as well as a faint improvement in consumer sentiment about the U.S. economy, also may have accelerated use of some medical services in the last quarter. That represents a hopeful sign for some healthcare companies, but analysts do 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,” said FAF Advisors analyst Tim Nelson. “This is a second-half phenomenon, not a first-half.”

JPMorgan analyst Mike Weinstein said managed care revenue had been flat recently, and hospital admissions were down as much as 3 percent, although the number of surgical procedures was up.

“It would be premature to say this (fourth-quarter recovery) is sustainable,” he said at JPMorgan’s annual healthcare conference in San Francisco this week. “People are assuming the first quarter will be worse than the fourth quarter.”

A SLOW RECOVERY

Fourth-quarter sales and profits were better than expected for a long list of healthcare companies, some of which also raised their forecasts for 2011.

Among those that expect to report stronger-than-expected results are cardiovascular device makers St. Jude Medical Inc and HeartWare International Inc; smaller specialty drug developers like Amgen Inc, Allos Therapeutics Inc., Auxilium Pharmaceuticals and Emergent BioSolutions; medical supplies and orthopedic implant maker Stryker Corp; and eyecare product manufacturer Staar Surgical.

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.

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

Aetna Inc Chief Financial Officer Joseph Zubretsky 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.

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

Zubretsky sees the industry 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 said. “And we also believe that the softness the industry experienced in 2010 was equally as abnormal.”

CEO Wayne Smith of Community Health Systems, which manages 126 hospitals in 29 states, told the conference that he did not expect admissions to rise much in 2011 from 2010.

While 2011 may be better than 2010, weakness in certain areas, like orthopedic procedures, which are more sensitive to the economy since they often can be deferred, is expected to persist.

Stryker CEO Stephen MacMillan provided a rosy outlook for its businesses in 2011, but acknowledged that growth in the spinal market will be in the low single-digit percentage range.

Zimmer Holdings CEO David Dvorak said he did not see a big change in fundamentals and did not expect demand for orthopedic implants to improve until at least the second half of 2011.

For healthcare overall, “2011 probably won’t look materially different from 2010,” Dvorak said. “We’re going in the right direction, but it’ll be a slow recovery.”

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