In a survey reported by Healthcare Finance[1] in August 2020, 36.5% respondents (n=2,300) from across the health care ecosystem saw revenue losses from de-prioritized elective surgeries as the most impactful change affecting their operations. Further compounding these losses, 10.3% of respondents noted that declines in commercial health insurance for those Americans that have been furloughed or laid off would additionally impact the healthcare industry.
Fortunately, the US unemployment trend is in the right direction, dropping from 10.2% in July, 2020 to August’s figures of 8.4%. For purposes of comparison, the August figures are lower than the 2008-2009 economic crisis pinnacle of 10%.
What keeps Medtech executives up at night?
Although the embargo on elective surgery was largely from March through May 2020, it has wreaked havoc with hospital systems, and the trickle-down effect to medtech is painful. For example, the Journal Of Bone And Joint Surgery[4] has created a model predicting that if elective orthopedic surgery (knees, hips, etc.) resumed in June 2020, it could be as many as 7, 12, or 16 months, in the circumstances of best, medium and worst case scenarios, until the US healthcare system can reach 90% of the pre-COVID forecasted volume of surgical procedures. In the best-case scenario, the authors forecast a bottleneck of greater than 1,000,000 surgical procedures 24 months after the post-leective-surgery delay.
Expect pandemic uncertainty and volatility to continue, long-term.
This means that deferment of surgical care will have a lasting impact on medtech and the US economy. The root cause of the GDP decrease, approximately one half of the 1Q20 annualized 4.8% GDP decline is ascribed to healthcare services, particularly deferred elective procedures.[5]
The Bigger Picture
It's hard to exaggerate the lasting financial impact coronavirus will have on US hospitals. A recent report[6] found that hospital operating margins have dropped 96% since January 2020, not including federal funding from the CARES Act. Even with that assistance, hospital operating margins are down 28% YOY, compared to the first two quarters of 2019.
What models are available or can be created in the medical specialties that affecting your medical device business?
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Footnotes
https://www.healthcarefinancenews.com/news/hospital-revenues-telehealth-are-among-top-healthcare-trends-over-next-year
https://tradingeconomics.com/united-states/unemployment-rate
https://hbr.org/2020/08/covid-19-created-an-elective-surgery-backlog-how-can-hospitals-get-back-on-track
J Bone Joint Surg Am. 2020;102:e68(1-5)
https://www.barrons.com/articles/health-care-was-the-biggest-drag-on-first-quarter-gdp-here-are-4-other-highlights-from-the-report-51588195277
https://flashreports.kaufmanhall.com/executive-summary-august-2020?utm_source=agcy&utm_medium=pr&utm_campaign=hc-corp-flash-200824