I love doing hospital administrator research!
And, the Truist team has done a fine job of conducting their own hospital administrator research.
Where else can you get a sense of the economic trends in the US hospital ecosystem? In our research we recommend that almost every client (especially when we are doing due diligence research for mergers and acquisitions) add a segment of interviews for hospital administrators. We have our own special techniques to make sure we get the most qualified hospital administrators possible and have been successful in uncovering trends for our clients for the past 15 years.
We have come out of a bruising two years caused by COVID which is unleashed economic turbulence not seen for decades. In September 2020, I moderated a panel at AdvaMed "What do Hospital CFOs Really Want?" We discussed COVID-19’s impact on U.S. hospital capital spending (in the medtech segment) and the management of capital budgets. Our panelists estimated that COVID-19 had diverted 70% of 2020 hospital spending plans, with approximately 35% of total funds redirected at the care for patients in the pandemic and bolstering hospital IT infrastructure.
The panel was clear: hospital administrators simply did not know when they could complete planned purchases. Now, in mid-2022 we have more data to indicate that the next 18 months will not be so ugly, from the Truist report. According to a survey by Truist of Hospital Administrators, (n=50, representing 8-10% of all US hospital beds), 2Q22 -4Q23 will continue to show a downward impact on the P&L for medical device companies. However, there is upside. Investor expectations are low for growth and medtech stock prices are still relatively high. Truist is recommending a Buy rating for Lantheus, Inspire, Axonics (great DTC adverting by the Axonics team, BTW) and IRhythm.
Hips, Knees, and Urology had the highest weighted average next-twelve-month (NTM) projection in the Truist report, which are mostly elective segments, and may indicate suppressed demand that could emerge in the next 18 months.
Capex spending in hospitals (and ASCs and other healthcare facilities) is still an issue but is not as horrifying as it was in 2020. Healthcare IT spend remains the same. In this survey, (comparing Bed-Weighted Capital Budget Allocation (LTM vs. NTM), in the Capex game are radiation oncology, bricks and mortar infrastructure and equipment for the OR. Robotics, imaging equipment (including mammography), ventilators and respiratory equipment (no surprise there) are directionally lower in priority in hospital budgets.
In general, the survey suggests that medical device manufacturers are effectively handing over (small) price increases to hospitals in the current inflationary setting. Average Bed- Weighted Expected Pricing Change percentages increased from 0.7% to 2% depending upon the site of care in, inpatient, outpatient and ambulatory surgery centers. That probably will not offset our rising supply costs, but it is better than some of the price declines we have seen in the past .
The good news? A somewhat greater weighted percent of hospital administrators (22%) plan increases in capital spend vs. 18% that are forecasting decreases, and a full 60% of responses indicated a flat NTM capex spend.
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