With COVID-19 cases and deaths surging in some U.S. states, it has become clear that the nation won't be back to normal anytime soon. Still, the country's largest health insurer is betting that health care utilization, and the costs associated with it, will return to something close to typical levels in the second half of the year, AIS Health reported.
At its lowest point in April, inpatient care volume — including care for COVID-19 patients — was about three quarters less than normal, UnitedHealth Group Chief Financial Officer John Rex said during a July 15 conference call to discuss the company's second-quarter earnings. At that same low point, utilization of outpatient and physician services fell to roughly 60% of normal levels. But in June, UnitedHealth saw inpatient volume recover to nearly 95% of baseline, and as June turned to July, outpatient and physician services were "tracking above 90%," Rex said. "These national trends have continued thus far in July, even as certain states are seeing short-term deferral of services where there are elevated levels of infection and hospitalization," he added.
In a note to investors, Citi analyst Ralph Giacobbe observed that the executives' comments about health care utilization returning to normal were "surprising to us."
"Ultimately we believe healthcare cost trends will remain muted, and as we look out over the next 12+ months we see those trends driving upside, and lower headline risk post-election driving multiples higher," Giacobbe added.
In the second quarter, UnitedHealth's adjusted earnings per share of $7.12 easily beat the consensus estimate of $5.28, and the firm nearly doubled its adjusted EPS compared with the second quarter of 2019. UnitedHealth also maintained its 2020 EPS outlook of $15.45 to $15.75 ($16.25 to $16.55 on an adjusted basis).
Meanwhile, job losses tied to the COVID-19 pandemic and ensuing recession led to a decline in revenue and enrollment for UnitedHealth's commercial insurance business. But revenue rose on the government business side as Medicare and Medicaid enrollment grew "by nearly 600,000 additional people served year to date," per the company's earnings release.