Worst flu season to lift U.S. hospital operator results

[March 02, 2018] By Manas Mishra and Ankur Banerjee

(Reuters) - One of the most severe flu seasons in the United States this past decade is proving to be a shot in the arm for U.S. hospital operators that have struggled with tepid patient admissions in recent quarters.

Hospital operators Tenet Healthcare Corp <THC.N> and LifePoint Health Inc <LPNT.O> noted on their post-earnings calls recently that this flu season was particularly boosting patient admissions.

U.S. health officials last month predicted that the current "intense" season could continue for weeks. The number of flu-related doctor visits has already reached a 20-year high and nearly 100 flu-related pediatric deaths have been reported.

"We've seen through the first six weeks of the year many of our volume indicators, including admissions, adjusted admissions, emergency room volumes turn positive," LifePoint Health Inc's Chief Operating Officer David Dill said on a post-earnings call last week.

LifePoint has not provided admissions forecast for the current quarter that ends March 31. It had reported a 5.5 percent fall in admissions in the quarter ended Dec. 31.

Larger rival Tenet on Monday reported higher quarterly patient admissions for the first time in over a year and raised its full-year forecasts for profit and revenue.

The Dallas-based company said the current flu season had added 20 basis points to patient admissions volumes in the reported quarter.

With flu-related hospitalizations continuing to rise and remaining well above other severe flu seasons, the fourth-quarter volume bump for hospitals will likely be more pronounced in the first quarter, Evercore ISI analyst Michael Newshel said.

While flu-related admissions do not generate a lot of money for hospitals, incoming patients — especially the elderly — often get tested and treated for other ailments, adding to hospital operators' revenue, analysts said.

"We believe this could create additional volumes for the hospitals as patients from these population pools often require higher acuity services once hospitalized," Jefferies analyst Brian Tanquilut said.

The boost to results is however likely to be short-lived. But it is a breather for U.S. hospital operators who have seen patients delaying non-emergency surgeries due to concerns about soaring out-of-pocket medical costs.

The flu season is also helping U.S. drugstore operators such as CVS Health <CVS.N> and Walgreens Boots Alliance <WBA.O>, whose front-store retail sales have declined for years as online competitors have lured customers with deals and discounts.

But with people flocking to drug stores to get flu shots and buy over-the-counter cold medicines, drugstore sales in the current quarter are expected to get a boost.

CVS, which initially forecast operating profit in its retail care unit to contract in the first quarter, said last month that it expects better results.

"The impact of (the flu season) is fairly significant as we look across the country ... at this point in time," Larry Merlo, CVS's chief executive officer said on a post-earnings call last month.

Not all healthcare companies are expected to benefit from the flu season, however, as medical costs for insurers are likely to rise when they report results for the latest quarter.

(Reporting by Manas Mishra and Ankur Banerjee in Bengaluru; Editing by Sayantani Ghosh and Shounak Dasgupta)

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