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Daily Briefing

Elective surgeries are on the rise: What does it mean for healthcare?


Older adults are now catching up on elective procedures they missed during the pandemic, such as hip and knee replacements. And as service volumes continue to grow, there will be a significant impact on several areas of the healthcare industry.  

Healthcare service volumes are on the rise

During the pandemic, many older adults avoided receiving elective procedures, such as knee and hip replacements, due to health concerns. But now seniors are coming back "to the healthcare system with a vengeance," the Wall Street Journal writes.

According to data from UnitedHealth Group* (UHG), there was "strong outpatient care activity" in April, May, and the early part of June, largely from Medicare enrollees.

"We're seeing that more seniors are just more comfortable accessing services for things that they might have pushed off a bit, like knees and hips," said Tim Noel, UHG's CEO for Medicare and retirement.

Similarly, UHG CFO John Rex said that "there are some indications that look a little bit like a pent-up demand or delayed demand being satisfied."

What this means for the healthcare industry

As service volumes rise, hospitals are reporting an increase in revenues, which comes after months of concerns of financial instability due to inflation, labor costs, and more.

According to a Cowen survey, more than 300 non-profit hospitals reported a 7.5% increase in year-to-year revenue growth in May, a sharp increase from the 3.5% growth rate in April and the 4.7% growth rate in the first quarter of the year.

"Most of this acceleration is clearly happening on the outpatient side," Cowen analysts noted.

Aside from hospitals, medical device manufacturers are also benefiting from the increase in surgery volume. According to BTIG analyst Ryan Zimmerman, the pent-up demand for elective procedures will likely continue to provide a boost to medical device manufacturers for the rest of this year and into the first half of 2024, particularly for orthopedic equipment makers.

Truist analyst Richard Newitter made similar comments, saying that the increases in service volume "will certainly help feed the view that backlog and elective volume will serve as an extended tailwind for device companies."

On the other hand, these growing service volumes may be burdensome for health insurers, who will see higher medical costs going forward. Recently, shares of several health insurers saw a downturn on the stock market, the Journal reports.

However, it is not guaranteed that health insurers will see a rise in costs due to these volume increases. According to Goldman Sachs analyst Nathan Rich, this rise in volume will likely be less expensive than expected for insurers since most of it is occurring among outpatient procedures rather than inpatient care, which costs much more. (Owens, Axios, 6/15; Mishra/Leo, Reuters, 6/15; Wainer, Wall Street Journal, 6/15; Herman, STAT+ [subscription required], 6/14)

*Advisory Board is a subsidiary of Optum, a division of UnitedHealth Group. All Advisory Board research, expert perspectives, and recommendations remain independent.  


How 7 health systems are tackling delayed surgery backlogs

Throughout the pandemic, many hospitals have had to delay some surgeries amid COVID-19 surges — a move that has resulted in a substantial backlog of surgical procedures. Read on to find out the strategies health systems have used to catch up. 


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