Insurers fall, hospitals rise as UnitedHealth says surgeries up among older

June 14 (Reuters) – Shares of health insurers fell on Wednesday – but hospital and medical devices stocks rose – after UnitedHealth (UNH.N) said surgeries among adults aged 65 and older had picked up more than expected in the last two months.

Shares of UnitedHealth fell about 8.4% to $450.04, Medicare-focused insurer Humana Inc (HUM.N) 14%, Elevance Health (ELV.N) and CVS Health Corp (CVS.N) between 6% and 7.5%.

While health insurers have been benefiting from delayed non-urgent surgeries due to the COVID-19 pandemic and hospital staffing shortages, medical device makers and hospital operators have been hit by them.

“UnitedHealth’s comments suggest those trends may be reversing a bit, which could reverse the stock stories somewhat, as well,” Morningstar analyst Julie Utterback said in a research note.

Hospital operators HCA Healthcare (HCA.N) and Tenet Healthcare (THC.N) rose between 5% and 10%, while medical device makers Stryker (SYK.N), Boston Scientific (BSX.N) and Zimmer Biomet Holdings gained between 5% and 6.5%.

UnitedHealth, at a Goldman Sachs healthcare conference on Tuesday, said it saw increased demand from patients in Medicare health plans for those aged 65 and above, particularly related to knees and hips.

“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,” Tim Noel, CEO of UnitedHealth’s Medicare and retirement business, said late Tuesday.

This pent-up demand is expected to drive up the company’s second-quarter medical loss ratio – a percentage of spend on claims compared to premiums collected – to the high-end or moderately above its full-year outlook of 82.1% to 83.1%.

In April, Chief Financial Officer John Rex had said some health care services, such as physician office activity, were near pre-pandemic levels, while others including emergency room visits and pediatrics were below those levels.

UnitedHealth’s 18.51 forward 12-month price-to-earnings ratio – a common benchmark for valuing stocks – is higher than rival Cigna Corp’s (CI.N) 10.29 and CVS Health Corp (CVS.N) 8.26.

Reporting by Leroy Leo and Bhanvi Satija in Bengaluru, Writing by Manas Mishra; Editing by Shinjini Ganguli

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