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Analysis

UnitedHealth, CHS Among Healthcare Winners and Losers in Q2

By Jack O'Brien  
   August 08, 2019

For the most part, healthcare companies produced strong performances in Q2 2019.

Publicly-traded healthcare companies continued to build on decent balance sheets from the start of 2019, with many raising year-end financial guidances.

At the high end of the spectrum were several insurers, including UnitedHealth Group, Cigna, and Humana, while for-profit hospital companies like Community Health Systems and HCA Healthcare struggled to keep pace.

Below is a list of healthcare's winners and losers from the Q2 earnings season:

Winners:

UnitedHealth Group

  • The Minnetonka, Minnesota-based health insurer achieved total quarterly revenues once again north of $60 billion.
     
  • CEO David Wichmann said the earnings reflect "strong and balanced performance" from Optum and UnitedHealthcare.
     
  • The insurer's quarterly cash flows from operations reached $5.9 billion, bringing the year-to-date total up to $9.1 billion. 
     

Related: Winners and Losers from Healthcare's Q1 Earnings Season

 

DaVita Inc.

  • The Denver-based dialysis company completed the long-awaited sale of its subsidiary DaVita Medical Group to Optum Inc. for $4.34 billion, with DaVita recording a pre-tax loss of $23 million associated to the transaction.

  • On July 22, the company released its preliminary Q2 financials as it commences with a 'Dutch Auction' of up to $1.2 billion worth of common stock that will run through mid-August.

  • Overall, DaVita generated nearly $2.9 billion in consolidated revenues, supported by growth in not only its dialysis business but also ancillary services and strategic initiatives.

 

Cigna Corp.

  • The Bloomingfield, Connecticut-based insurer built on its strong start to 2019, notching nearly $39 billion in total revenues and shareholders' net income of $1.4 billion, an increase of $600 million year-over-year. 

  • In its earnings report, Cigna attributed significant growth in its health services segment, particularly among adjusted revenues and adjusted income from operations, to the insurer's megamerger with Express Scripts Holding Co. late last year.

  • In May, the company also reportedly flexed its muscle to prevent Connecticut from enacting legislation that would have created government-subsidized healthcare through a public option.

 

Centene Corp.

  • The St. Louis-based insurer posted revenues of $18.4 billion, a 29% year-over-year increase.
     
  • Centene also grew to cover 15 million managed care members, up 2.2 million members, as its Medicaid segment grew by nearly 1.3 million members.
     
  • CEO Michael Neidorff said the pending WellCare deal will "bolster and diversify" the insurer's portfolio.
     

Humana Inc.

  • Humana continues to ride the strength of its Medicare Advantage offerings, raising its projected membership growth to between 480,000 and 500,000 members for the full year 2019.

  • At the end of Q2, the insurer had an individual Medicare Advantage membership of nearly 3.5 million, with group Medicare Advantage membership of 519,000.

  • In mid-June, Humana and Epic Systems announced plans to collaborate on value-based care by integrating the insurer's real-time benefits check tool with the electronic health records company's e-prescribing workflow.

 

Middle:

Teladoc Health

  • The telemedicine company topped $130 million in total revenues during Q2 and named a new COO.
     
  • The Purchase, New York-based company's total subscription access fees revenue also rose 39%.
     
  • While Teladoc's gross margin fell less than 3% year-over-year, its net loss grew to $29.3 million compared to $25.1 million in Q2 2018.
     

Molina Healthcare

  • The Long Beach, California-based insurer experienced a 10.3% drop in premium revenue drop during Q2 but company leadership indicated those metrics were in line with expectations.
     
  • In addition to premium revenues, the company's total revenue and net income slid year-over-year, though its diluted earnings per share (EPS) rose from $3.02 to $3.06 per share.
     
  • Molina now projects its EPS guidance to be in a range of $11.20 to $11.50 per share, as well as premium revenue of $16.1 billion, an increase of $200 million compared to its Q1 guidance. 
     

Losers:

Magellan Health

  • Magellan Health's Q2 earnings report featured a slide in several important metrics but was overshadowed by the announcement of the planned retirement of CEO Barry Smith.
     
  • Smith, who has held the CEO position at Magellan since January 2013, will remain at the helm as the company searches for his replacement. 
     
  • The news comes as Magellan posted another mediocre quarter of earnings amid speculation that UnitedHealth and a private equity firm are eyeing a purchase of the company. 
     

Community Health Systems

  • Franklin, Tennessee-based Community Health Systems (CHS) reported a net loss of $167 million in Q2, a much larger loss than the $110 million posted this time last year.
     
  • CHS saw its net operating revenues top $3.3 billion for yet another quarter, but this metric was down from $3.5 billion in Q2 2018. The for-profit hospital operator also experienced a $9 million deterioration to its adjusted EBITDA, totaling $402 million.
     
  • The company's earnings report came out the same day as the largest single-day drop for Wall Street in 2019, leaving CHS' stock trading below $2 per share.
     

HCA Healthcare

  • Though HCA Healthcare's total revenues increased to $12.6 billion in Q2, the company missed on other key areas.
     
  • Growth in same facility outpatient surgeries and same facility revenues per equivalent admission slowed in Q2 while same facility inpatient surgeries declined 0.1%.
     
  • By the end of Q2, HCA was operating 184 hospitals, down from 185 hospitals at the end of Q1.

Jack O'Brien is the finance editor at HealthLeaders, a Simplify Compliance brand.


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