Deferred elective surgery was a through-line of second-quarter earnings calls at four of the country’s largest for-profit hospital operators. But their executives do not agree on what is driving the slowdown, or whether it represents lost demand at all.
Nashville, Tenn.-based HCA Healthcare, Franklin, Tenn.-based Community Health Systems and Dallas-based Tenet Healthcare all reported softness in elective volumes, particularly in high-acuity areas such as orthopedic and cardiac care that generate some of hospitals’ strongest margins.
King of Prussia, Pa.-based Universal Health Services reported milder surgical softness alongside a broader volume rebound and pinned the weakness on a different cause.
The distinction matters because the competing explanations point to very different futures. If patients are postponing care they cannot afford, the volume loss reflects a demand problem that additional capital and capacity will not solve. If cases are shifting to lower-cost settings, the revenue has not disappeared; it has just moved somewhere else.
HCA: Electives down 6%
At HCA, same-facility inpatient surgeries fell 2.3% and outpatient surgeries fell 3.4% in the second quarter. President and CEO Sam Hazen said the decline was concentrated in elective care.
“The primary explanation for the decline was from reduced demand in elective surgeries across both inpatient and outpatient settings,” Mr. Hazen said. “We believe there are several factors contributing to this dynamic, including declines from patients who were previously covered through the exchanges.”
“[Health Insurance Exchange] demand, which is a big piece of our elective declines on both inpatient and outpatient, is a part of it,” he added. “We’re seeing it in the ER with our payer mix, we’re seeing it in outpatient surgery from an elective standpoint and we’re seeing it on the inpatient [side].”
Elective procedures make up about a third of HCA’s inpatient surgeries. That volume fell 6% year over year after declining 2% last year, Mr. Hazen said.
By comparison, emergency inpatient surgeries, which account for about two-thirds of HCA’s inpatient cases, increased from a year earlier.
HCA attributed part of the elective decline to patients who lost coverage through the health insurance exchanges, though Mr. Hazen said broader economic pressures may also be affecting demand.
“We do hear from our physicians that their activity flow is off a little bit this year,” he added. “They’re attributing it to the general affordability and pressures that people are experiencing with the economy as a whole. It’s hard for us to tease that apart, but that’s the best feedback loop that we have.”
CHS: Orthopedics leads the decline
At CHS, same-store surgeries were essentially flat, down 0.1%, but inpatient surgeries dropped 3.8%. CEO Kevin Hammons said the softness was concentrated in elective procedures and led by orthopedics.
“The procedural softness and service line softness is trending towards more elective procedures. Orthopedics being the largest decline,” Mr. Hammons said, pointing to hip, knee and shoulder replacements as cases patients can defer.
Cardiac surgery is following the same path, though the underlying care is less discretionary, according to Mr. Hammons. Patients are postponing cardiology visits and screenings, which means the procedures those appointments would have generated are not materializing.
CHS sees evidence that upstream demand remains. Clinic visits and orthopedic MRIs are running ahead of last year, but “those visits and screenings are not translating into surgeries,” Mr. Hammons said.
That supports CHS’ view that commercially insured patients are making economic decisions to postpone follow-up procedures.
The affordability signal
Mr. Hammons drew the clearest connection between surgical softness and household finances.
He cited weak consumer confidence, gas prices, grocery inflation and the prospect of higher interest rates as pressures on households in CHS markets, where median incomes trail the national average.
“Healthcare seems to be one of the first things that people … will delay or at least attempt to delay if they can,” he said. “In terms of the softness in surgeries, we think that is primarily commercially insured patients, and as a result of economic headwinds with copays and deductibles.
CHS is not seeing a comparable decline in emergency department volume, where much of its uninsured and self-pay care originates. That further suggests the surgical weakness is concentrated among insured patients facing out-of-pocket costs.
The key question for the second half of the year is whether those patients return after meeting their deductibles.
CHS Executive Vice President and CFO Jason Johnson said the upside case depends on commercially insured patients scheduling procedures in the third and early fourth quarters before their deductibles reset.
“The risk … is that they don’t get to the point where they meet those deductibles this year, and they continue to defer those blunted procedures in the next year,” Mr. Johnson said. “Our back-half range assumes a similar decline.”
Tenet offers a counterpoint
Not everyone is convinced the slowdown is a broad consumer retreat.
Tenet reported pressure on inpatient elective cases but strength in outpatient electives. Chair and CEO Saum Sutaria, MD, said the company is not seeing a consumer pullback in its results.
“This is not an environment to be pessimistic about with respect to the acute care industry,” Dr. Sutaria said, noting that industry volume growth of 2% to 2.5% is consistent with healthy pre-pandemic years.
The divergence is partly strategic.
Tenet has shifted high-acuity elective procedures, including orthopedic cases, into its ambulatory surgery centers. Its United Surgical Partners International subsidiary reported 10% same-store growth in total joint replacements in the second quarter. The shift is central to Tenet’s multiyear expansion of USPI, which Becker’s has tracked closely.
Dr. Sutaria said the elective pressure Tenet did see clustered in the states hit hardest by exchange disenrollment, and that investments in hospital outpatient surgery had offset much of it.
“Our elective surgery book was under more pressure on the inpatient side, but elective outpatient surgeries in the hospital or hospital outpatient-based department were actually quite strong,” Dr. Sutaria said.
“I attribute [that] largely to the fact that over the past couple of years in these hospitals — especially as we’ve been doing more work at USPI — we have been investing in hospital-based outpatient surgical programs,” he added. “I think that’s probably the driver of why the elective outpatient surgeries continue to look strong in this current environment.”
UHS sees a rebound — and a different diagnosis
UHS reported a different second-quarter picture. Same-facility acute care adjusted admissions increased 2.9%, emergency department visits rose 4% and adjusted earnings per share reached $5.98, up 12% from a year earlier.
Executive Vice President and CFO Steve Filton said overall and surgical volumes rebounded during the quarter.
Same-facility surgical volume remained down, but only slightly, declining 0.8%. That represented an improvement from the previous several quarters. On a blended basis, inpatient surgeries increased while outpatient cases declined slightly, Mr. Filton said.
He did not attribute the softness to affordability.
“We’re seeing continued shift of certain elective and outpatient procedures into alternate site settings, ASCs, freestanding imaging, etc.,” Mr. Filton said. “I think that’s the primary contribution.”
UHS does not separately track elective and nonelective surgeries, making its 0.8% decline difficult to compare directly with the elective-specific figures reported by HCA and CHS.
Its explanation places UHS closer to Tenet than to HCA or CHS. Both operators view the pressure primarily as a channel shift that a well-positioned system can capture rather than a disappearance of demand.
For UHS, affordability pressures surfaced in insurance coverage rather than surgery volume.
Exchange volumes fell about 15% year over year, and Mr. Filton said nearly all patients who lost exchange coverage became uninsured rather than moving to employer-sponsored plans.
“It felt like virtually everyone who lost their exchange coverage became an uninsured patient,” he said.
UHS raised its estimate of the full-year exchange-related impact to about $85 million from $75 million.
The company also trimmed its outlook, lowering full-year acute care admission guidance to a range of 1.5% to 2.5%. The new range is 50 basis points below the midpoint of its previous guidance and reflects first-half trends.
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