Christine McCarthy, a nurse for over 20 years and a palliative nurse for the past year, sits for a portrait on an empty hospital bed at Massachusetts General Hospital in Boston on Apr. 2, 2020. Here at the states largest hospital, staff are coping with unprecedented realities in this coronavirus pandemic and deeply worried about what is yet to come. There is an odd juxtaposition inside this normally bustling world-renowned hospital: Expanded intensive care units are packed with COVID-19 patients, while other floors and places such as family waiting rooms are deserted, quiet.

Erin Clark | Boston Globe | Getty Images

UnitedHealth Group earnings will provide the first window into the financial impact of the coronavirus crisis when it comes to health insurance costs from testing and hospitalizations, as well as the toll on providers from the cancellation of nonemergency care.

Analysts expect the health-care giant to report on Wednesday adjusted earnings of $3.63 per share on $64.4 billion in revenue, according to the consensus estimate calculated by Refinitiv.

Covid-19-related medical costs are not expected to weigh on UnitedHealth’s first-quarter results, because coronavirus testing and confirmed infections in the U.S. ramped up late in the quarter, during March.

For the current quarter, analyst expect that the drop-off in high-priced elective surgical procedures will likely offset the insurers’ higher spending on coronavirus-related costs. Last month, all of the major insurers waived out-of-pocket costs on coronavirus testing and medical visits, while this month, many extended first-dollar coverage for hospitalizations, as well.

Yet, UnitedHealth is also spending more on its overall pandemic response, pledging more than $50 million to provide medical support in cities and states that have elevated virus outbreaks, and providing $2 billion in advanced payments to hospitals and physicians over the last week to help them with liquidity constraints.

2020 outlook a lot less clear

Investors will be looking for UnitedHealth to provide a view into coronavirus medical costs, but analysts at Piper Sandler cautioned in a note to clients that early data on medical claims may not provide much clarity; noting “with much of the claims processing/coding teams now working from home at hospitals and insurers” overall billing and payments could be slower than normal for the industry.

UnitedHealth’s analytic team may have some view on the spread of the virus, but it may not be as useful as its flu-tracking data because of the limited testing on a national scale.

“It is entirely possible that UnitedHealth could withdraw its 2020 guidance due to the uncertainty. This would not concern us,” said Cantor Fitzgerald analyst Steven Halper in a note to clients, adding that he believes the health-care giant is well positioned to withstand Covid-related headwinds.

Unemployment and health insurance losses

UnitedHealth is the nation’s largest health insurer, ending 2019 with more than 48 million members, with over 19 million of them in employer plans. The company warned late last year that its employer numbers would dip in the first half of this year, after some major accounts were not renewed.

The rising tide of employer furloughs and layoffs could lead to overall industry reductions in employer insurance memberships.

“The big factor is how long does this last and how much of these employees are ultimately back on the payroll,” said Kyle Roland, senior fixed income analyst at Wells Fargo Securities, adding that insurers with great exposure to the Medicaid government health care safety-net program will be better positioned in a downturn.

“If you’re UnitedHealthcare, Centene or Anthem, with massive Medicaid exposure … you can onboard those members on a different platform at a lower margin, but some others are not going to have that luxury,” Roland said.

He notes rival Cigna may benefit near term from having a larger employer-based membership that may not be as heavily impacted by Covid-19 hospitalizations, but longer term the insurer could face steep losses in an economic downturn.

“In a material downturn where large employers are experiencing heavy layoffs, Cigna would undoubtedly face a fair amount of pressure in being unable to recapture lost membership via government programs,” he said.

Longer rebound in nonessential care

Nearly half of UnitedHealth Group’s operating profits come from its Optum services division, which includes surgical centers and an army of more than 30,000 physicians and nurses, and data analytics and consulting.

The company has shifted nonemergency care to telehealth visits and many of its physicians have been providing care on the front lines of the Covid pandemic, but investors will want to hear the company’s outlook for a potential rebound in the second half of the year for outpatient surgery and nonemergency care.

“Optum could be affected by fewer elective procedures at surgery centers, and fewer home-health visits, and physician office visits. Clearly, the ultimate impact is difficult to quantify,” Halper said.

The postponement and cancellation of higher-margin elective procedures has weighed on both hospitals and ambulatory surgical operators. Envision Healthcare, a physician staffing firm with 27,000 clinicians, said earlier this month that its patient volumes are down 70% for its ambulatory surgery and anesthesia services. The firm, which is owned by KKR & Co., has slashed executive pay in an effort to preserve cash.

This month, hospital operator Tenet Healthcare furloughed 500 full-time employees, and withdrew its first-quarter and full-year guidance amid Covid-19 uncertainty. Last month, outpatient surgery provider Surgery Partners withdrew its 2020 earnings guidance.

If the crush of the Covid-19 pandemic subsides by summer, it’s possible hospitals and surgical centers will be able to reschedule orthopedic and cardiac stent procedures that have been postponed for sometime in the second half of the year.

“Personally, I think it could take a little bit longer to get that volume back than maybe people think,” said Roland, who notes most orthopedic patients are close to 60, an age puts them at great risk for Covid-19.

“If I think about that, do I want to rush back into a hospital in August, September, if I know I don’t have to have it done immediately?” he said.

UnitedHealth is scheduled to report first-quarter results on Wednesday, ahead of the opening bell.

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