It’s quite the paradox, considering the United States has long prided itself on the quality of its healthcare, physicians, hospitals and academic medical centers. Yet the startling truth is that U.S. residents live shorter lives and experience more injuries and illnesses than people in other high-income countries (Austria, Canada, Denmark, Finland, France, Japan, Norway and Sweden, among others), according to a study released earlier this year by the Washington, D.C.-based National Research Council. The 378-page report grew out of an effort last year that found a large and widening “mortality gap” among U.S. adults over 50.
The report, “U.S. Health in International Perspective: Shorter Lives, Poorer Health,” finds that Americans fare worse than their wealthy counterparts in nine health-related domains: birth outcomes, injuries and homicides, teen pregnancies and sexually transmitted infections, HIV/AIDS, drug-related mortality, obesity and diabetes, heart disease, chronic lung disease, and disability. The research also shows those deficiencies curiously transcending race, education and income levels, failing to distinguish between poor, uninsured minorities and white, professional college graduates.
While the report lists various contributors to Americans’ subpar health, none are considered sole culprits of the disparity. Rather, the underlying causes are extremely complex, the authors suggest, likely driven by a mix of social and environmental factors as well as personal choices.
“No single factor can fully explain the U.S. health disadvantage,” the report states at the outset.
“Deficiencies in the healthcare system may worsen illnesses and increase deaths from certain diseases, but they cannot explain the nation’s higher rates of traffic accidents or violence. Similarly, although individual behaviors are clearly important, they do not explain why Americans who do not smoke or are not overweight appear to have higher rates of disease than similar groups in peer countries. More likely, the U.S. health disadvantage has multiple causes and involves some combination of inadequate health care, unhealthy behaviors, adverse economic and social conditions, and environmental factors, as well as public policies and social values that shape those conditions.”
Skipping doctors’ visits doesn’t help either. Four in 10 American adults have ditched their doctors or put off needed medical care in the past year to save money, and 25 percent have bypassed treatment from a specialist, according to a Biennial Health Insurance Survey released on April 26 by the New York, N.Y.-based private foundation, The Commonwealth Fund. Another 20 percent have not filled prescriptions and/or blown off recommended tests, treatment or follow-up doctor visits, the survey also found. Though unwise, these decisions have become commonplace in recent years as U.S. residents grappled with a deep recession, high unemployment and rising healthcare costs. Skyrocketing medical premiums have impacted all residents, regardless of insurance coverage: Healthcare costs for a family of four with a workplace-sponsored insurance plan topped $20,000 for the first time last year. And Standard & Poor’s is predicting costs to rise by more than 6 percent this year.
Now exacerbated in the final year before President Barack Obama’s healthcare law takes full effect in 2014, these trends are beginning to affect company earnings, some industry analysts claim. Medical testing firm Quest Diagnostics Inc., Johnson & Johnson, Abbott Laboratories and hospital operators such as HCA Holdings Inc. all have noticed a slowdown in the use of medical equipment and/or services.
“It’s still early in the reporting season, but so far it all points to softness,” David Heupel, senior healthcare analyst at Thrivent Financial for Lutherans, told MedCity.com last month. “In the U.S., volumes at hospitals, in-patient and outpatient, are soft.”
Softer volumes, of course, slow product demand, which in turn stymies sales. Johnson & Johnson (JNJ) came up short in several divisions during the first quarter of 2013, reporting double-digit losses in wound care and infection prevention devices, and an overall 2.4 percent decline in worldwide medical device and diagnostic operational sales (the latter loss excludes the net impact of last year’s $19.7 billion purchase of Synthes Inc. The acquisition, executives claim, actually lifted global operational sales by 5.7 percent). Domestic device and diagnostic sales were down 5.2 percent but international transactions slipped just 0.2 percent operationally, according to the company’s Q1 earnings statement.
Global wound care sales fell 10.5 percent to $222 million, with U.S. transactions tumbling 13.3 percent to $117 million and international sales sliding 7.1 percent to $105 million. Infection prevention earnings were off by 10.5 percent on an operational basis, though domestic sales took a particularly harsh beating in the quarter (ended March 31), sinking 26.7 percent.
The numbers weren’t much better in JNJ’s diabetes division, where overall sales fell 9.8 percent on an operational basis to $600 million. Domestic revenue plummeted 19.6 percent, but company bigwigs quickly blamed the loss on lower prices, new product launches in 2012, and competitive pressures rather than weak demand.
Yet when pressed by industry analysts, those same executives ultimately attributed JNJ’s disappointing device and diagnostic sales to market stagnation.
“Overall, the medical device business is probably flat or modestly increased in the first quarter,” Chief Financial Officer and Vice President of Finance Dominic Caruso admitted during a first quarter earnings call on April 16. “But the major driver of that is in fact the utilization trends that we did not see accelerate in the first quarter across primarily the surgery businesses, including outpatient surgeries, etcetera, and some competitive pressures...overall, the trends that saw a modest uptick in the fourth quarter [of 2012] did not persist into the first quarter.”
Such discontinuity perhaps explains the 7.2 percent drop-off in surgical care sales and the flatlining of vision care and specialty surgery product proceeds. It also undoubtedly contributed to the continued downward spiral of the New Brunswick, N.J.-based conglomerate’s diagnostic business, which in recent months has become a prime candidate for sale or spinoff. Diagnostic sales fell 6.8 percent in the first three months of 2013 to $477 million; domestic revenue slid only 2 percent but international proceeds dropped 11.6 percent compared with Q1 2012, generating $229 million for the 127-year-old company.
The downturn in device use/demand also took its tool on Quest Diagnostics, which posted a 6.4 percent loss on $1.8 billion in first-quarter revenue (period ended March 31). Net income fell 14.7 percent to $143.6 million, and reported diluted earnings per share skidded 25.7 percent to 72 cents.
Diagnostic information services dividends slipped 6.7 percent to $1.64 billion and adjusted operating income decreased 14.4 percent, going from $318 million, or 16.7 percent of revenue in Q1 2012 to $272 million, or 15.2 percent of revenue in the first three months of this year. Volume, as measured by the number of requisitions, declined 3.4 percent despite a 1 percent boost from last fall’s purchase of the clinical and anatomic pathology outreach laboratory businesses of UMass Memorial Medical Center in Worcester, Mass.
While the acquisitions added roughly 50 new patient service centers to the company’s Bay State roster and extended its range of diagnostic information services in New England, they could not offset the overall downward trend in demand for procedures and/or services.
Quest executives, however, blamed part of the lower volume on fewer business days in the quarter compared with 2012 and the impact of severe weather. Still, the dropoff in volume wasn’t totally unexpected. The company’s top brass noticed signs of trouble during the second half of 2012 as Mother Nature (via Superstorm Sandy) and political squabbling dampened economic growth. U.S. gross domestic product fell for the first time in three and a half years during the fourth quarter, declining by an annualized 0.4 percent, U.S. Commerce Department figures show.
Consequently, Quest’s Q4 net income took a nosedive, plummeting 24 percent to $140 million. Revenue crashed as well, falling 4 percent to $1.8 billion as sales of diagnostic information services dropped 4.4 percent and test volume decreased 2.4 percent compared with Q4 2011.
To recoup the lost proceeds, Quest has implemented a plan to save $500 million through 2013. Executives, however, are keeping their expectations in check. Though they’re hoping the restructuring plan and acquisitions will increase annual revenue between 1 and 2 percent, they have downgraded their outlook for the year, anticipating proceeds to match 2012 levels rather than expand by 1 percent. “If you look at what we’re assuming in our guidance going forward, we’re not looking for a material change in the overall environment in the marketplace,” Quest CEO, President and Director Stephen H. Rusckowski noted during an April 17 conference call with analysts. “And if you look at our second, third and fourth quarter of last year, we did see some softening already in those quarters. So now that’s factored into our guidance as well about the second half. So [there’s] no material change in the environment going forward. What we saw in the first quarter and what we saw in the second half of last year is what we expect to see going forward.”
Rusckowski’s counterpart at St. Jude Medical Inc. is more optimistic about the year, in spite of a 4 percent decrease in first-quarter revenue and slumping cardiac device sales.
Total proceeds in the company’s Cardiac Rhythm Management (CRM) unit fell 8 percent to $618 million in the period ended March 31. Implantable cardioverter defibrillator sales slid 5 percent to $427 million, while pacemaker revenue sank 12 percent to $251 million, according to St. Jude’s latest earnings report.
Total structural heart product sales were down 1 percent in the quarter and vascular device proceeds came in $6 million under their 2012 level. Cardiovascular and neuromodulation sales were caught in the fray as well, slipping 2 percent and 4 percent respectively. Only atrial fibrillation products proved popular with customers during the quarter, generating $233 million, a 5 percent increase compared with Q1 2012.
Though Chief Financial Officer John Heinmiller expects CRM revenue to decline 4 percent this year, CEO Daniel J. Starks is confident that sales will improve over the next seven months. The company, he told industry analysts, is preparing to launch more than 20 new products this year.