New Analysis: Trumpcare May Cut Ortho Volumes 1.2%
Robin Young • Tue, May 23rd, 2017
A new analysis by one of Wall Street’s top medical device research groups has concluded that the May 4 passage of the American Health Care Act (AHCA), if ultimately signed into law by President Trump, would likely reduce orthopedic procedure volumes 0.7% in 2018 and, cumulatively, cut overall volumes 1.2% in 2026.
The new analysis also concluded that the spine surgery sector would be the hardest hit.
The May 17 research report was issued by Wells Fargo Securities and was based on their analysis of the Congressional Budget Office (CBO) analysis of the initial House AHCA bill. That CBO analysis concluded that, if passed, the AHCA bill would pull insurance back from 14 million to 24 million Americans in 2018 and 2026, respectively.
The CBO will be updating this scoring in the coming weeks, but most analysts, including the Wells Fargo team, don’t expect the basic conclusions to change materially.
Five takeaways from both the CBO report and Wells Fargo’s analysis:
People with healthcare coverage tend to consume more healthcare services than those without coverage. Wells Fargo’s team found that the number of procedures per million tends to be lower in people without insurance then those with insurance.
Passage of AHCA could cut coverage for 4.4% of U.S. population. The CBO estimated that passage of AHCA would remove health coverage from approximately 14 million people or 4.4% of the U.S. population in 2018. Doing the math, that would mean a potential 0.5% reduction in healthcare procedure volume.
Orthopedic procedures are highly dependent on insurance coverage. Wells Fargo’s research team found that orthopedic procedures are among the most dependent on insurance coverage. Of the six procedures which appeared to be most dependent on insurance coverage, four were orthopedic including knee arthroplasty, hip arthroplasty, spine fusion and non-hip & knee arthroplasty. For example, the average number of uninsured among the non-elderly (non-Medicare) population is 10.5%. But the number of uninsured who have knee arthroplasty (again, non-elderly) is 1.2%. Again, 10.5% for the overall population and 1.2% for knee arthroplasty.
Pure play spine especially vulnerable. While the Wells Fargo team focused on companies, the logic also holds for any pure play spine surgery provider (ambulatory surgery center, clinic and hospital). Most orthopedic services and implant/instrument providers are part of large diversified companies like Johnson & Johnson, Medtronic, Stryker, Zimmer Biomet and Smith & Nephew. The portfolio effect of a broad range of medical device, pharmaceutical, biologic and durable equipment products mutes the effect of AHCA. But pure play companies and providers—which are more prevalent in the spine sector than in any other orthopedic sector—are more vulnerable to AHCA insurance coverage changes.
AHCA could cut spine procedure volumes by 1.2% in 2018. These Wells Fargo percentages are not only estimates, but also averages. So the precise number is less important than the direction. For the first quarter ended March 31, 2017, global spine procedure volumes rose just 0.5% (before factoring in Medtronic’s numbers—which likely will raise this to, we estimate, about 0.75%). That is the lowest rate of growth of any orthopedic sector. The spine sector is more fragmented, has more pure play suppliers and is already the weakest sector in terms of procedure volume growth so it may well experience the highest rate of volume decline due to AHCA passage.