Aug 30, 2021 - Health

The vaccine wave kept health care as profitable as ever

Illustration of emoji with money symbols for eyes surrounded by sick emoji.

Illustration: Shoshana Gordon/Axios

Hospitals, drug companies, health insurers, medical device manufacturers and other health care suppliers generated record sales and profits during the second quarter, according to an Axios analysis of financial statements.

The big picture: Health care spending soared as Americans got vaccinated and resumed seeing their doctors between April and June. However, the coronavirus is raging again and may change behaviors going into the flu season.

The state of play: The pandemic has not damaged the finances of most health care companies.

  • To offset the decline in patient volumes, hospitals, nursing homes and other providers received billions of dollars in federal bailout dollars, most of which were paid out last year.
  • Health insurers were never that worried about the coronavirus and collected large piles of cash because they had fewer medical claims to pay.
  • Pharmaceutical companies saw some sales dip, but pharmacy prescriptions and infusions have picked back up.

What we're seeing now: The industry maintained a 9% profit margin on much higher revenues compared with the second quarter of 2020.

  • Large, dominant hospital systems never saw their total profit fall that much thanks to the bailout cash and huge investment gains, and the influx of returning patients has only helped more. Rural and safety-net hospitals have struggled more.
  • Banner Health, a dominant hospital system based in Arizona, said it had 283 days of cash on hand as of June 30, compared with 225 days at the same time in 2019.
  • Health insurers paid a lot more medical claims this quarter, but many are still more profitable now than they were before the pandemic.
  • Net income at Health Care Service Corp., a large Blue Cross Blue Shield plan, fell 45% in the first six months of 2021 compared with the same time last year. But the company still posted almost $1.5 billion of profit on its fully insured plans.

By the numbers: Some pharmaceutical companies and medical device firms continued to hold the highest measures of profitability.

  • The two companies with the highest profit margins in the quarter: Moderna (64%), which was flush with COVID-19 vaccine sales, and Regeneron (60%), which raked in billions from its COVID-19 antibody treatment.
  • Edwards Lifesciences and Intuitive Surgical each posted profit margins above 35% as hospitals resumed surgeries.
  • Of course, there were plenty of exceptions to the rule. For instance, telehealth provider Amwell — a company that saw boom times in the early days of the pandemic — saw a negative 63% margin.

The bottom line: The fortunes that health care companies continue to amass during the pandemic further insulates them from bigger reforms, just like Big Tech.

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