The sluggish economy is prompting more Americans to put off medical tests, prescriptions and so-called elective procedures—like knee or hip replacements—and related health care companies are feeling the pain.
Many patients are deciding to delay testing or treatment either because they lack insurance, face higher out-of-pocket costs or are afraid to take time off work, health care analysts say.??
"One of the more the dramatic shifts in this economy has been a slowdown in health-care consumption," says economist Diane Swonk of Mesirow Financial. "It’s become discretionary spending in the U.S. because people are really pulling back."
Ask a patient about going without care and the word discretionary takes on new meaning.
"I waited a long time to get Neupogen injections because it was so expensive," said Mary Laidman, breast cancer survivor. "It was supposed to increase my white cell count during chemotherapy. Insurance didn't cover it, and it was about $6,000 out-of-pocket."
In her latest economic forecast, Swonk predicts elective spending on medical care to drop relative to other personal consumption in 2013.
"We're operating in a do-more-with-less economy when it comes to health care," said Christi Bird, health care analyst for the consulting firm Frost & Sullivan.
Bird says both doctors and patients are cutting back as new rules from Obamacare—formally known as the Affordable Care Act — have everyone more concerned about rising costs.
The impact was clear this past week when companies that specialize in diagnostics (the industry’s broad term for disease detection and treatment) reported disappointing earnings. Orthopedic implant maker Stryker posted second-quarter earnings that fell short of analysts' expectations. The company attributed the miss to a weaker euro, which hurt overseas sales.
"Stryker's focus is (anatomical) replacements, and there is a concern that patients are putting that off. So while the company might suffer from exchange rate deviations, a lower demand wouldn't surprise me," said Gavin Magor, a senior analyst with Weiss Ratings.
Quest Diagnostics, which provides medical testing and replacement products—issued a lackluster earnings report with revenue coming in flat. The company also cut its 2012 revenue growth outlook. The company did not immediately respond to request for comment.
Laboratory Corp (LabCorp) , which conducts genetic and anatomic tests used by doctors, hospitals, and pharmaceutical companies, posted a mixed earnings report. LabCorp's CEO David P. King attributed the company's performance to "low-volume-growth."
But patients aren't the only ones contributing to this slowing demand, added Bird. Hospital spending is key.
"There’s no increase in demand going to LabCorp or Quest Diagnostics because hospitals are not increasing their infrastructure and the instruments used for testing. Testing volume is flat right now. That means demand is not there, so this might be a bottleneck situation," said Bird.
In an interview on Thursday Katherine Owen, VP of strategy for Stryker acknowledged that hospital spending is a factor for her company.
"We did see some reprioritization of hospital capital spending and a lot of that was around some of the requirements associated with the Affordable Care Act," said Owen.
She did not specify which requirements, but whatever the reason, investors are facing falling share prices — suggesting that as long as Americans are afraid to spend, this sector is at-risk.