Hospitals Injure Cardinal Health, Intuitive Surgical

Within about a 12-hour period, two healthcare companies have blamed the pullback in hospital spending for worse-than-anticipated financial results.

This morning Cardinal Health issued a cautious outlook "because of a deferral in hospital capital spending...." And Chairman and CEO R. Kerry Clark said he doesn't see the light at the end of the tunnel. He's quoted in the press release as saying, "It is difficult to forecast the exact duration and potential long-term changes in hospital spending patterns...."

But the head of CAH's Clinical and Medical Products business, David Schlotterbeck, got a little more specific. "With the delay in hospital capital spending, we expect softness in our capital equipment sales to continue in the second half of the fiscal year."

And after the closing bell yesterday, Intuitive Surgical , which makes a million-dollar, scalpel-wielding robot said its results will be hurt by hospitals buying fewer of the machines. In the press release Lonnie Smith, Chairman and CEO, said, "At this point, we believe that uncertainty in global economic markets will make forecasting system placements (robot sales) difficult in 2009." Shares of ISRG hit a nearly two-year low this morning on the warning and at least a couple of analyst downgrades.

Source: Intuitive Surgical

As I blogged last month when the Madoff scandal was just beginning to unfold, JPMorgan's medical device analyst Mike Weinstein saw this coming. After doing a survey of a bunch of hospital Chief Financial Officers, Weinstein called the responses "bleak: and concluded, "Hospital capital spending trends are deteriorating." Weinstein points out that in recent days and weeks that Stryker and Conmed , just to name a couple of companies, have also cited hospital spending cuts for disappointing results.

The economy is hitting many hospitals hard, especially non-profit, community hospitals. A lot of them were living hand to mouth even before the recession so, it only made a bad situation worse.

Questions? Comments?