2020年Q2管理式医疗总结：Q2很强劲下半年重点转向利用率反弹.docx

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1、Equity ResearchAmericas | United StatesCredit SuisseManaged Care2Q20 Recap: Very Strong Q2, Focus Shifts to 2H Utilization Rebound/ElectionManaged Care | QuarterlyResearch AnalystsA.J. Rice212 325 8134Eduardo Ron212 325 7491Alexander Khan212 325 7714Robert Moon212 325 71122Q20 Results Strong as Expe

2、cted; MCOs Anticipating Above Normal Utilization in 2H20； Will It Happen?: All MCOs in our coverage reported EPS ahead of consensus. The average positive variance relative to cons was 19%, with results ranging from a 0.8% beat for CNC (in-line with its outlook) to a 38.2% beat for CVS. For MCOs in o

3、ur coverage, consol MLR (ex-WellCare) decreased 980 bps Y/Y, on avg, to 74.6% in 2Q20. On a Y/Y basis, all MCOs reported a decrease in MLR driven by deferred care/procedures due to the COVID-19 pandemic, as well as the return of the HIF in 2020, partially offset by premium credits/co-pay waivers in

4、Q2 as well as incremental COVID-19 testing/treatment costs.2020 EPS Outlooks Largely Reaffirmed; CNC Reduced Revenue Outlook： Along with their 2Q20 earnings releases, all MCOs in our coverage, except for CVS, reiterated their respective 2020 EPS outlooks. CVS raised its 2020 EPS outlook by $0.10 to

5、$7.14- $7.27 to reflect an update to its estimated full-year effective income tax rate. CVS also raised its 2020 OCF outlook by $500 mln to $11.0-11.5 bln. CNC lowered its 2020 revenue outlook by $500 mln due to slower Medicaid enrollment growth relative to CNCs investor day unemployment assumptions

6、. Centene now expects its peak membership growth to be 1.4 million (in November) vs. 1.9 million (in August). Cigna continues to expect the sale of its Group Disability & Life business to close in 3Q20 and to generate $5.3 bln of net proceeds which will be used for share repurchases and debt paydown

7、.3Q20 EPS Expectations Set for CNC & HUM. Centene and Humana were the only MCOs to offer explicit Q3 EPS expectations. Centene expects roughly 20% of FY20 EPS outlook to occur in Q3, which implies a Q3 EPS of $0.95 - $0.99 and a Q4 of $0.55 - $0.71. Humana noted on its earnings call that roughly 15%

8、 (or $2.78 at the midpoint) of its full-year 2020 EPS outlook ($18.25-$18.75) is expected to occur in Q3. This implies a loss of roughly $2.24, at the midpoint, for 4Q20.2H20 MLR Expectations Discussed: While there are unknowns with respect to the return of deferred care utilization, the potential f

9、or higher acuity cases coming back in to the healthcare system, and the impact of reduced copayments on utilization, most MCOs provided a framework for their thoughts on 2H MLR. Anthem expects 2H20 MLR to be roughly 200 bps higher relative to what normal seasonality might have suggested. Cigna indic

10、ated that 2H20 MLR is expected to be 150-200 bps higher than it would have expected prior to COVID. HUM expects 2H20 consolidated MLR to be in the neighborhood of 250-300 bps higher than its pre-COVID expectations. Humana expects non-COVID medical utilization to begin to approach normal levels as th

11、e year progresses and potentially run slightly above normal later in the year. With respect to COVID-related testing and treatment, HUM expects to incur $600 mln of costs in 2020 and noted that a relatively small portion of that has been spent through June 30, 2020. UNH expects 2H20 MLR to run a cou

12、ple hundred basis points above what it would consider historical 2H MLR levels. CVS expects HCB utilization in 2H20 to remain at more normal levels with select geographies continuing to be affected by COVID-19 waves. In addition, the company expects higher costs related to COVID-19 testing and treat

13、ment.DISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLOSURES, ANALYST CERTIFICATIONS, LEGAL ENTITY DISCLOSURE AND THE STATUS OF NON-US ANALYSTS. US Disclosure: Credit Suisse does and seeks to do business with companies covered in its research reports. As a result, investors sho

14、uld be aware that the Firm may have a conflict of interest that couldCons/CSe, with an adjusted pre-tax margin of 4.4%. Revenues for Integrated Medical (benefits biz) came in at $9.2 bln ($480/$410 mln below Cons/CSe) with adj. income from operations of $1.5 bln (or a 16.5% margin) which was $129/$1

15、50 mln above Cons/CSe.MLR Trends： Integrated Medical segment MLR at 70.5% (CSe was 76.1%) in 2Q20 decreased 1,110 bps Y/Y, with the Y/Y decline reflecting significantly lower medical utilization in both the Commercial and Government segments compared to historic patterns, partially offset by premium

16、 relief programs for clients and cost share waivers for customers.Utilization Update： By month, compared to baseline expectations, utilization was 30-35% lower in April, 20-25% lower in May and closer to normal in June at approximately 0% to 5% lower.Health Services Results： Cl fulfilled 364 million

17、 (up 23.8% Y/Y) adjusted pharmacy scripts in 2Q20 driven by the insourcing of Integrated Medical script volumes and strong organic growth, partially offset by somewhat lower retail network scripts related to acute needs due to the COVID-19 pandemic.The Health Services segment reported adjusted EBITD

18、A of $1,327 bln (up 9.6% Y/Y) in 2Q20.International St Group Disability & Other Results： Cigna reported International segment adj pre-tax income of $319 mln, up 54.1% Y/Y, ($101 mln above Cons/CSe) reflecting lower claim levels driven by the COVID-19 pandemic, continued business growth and operation

19、al efficiency.Group Disability & Other reported adj pre-tax income of $132 mln, down 11.4% Y/Y, (in-line w/ Cons/CSe) reflecting elevated claims in Cignas Life business primarily related to the COVID-19 pandemic, partially offset by favorable performance within the Disability business.Membership Tre

20、nds： Cignas Integrated Medical membership declined by 137K (0.9%) sequentially in Q2 driven by a 140K (1.0%) decline in Commercial membership.DCP Trends： DCPs in Integrated Medical were 45.7 days, up 6.5 days sequentially and 5.9 days Y/Y.Share Repurchase： YTD through July 29, Cl repurchased 8.3 mln

21、 shares for approximately $1.5 bln.2020/2021 Outlook: Cl reaffirmed its 2020 outlook for adjusted rev of $154-156 bln, adjusted EPS of $18.00-18.60, and OCF outlook of greater than $7.5 bln. Cl notes that the outlook excludes future share repurchase. The company continues to target below 40% D/C by

22、the end of 2020. Cl continues to expect to close the sale of the Group Disability and Life business in 3Q20, Cignas outlook assumes a full year contribution from the Group Disability and Life business. Cl still assumes the Group Disability & Life sale will generate $5.3 bln of net proceeds for share

23、 repurchase and debt paydown in 2020 with share repurchase being the larger piece.Additionally, Cigna indicated that 2H20 MLR is expected to be 150-200 bps higher than it would have expected prior to COVID. The company thinks there will be some deferred care utilization and the potential for higher

24、acuity coming back in as well as the ongoing effect of the programs Cl put in place to reduce copayments or make care more affordable which is expected to drive some additional utilization.Cl also reaffirmed its $20-21 target for adj EPS in 2021. In Health Services (PBM), Cl projects a 96-98% retent

25、ion rate in 2021. Cigna has indicated that the strong retention in its PBM business sets it up well for another year of profitable growth.Additionally in MA, Cl has seen 16% customer growth YTD, and the company is continuing its path of geographic and product expansion which will put it in the 10-15

26、% customer growth range for 2021. In Integrated Medical, Cl is progressing through the national accounts selling season now, where it has seen some higher retention partially driven by the broader environment. Cl has also had some new business wins. All in, across the book, Cl believes it isset up w

27、ell for profitable revenue growth in 2021. Additionally, ongoing deleveraging work and continued realization of synergies will all be part of the story for 2021.Centene2Q20 Results Summary： CNC posted 2Q adj. EPS of $2.40, in-line with its guidance of $2.35-$2.45 and $0.02 below/0.02 above CSe/Cons.

28、 2Q premium and service revs at $25.7 bln increased 48.7% Y/Y and were $77.7 mln ahead of/$7 mln below CSe/Cons.Operationally, better than expected revs and G&A were offset by higher MLR as compared to our estimates (MLR 20 bps ahead of cons).MLR A SG&A Trends： 2Q20 MLR of 82.1% decreased 460 bps Y/

29、Y, while adjusted SG&A expense ratio was 8.5%, down 50 bps Y/Y. 2Q20 MLR was 20 bps better/60 bps worse than Cons/CSe, while adj. SG&A ratio was 40/70 bps better than Cons/CSe. While discussing the Y/Y trends for MLR, CNC highlighted lower medical utilization due to the COVID-19 pandemic, partially

30、offset by normalizing HIX margins. The decrease Y/Y in the SG&A ratio was driven by the addition of the WCG business, which operates at a lower SG&A ratio, and the leveraging of expenses over high revenues, partially offset by additional support provided to CNCs HIX members through the extension of

31、grace periods for member premiums for those impacted by the COVID-19 pandemic.Utilization Update： Utilization returned to more normal levels towards the end of Q2. Volume began to return in May, and June was virtually a normal month relative to prior years. With the recent surge in the virus, CNC in

32、dicated that it is seeing some preliminary decline in utilization in July.Membership Trends： Total membership at CNC increased 819K (3.4%) sequentially primarily driven by Medicaid membership growth of 736K (or 6.2%).DCP Trends： DCPs were increased 4 days sequentially (using pro forma 47 days) to 51

33、 days.2020 Outlook: CNC maintained its 2020 adj EPS outlook of $4.76-4.96 and lowered its 2020 revenue outlook by $500 mln form $109.5-111.9 bln to $109.0-111.4 bln. Additionally, the companys share count outlook is updated to 577.9-580.9 mln from 577.3-580.3 mln. The company noted that early in Q2,

34、 CNC experienced a significant decrease in utilization during shelter-in-place and similar orders, which caused delayed or avoided costs. The deferral of medical services may lead to higher costs of treatment once members return to seeking medical care, as their health issues may have become more ac

35、ute. As shelter-in-place orders were lifted late in Q2, medical utilization began to increase as elective procedures and other non-emergent care resumed. CNC experienced and continues to expect incremental COVID-19 costs as the outbreak continues to spread. In addition, the pandemic has widespread e

36、conomic impact, driving interest rate decreases and lowering investment income. CNC is also seeing higher interest expense due the deferral of the early redemption of senior notes.CNC lowered its 2020 revenue outlook by $500 mln due to the lack of enrollment materialization from CNCs unemployment le

37、vel assumption. The company assumes that the suspension of redeterminations now runs through the end of the year as opposed to September, as indicated at its Investor Day. However, CNC notes that this did not have a material impact on its revenue outlook. Centene now expects its peak membership grow

38、th to be 1.4 million (in November) vs.1.9 million (in August) indicated at Investor Day. Additionally, while Medicaid rate discussions with states continue, no change in underlying assumptions contributed to the revenue reduction either. CNC expects to add a total of $3.5 bln in COVID-driven revenue

39、 in 2020 which compares to its original expectation of $4 bln.Centene expects roughly 20% of FY20 EPS outlook to occur in Q3 which implies a Q3 outlook of $0.95 - $0.99 and a Q4 outlook of $0.55 - $0.71.CVS Health2Q20 Results Summary： CVS posted 2Q20 adj EPS of $2.64, up 39.7% from $1.89 last year.

40、Results were $0.72/$0.73 ahead of CSe/Cons. 2Q20 adj revs at $65.3 bln and up3.0% Y/Y, were $833 mln/$2.2 bln ahead of Cons/CSe, while adj op income at $5.3 bln (up 32.2% Y/Y), was $1.1 bln above Cons/CSe. Adjusted revs & op income were ahead of CSe/Cons for the Pharmacy Services, while for Retail/L

41、TS revenue was above CSe/Cons and op income was below. The Health Care Benefits segments adj revs were slightly below CSe/Cons, but op income was meaningfully above CSe and cons.MLR fit SG&A Trends： MLR came in at 70.3% (830/820 bps better than CSe/Cons) and was down 1,370 bps driven by the deferral

42、 of elective procedures and other discretionary utilization related to COVID-19 and the reinstatement of the HIFSegment Results： Pharmacy Services (PBM) posted adj. operating income of $1,327 bln (up 2.4% Y/Y), $135/66 mln ahead of CSe/Cons. Total adjusted pharmacy services claims came in at 505.4 m

43、ln (up 3.4% Y/Y) was down 6.6% sequentially primarily driven by pharmacy network claims (down 7.8% sequentially), as mail choice was flat sequentially. The total estimated COVID-19 impact on PSS was a negative $50 million.Retail/LTC posted adj. op income at $1,057 bln (down 36.7%), which was $450/33

44、5 mln below CSe/Cons. SS front store sales decreased 4.5% Y/Y, as a result of shelter-in-place orders during the quarter. SS pharmacy sales increased 4.6% Y/Y, and SS prescription volume increased 0.6% Y/Y. The total estimated COVID-19 impact on Retail/LTC was a negative $525-$575 mln.Health Care Be

45、nefits posted adj. 01 of $3.46 bln, up 141% Y/Y, and $1.4 bln above Cons/CSe, primarily driven by reduced benefit costs due to the deferral of elective procedures and other discretionary utilization in response to the COVID-19 pandemic, growth in the segments Government products and the impact of co

46、st reduction efforts, including integration synergies. The total estimated COVID-19 impact on HCB was $1.8-2.1 bln in Q2.Approximately 35% of the estimated $1.5 bln of FY20 COVID-19 related investment was completed in Q2. Gross PYD was negative $44 million in 2Q20 vs. a positive $43 mln in 2Q19.Util

47、ization Update/Same Store Trends： The sequential improvement in June adjusted prescription volume and total claims processed reflects 90-day maintenance prescription refills from March.Improvement in June Front Store sales continued into July reflecting state reopenings followed by purchasing of pre

48、ventative and treatment items in Sunbelt states during July.Health care utilization largely returned to prior year levels in June and July but varied by geography and business line.The table below highlights Y/Y business trends at CVS from March 2020 - July 2020.Figure 3: July Business UpdateMar-20A

49、pr-20May-20Jun-20Jul-20*Retail Same Store Sales*17.5%1.5%(1.1%)7.1%4.6%Pharmacy Sales17.2%5.4%(0.5%)9.2%4.5%Pharmacy Adjusted Prescription Volume*12.6%(0.5%)(4.2%)7.0%5.2%Front Store Sales18.6%(10.7%)(3.2%)0.4%4.7%Pharmacy Services Total Claims Processed17.0%0.6%(2.3%)12.4%1.9%HCB Decreases in Utilization(-30%)(-25%)(5%)0%Source: Company data*Same store sales and prescription vo