Becker's ASC Review

30 Thought Leadership Moody's updates US medical products, devices sector outlook to 'stable' amid coronavirus: 6 key points By Laura Dyrda M oody's expects to see slow global economic growth and healthcare expenditure diversion due to the coronavirus outbreak, according to a March 17 outlook report. The medical device industry in particular will experience a negative impact from hospitals and surgeons cancel- ing or postponing elective surgeries. Here is an ongoing list of hospitals that are halting elective surgeries for now. Moody's expects eventually patients will have their elective procedures at some point in the future. "We expect a pullback in consumption in the first half of the year, followed by a moderate recovery, assuming global ef- forts to arrest the spread of coronavirus are successful," said Moody's Senior Vice President Scott Tuhy. Six things to know: 1. If disruption from the coronavirus outbreak is prolonged, Moody's believes companies will moderate some discre- tionary expenses to keep margin stability. "We could revise our industry outlook to negative if we expect EBITDA to decline over the next 12 to 18 months. [That] could happen. If global efforts to arrest the spread of the virus are unsuc- cessful and procedures become deferred for an extended period of time." 2. Moody's changed the outlook for U.S. medical products and devices sector from positive to stable, reflecting its revised EBITDA of 2 percent to 4 percent over the next year to 18 months. Prior to the coronavirus outbreak, the EBITDA forecast was 5 percent to 6 percent. 3. Beyond the coronavirus impact, Moody's projects the longer term revenue trends for medical products and de- vices are promising, especially related to minimally invasive procedures and robotics. The firm sees robotic-assisted procedures continuing to expand, which will benefit Stryker and Zimmer Biomet. "While Stryker has a significant head start in robotics, we believe Zimmer will be able to grow this business, partly due to the high level of physician loyalty for Zimmer," the report states. 4. Moody's expects device company revenue to improve slightly in the coming years since the cost savings from the mergers in 2017 have been achieved, according to the report. They are likely to use research and development to grow revenue while using some discretionary expenses to keep margins stable. 5. It is unclear how long it will take hospitals to recover procedure volume. In some cases, companies have reported that sales in China are beginning to recover, but still are at historic lows. 6. Stryker is still expected to close its $5.4 billion acquisition of Wright Medical later this year. However, Moody's said it expects companies to be cautious regarding transactions going forward until the coronavirus pandemic subsides. n 5 ways ASCs could be affected long after the pandemic By Angie Stewart F or surgery centers, the effects of the COVID-19 pandemic could linger long aer the crisis is contained. Five ways ASCs may be affected down the line: 1. Utilization. Unveiled March 30, CMS' "hospitals without walls" initiative allows hospitals to provide inpatient care in ASCs and other temporary expansion sites as part of their COVID-19 response efforts. Serving in new capacities could help ASCs demon- strate their quality and gain public trust. Plus, the COVID-19 pandemic will make people more infection-conscious, leading them to seek out care in ASCs that offer a lower risk of exposure, according to St. Louis-based Atlas Surgical Group CEO Shakeel Ahmed, MD. Surgical Management Professionals Presi- dent and CEO Mike Lipomi offered a similar perspective, saying that ASCs' capabilities "are wholly underutilized." 2. Finances. Elective procedure restrictions in more than 30 states have led to steep declines in patient volumes and forced surgery centers to forgo an important revenue stream. While some ASCs can seek financial relief from the Small Business Administration, they still may need to develop financial contingency plans and operate on minimum cash flow to stay afloat. Next Services' Paycheck Protection Program loan calculator is designed to help centers plan accordingly. 3. Patient payments. One-fourth of Americans have either lost their job or taken a pay cut, and an additional 9 percent expect to find themselves in that same situation, according to a recent CNBC survey of 800 people. at means more than 30 percent of Americans may be at risk of losing coverage under employer insurance plans. So, when elective cases are allowed to resume, patients may delay them indefinitely or forgo them altogether if forced to pay out of pocket. 4. Staffing. Several surgery centers are lay- ing off or furloughing employees to offset financial losses from elective case bans. In Minnesota, where non-urgent case bans took effect March 23, most ASCs are unable to guarantee unemployed workers will get their jobs back. Surgery centers will have to grapple with ensuring they're sufficiently staffed for a post-pandemic surge of patients whose elec- tive cases were put off. 5. Telemedicine. Seventy-five percent of medi- cal practices and clinics surveyed by medical technology company Kareo are either using a telemedicine solution or plan to deploy one soon. Orthopedic surgeon Geoff Van iel, MD, of Rockford-based OrthoIllinois said he thinks the COVID-19 crisis could create long-lasting changes in telemedicine because patients are getting more comfortable with the technology, and providers could use it to track postoperative progress. n

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