SSR Index of Current-Quarter Healthcare Demand Growth: Initial 2Q14 Estimates

Richard

We expect 7.1% (nominal) y/y growth in US health services demand during 2Q14, the product of 5.5% growth in demand intensity and 1.5% growth in price. Our estimate of demand intensity are sharply higher in 2Q14, and reflect an expectation that Affordable Care Act (ACA) related enrollment gains will increase intensity by approximately 2%

Independent of our quarterly growth rate models, we handicap the odds of a trend break, i.e. a significant acceleration or deceleration in demand. The trend-break model indicates that sequential acceleration in demand during 2Q14 is likely (96%)

Pricing growth remains low, although we expect observed y/y price dynamics to improve substantially this quarter as sequester-related cuts to Medicare reimbursement annualize out of the base period observations. In spite of this (mathematical) improvement in government pricing, commercial pricing is weakening

We still believe intensity of demand will continue to grow as employment improves, as this serves to move a larger percentage of the population into the most generous form (employer sponsored) of health insurance. For this reason, we favor healthcare sub-sectors that are: 1) positively levered to gains in US per-capita intensity; and 2) have stable pricing, such as Non-Rx Consumables (e.g. BDX, BCR, COV, CFN, OMI)

For our full research notes, please visit our published research site

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