AETNA: Rising Medical Costs Will Cause Q2 Shortfall
Aetna Inc. yesterday warned that its second-quarter earnings would fall far short of expectations as a result of unexpectedly high medical costs, the Wall Street Journal reports. The insurer anticipates reporting an operating profit of 85 cents to 95 cents per share, compared with analysts' consensus estimates of $1.20 per share. Aetna officials attributed the shortfall to an increase of up to 12% in HMO medical costs, reflecting a significant jump in hospital visits and stays, ED visits and outpatient surgeries, as well as longer maternity stays, an increase in specialist visits and higher costs for physician-administered medications. Aetna officials didn't offer specific reasons for the increase in enrollees' use of health services but noted that the insurer is moving more of its utilization-review personnel out of the company's offices and into hospitals to improve their access to information. In addition, Aetna plans to raise next year's premiums more than it had previously expected, beginning with health plans scheduled for renewal in the fourth quarter, and will withdraw from some markets and eliminate some products. Some analysts argued Aetna's managers have been distracted by attempts to reorganize the company and speculated that efforts to appease patients and physicians by easing "gatekeeper" restrictions and reimbursement policies may be taking a toll (Martinez, 7/19).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.