By Emma Court
With Hurricane Irma and Hurricane Harvey hitting the U.S., the devastating storms are expected to and have affected health care companies with business in those parts of the country, from hospital chains to medical technology facilities and parts of the pharmaceutical supply chain.
Hospital chains are chief among them, since hurricane activity can and has damaged hospital property, required patient relocation and disrupted care.
With Hurricane Irma headed toward the Florida coast, the five hospital companies that appear to have the most Florida exposure are Tenet Healthcare Corporation /zigman2/quotes/207964487/lastsale THC -6.81% , Surgery Partners Inc. /zigman2/quotes/208307762/lastsale SGRY -11.94% , HCA Holdings Inc. /zigman2/quotes/205934574/lastsale HCA -7.62% , Envision Healthcare and Community Health Systems /zigman2/quotes/203657360/lastsale CYH -7.34% , according to Raymond James analyst John Ransom.
Take Hurricane Matthew last October, which hit the Florida coast and eventually developed into a Category 5 hurricane; by contrast, Hurricane Irma is a Category 5 storm already.
Hurricane Matthew affected companies in different ways. It cost Tenet hospitals an estimated $5 to $10 million and Tenet surgery centers an estimated $1.5 to $2 million, and cost Surgery Partners about $1.5 to $2 million, Ransom noted.
Community Health Systems said that Hurricane Matthew had a negative impact but didn’t specifically quantify it. HCA said the 2016 hurricane caused “minor disruption” but no major issues.
For a company like MEDNAX Inc. /zigman2/quotes/204002255/lastsale MD -8.29% , which provides physician services and for which Florida is one of its largest states, “the bigger impact will likely come from office-based practices, which are more exposed to closures and/or rescheduling,” Ransom said.
A number of medical technology companies also have facilities in areas hit by or expected to be hit by Hurricane Irma, including C.R. Bard , Boston Scientific Corp. /zigman2/quotes/203726728/lastsale BSX -5.82% , Cantel Medical Corp. /zigman2/quotes/208355023/lastsale CMD -10.57% , CONMED Corp. /zigman2/quotes/208421017/lastsale CNMD -6.73% , Hill-Rom Holdings Inc. /zigman2/quotes/200618216/lastsale HRC +7.45% , LivaNova /zigman2/quotes/208121019/lastsale LIVN -7.36% , Medtronic /zigman2/quotes/206816578/lastsale MDT -5.52% , Stryker Corp. /zigman2/quotes/207664662/lastsale SYK -10.49% and Zimmer Biomet /zigman2/quotes/205473073/lastsale ZBH -8.44% , according to Needham analyst Mike Matson.
“We estimate that the two storms (Harvey and Irma) could result in a procedural growth drag of ~30 bps for each week that hospitals are out of commission and/or patients are displaced,” Matson said. “We believe this impact could last anywhere from 2-4 weeks, resulting in an estimated 60-120 bps drag on U.S. procedure growth in 3Q17.”
Hurricane Irma Devastates Caribbean Islands
Hurricane Irma, the most powerful storm on record to hit the Atlantic Ocean, battered several islands in the northeast Caribbean on Wednesday as it barreled toward Puerto Rico and Florida. Photo: AFP
Pharmacies were also likely affected by Hurricane Harvey, noted UBS analyst Michael Cherny.
CVS Health Corp. /zigman2/quotes/209664499/lastsale CVS -1.47% has about 815 retail stores in Texas and 134 in Louisiana, and Walgreens Boots Alliance /zigman2/quotes/203410933/lastsale WBA -2.73% has about 713 retail stores in Texas and 158 in Louisiana, he said.
“The stores located in the parts of TX and LA that were hit hardest by the storm could see material damage or even total collapse that will take time and effort to fully repair,” he said. “Besides the time to repair or rebuild stores, the communities hit by the storm will themselves take time to rebuild. Together, these factors will determine if/when these stores return to pre-storm traffic levels.”
The major stock indexes swung between gains and losses Thursday, in part because of hurricane fears. The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA -3.13% was down 0.2% and the S&P 500 /zigman2/quotes/210599714/realtime SPX -3.39% was down 0.1%.