Weekly Health Tech Reads 7/19/26

HCA was down 8% on the week after it pre-empted earnings with an 8-K noting payer mix headwinds due to ACA/uninsured shifts, sending the hospital sector down ~5% early in the week.

UHG was roughly flat after its stock briefly jumped ~8% as it continued its recovery and raised earnings guidance, buoyed by positive medical trend in MA and the turnaround in Optum Health.

Elevance was down 11% after it managed to disappoint Wall St even while raising earnings guidance, citing the potential for additional Medicaid exits, which dominated the earnings call. More on this below.

What is Elevance up to in signaling Medicaid market exits?
One of the most befuddling parts of earnings this week was Elevance proactively telling Wall Street it expects to exit additional Medicaid markets beyond the previously announced D.C. exit, but then providing no detail on the scope of potential exits. Elevance has long indicated that 2026 would be the trough year for Medicaid, with margin improvement expected in 2027+, which would seem to imply that things are on the upswing. Elevance also indicated on the call that performance seems good: Medicaid rates are coming in favorable to expectations, acuity shifts are in line, and utilization, while high, is also in line. Adding to the unease is that analysts asked at least three separate times in the Q&A for clarity on what the magnitude of exits may be, and Elevance leadership never answered the question. It seems like an odd strategic decision to ride the market down to -1.75% margins and then announce unspecified market exits as the market rebounds. Elevance reiterated its commitment to Medicaid broadly, but the move naturally invites questions about how much volatility there is in specific market performance. It’ll be interesting to track how Centene and Molina describe this market dynamic.

How does the divergent narrative around commercial trend play out? Elevance presented a bullish narrative on the commercial market, noting that the trend was elevated but in line with expectations and that the customer pipeline is quite strong. Elevance noted that it is seeing a pattern in which customers who left over the past few years are now returning, which is an interesting observation on the momentum it has in commercial. UHG’s update on the commercial business highlighted a higher-than-expected commercial trend number, running north of the 11% trend it anticipated. This persistently high trend is pushing out UHG’s margin recovery target in commercial of getting back to 7%+ margins further out past 2027. It called out the No Surprises Act IDR process as a key part of that trend increase, accounting for 0.5% in the quarter and 1% of costs overall. UHG also noted it is seeing aggressive billing practices and higher cost per encounter in the FFS-dominated commercial market. The IDR process was a surprisingly large part of the conversation on the UHG call as an analyst asked a follow-up question on it, and perhaps equally as surprising, I don’t think Elevance referenced it once. As the national conversation about the costs of commercial healthcare intensifies, it’ll be worth keeping an eye on this trend narrative, both during earnings season and beyond.

Early returns on ACA don’t seem death spiral-y
Just last week, we were discussing a WSJ report suggesting the ACA market is in a bad spot, with payers requesting double-digit rate increases for 2027, presented as evidence that the market is experiencing something resembling a death spiral. HCA, Elevance, and UHG certainly don’t seem to give that impression. Elevance and UHG both noted that ACA trend is performing as expected, with Elevance suggesting the risk pool appears aligned with its assumptions. HCA noted its payer mix shift from ACA to uninsured has had a larger-than-expected negative impact, which would seem to imply this wasn’t just healthy non-utilizers (or fraudulent enrollees) leaving the exchanges, as HCA is seeing them show up as uninsured. It all seems to indicate, similar to the commercial conversation, a functioning market responding to an incredibly inflationary cost environment.

How does the 2026 outperformance in MA set up for 2027, particularly for Humana?
I’d imagine we’ll see Humana take a victory lap on its earnings call given the questions it faced early in the year about its influx of new membership. If Humana’s stock performance is any indication, it has moved past those questions — if you bought Humana stock in March at its low point of $165, you’d have returned 144% over the last three months. 2026 seems to be shaping up well for MA plans, and the questions now turn to 2027 and how plans are balancing margin and growth. Humana’s talk track will be worth paying particular attention to, as it has recently shifted its narrative sharply towards margin recovery. In an HTN conversation with Sam Melamed last week, we discussed how early broker readouts suggest that most large payers are aiming to be #2 in the MA market in 2027 in terms of benefit richness. Given the relative starting points of various plans, if everyone is aiming to be #2 in a market, it seems likely that Humana will end up remaining #1 more often than not.

How do the hospitals navigate the variety of headwinds they’re facing? In addition to the unfavorable ACA payer mix shift HCA called out, HCA noted a decline in surgical volumes. This resulted in it revising guidance downward for the year, even while it saw a $400 million incremental benefit from the Medicaid Supplemental Payment Program decision in Florida. Both Elevance and UHG were asked questions about whether they’re noticing softness in surgical volumes, with neither reporting a slowdown similar to HCA. HCA is now down 20% year-to-date, and it will be worth keeping an eye on how other hospital operators navigate the various headwinds here.

Chief Medical Officer Hybrid (Plano, TX)

SVP, Value Based Care Hybrid (Plano, TX)