The arrival of a new Covid-19 variant just as the winter flu season takes hold in the U.S. is sending tens of thousands of Americans to emergency rooms, and raising concerns about possible disruptions to U.S. hospitals.
In the last week of 2023, the Centers for Disease Control and Prevention said that levels of respiratory illness were high or very high in 39 states across the U.S., up from 34 the prior week. Hospitalizations due to Covid-19 and influenza and Covid-19 are spiking, according to CDC data, though rates of respiratory syncytial virus, or RSV, are dropping
The jump in influenza cases is to be expected for the winter season. “This is a very usual flu year,” says Michael Osterholm, director of the Center for Infectious Disease Research and Policy at the University of Minnesota.
What’s more unusual is the current Covid-19 spike, driven by the arrival of a new variant called JN.1, which global health authorities flagged as a potential threat in mid-December, and which the CDC estimates now accounts for more than 60% of Covid-19 cases in the U.S.
That variant has added fuel to what would otherwise be a standard winter season. Viral-respiratory illnesses account for 8.9% of emergency-room visits in the U.S. in the week ended Dec. 30, up from 6.8% just two weeks earlier. Most of those visits are due to influenza, at 5.2%, but Covid-19 is contributing another 3%.
Earlier in the pandemic, these sorts of surges in respiratory-virus activity led to sweeping cancellations of elective surgeries, which was bad news for the companies that sell the medical devices used in those surgeries.
This month could serve as a test as to whether those pandemic-era dynamics are still in play.
Bank of America analyst Travis Steed, who covers medical-device makers, says that hospitals have gotten much better at handling viral surges, and that he doesn’t expect an impact on elective procedure volumes from the current waves.
“What we’ve seen is, hospitals really get to a point where they’ve learned to manage through various Covid waves and flu waves,” says Steed.
While the current wave doesn’t yet match up to earlier Covid-19 surges in severity, the scale is significant.
There were nearly 35,000 Covid-19 hospitalizations in the U.S. in the week ending Dec. 30, up 20.4% over the prior week, according to CDC data. That’s higher than any time since last January, though well below the all-time peak of 150,000 in a week, which came during the initial Omicron wave in January 2022.
While influenza is responsible for more emergency department visits, Covid-19 is associated with vastly more death. In the week ending Dec. 23, 3.2% of deaths in the U.S. were tied to Covid-19, compared to 0.5% tied to influenza.
“It’s clear that every time a new variant arrives of Covid, even with as much immunity as we have in our population, it’s very challenging for us,” Osterholm says. “JN.1 surely is challenging the immunity that we have either from previous infection or from the vaccine.”
It isn’t yet clear how seriously the increase is testing hospital capacity in the U.S. Health officials in Maine and Tennessee, among other states, have said that emergency rooms are strained. Nationwide, the level of U.S. inpatient and intensive-care-unit beds currently occupied is roughly in line with levels last year at this time.
Jared Holz, a healthcare equity strategist at Mizuho, sees a risk that the wave could lead to canceled procedures, which would ding the medical device companies. “I think the risk is a little bit higher that…it limits the upside” for the companies, he says.
The wave of infections comes at an uneasy time for the medical-device makers, many of which saw steep jumps in share price in November and December after dipping in the fall on worries over the impact of the new obesity medicines from
Eli Lilly
and
Novo Nordisk.
The
iShares U.S. Medical Devices
exchange-traded fund, which tracks the sector, fell 19.3% through the end of October from August, but is up 17.7% since the start of November.
Throughout the pandemic, overwhelmed hospitals and nursing shortages led patients and physicians to cancel surgical procedures, which led to dramatic dips in revenue for the medical-device companies.
Medtronic
CEO Geoff Martha told Barron’s early last year that procedure volumes were back to normal.
The question is whether the current surge could cause new disruptions.
Steed, for his part, anticipates no impact. He says that procedure volumes are staying on track after a strong 2023.
Holz, though, says that following the recent run-ups, these stocks have a lot to prove. “But at these valuations, I feel like we need to see upside to numbers in order to either sustain where stocks are trading, or have them trade even higher,” he says. “And I think this is one variable that may prevent that from happening.”
Write to Josh Nathan-Kazis at [email protected]
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