Insurers have many of the same concerns. WellPoint, Inc. (NYSE:WLP) completely repositioned itself with its $4.5 billion purchase of AMERIGROUP in order to get a hold of as many of the 16 million soon-to-be newly qualified Medicaid-based members under Obamacare. If these members don’t sign up because of technical problems with the state exchanges, or a lack of education informing them where to go to get the insurance they’ve qualified for, then insurers like WellPoint, Inc. (NYSE:WLP) are going to be in a world of hurt. This uncertainty comes on top of the PPACA calling for an 80% medical loss ratio cap on insurers. In other words, they’ll be required to spend at least 80% of premium money collected on patient care. With the odds stacked against insurers, it’s not hard to see why they’ve been more cautious about giving the green light to Intuitive’s costlier robotic procedures.
Who’s next, and when will this end?
If I’m right, then it’s probably just a matter of time before MAKO Surgical Corp. (NASDAQ:MAKO) reveals similar weakness in its hip and knee procedure volume. A shortfall for MAKO Surgical Corp. (NASDAQ:MAKO) would be more concerning, however, since it’s still running in the red whereas Intuitive Surgical is healthfully profitable, even after last night’s revenue miss.
The question shareholders really should be asking themselves is, “When will this all blow over?” The answer to that question is probably not until the first or second quarter of next year. As we near the milestone dates for Obamacare of Oct. 1 for the opening of the state health exchanges and Jan. 1 for the full implementation of the PPACA, I’m afraid the uncertainties surrounding the bill and the spending habits of many health care companies — including hospitals and insurers — are only going to grow more cautious. Intuitive may be today’s sacrificial lamb, but it could be just the start of a rough patch for the health care sector.
My suggestion would be to keep your expectations reasonable for its growth prospects over the near term, but not to allow your emotions to cloud your better judgment. Nothing has, thus far, shown that robotic surgery isn’t safe. Intuitive has a veritable monopoly in soft tissue robotic surgery, which comes with perks like incredible pricing power for its devices, minimal market expenses, and near-guaranteed profitability. Over the long run, Intuitive Surgical still has my support; but that isn’t to say we won’t need a Band-Aid every now and then.
The article This Is What’s Really Behind Intuitive Surgical’s Revenue Shortfall originally appeared on Fool.com.
Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong. The Motley Fool owns shares of, and recommends, Intuitive Surgical and WellPoint. It also recommends MAKO Surgical and Natus Medical.
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