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Healthcare Executives Bullish on 2025: But Why Are Stocks Slipping?
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A recent survey by Deloitte revealed that U.S. executives are optimistic about the healthcare industry's prospects in 2025, buoyed by expectations of rising revenues and improved profitability, even amid regulatory uncertainty. The poll, conducted by Deloitte’s Center for Health Solutions, included 80 C-suite leaders from health systems and health plans, 40 each. Nearly 60% of respondents expressed confidence in the sector's outlook for this year, up from 52% in the previous year.
A notable 69% of respondents anticipate revenue growth, while 71% expect better profitability in 2025. Key priorities for these executives include growth and enhancing consumer affordability. Many organizations are focusing on organic growth by attracting new consumers rather than pursuing mergers and acquisitions. Improving the consumer experience, engagement and trust emerged as a top strategy, with 53% of the leaders prioritizing these areas to draw in new customers.
While the sector’s financial outlook is brighter, challenges persist. Regulatory uncertainty remains a major concern, with 44% of executives indicating it could impact their strategies for this year.
Regulatory Shifts & Potential PBM Shakeup
The incoming administration under President-elect Donald Trump’s expected regulatory steps is introducing an additional layer of uncertainty to the healthcare sector. Trump has signaled plans to overhaul pharmacy benefit managers (PBMs), entities that negotiate drug prices on behalf of insurers. This has sent ripples through healthcare companies with significant PBM operations, including UnitedHealth Group Incorporated (UNH - Free Report) , Elevance Health, Inc. (ELV - Free Report) , The Cigna Group (CI - Free Report) and Humana Inc. (HUM - Free Report) .
PBMs play a critical role in controlling healthcare costs and improving drug access. However, they often face criticism over their opaque pricing models and alleged contribution to rising drug costs. Any regulatory reforms targeting PBMs could pressure profitability in the sector.
Other Challenges Facing Healthcare Giants
The broader healthcare industry is grappling with additional headwinds beyond regulatory risks. In November 2024, orthopedic providers filed a lawsuit against Elevance, UnitedHealthcare and others, accusing them of participating in a price-fixing scheme involving MultiPlan. Companies like Humana and Elevance suffered a decline in their Medicare Advantage Star Ratings, potentially jeopardizing future quality bonus payments and enrollment numbers. Elevance, however, managed to win a Medicare Star Ratings lawsuit.
Cigna recently abandoned its pursuit of acquiring Humana in a deal that would have been valued at over $140 billion but faced significant antitrust hurdles. It is also facing lawsuits from other major companies. UnitedHealth faced a public relations crisis following the tragic murder of one of its executives. Social media users took this opportunity to voice frustrations about the healthcare system, adding to the company’s challenges. However, UNH recently provided a response to the Wall Street Journal’s report, which focused on improved outcomes thanks to Medicare Advantage at lower costs.
While UnitedHealth, Elevance and Humana currently have a Zacks Rank #3 (Hold) each, Cigna has a Zacks Rank #4 (Sell). The health maintenance organizations or HMO industry is currently placed in the Bottom 15% of the Zacks Industry Rank out of around 250 industries.
Many expect the new Congress to not extend the enhanced subsidies provided under the Affordable Care Act exchanges. This could negatively impact hospitals and insurance enrollment rates.
Despite the optimistic outlook shared by healthcare executives, these challenges underline the complexities the industry must navigate. Investors should keep an eye on the evolving regulatory landscape now and weigh these risks carefully while making investment decisions in the healthcare sector.
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Healthcare Executives Bullish on 2025: But Why Are Stocks Slipping?
A recent survey by Deloitte revealed that U.S. executives are optimistic about the healthcare industry's prospects in 2025, buoyed by expectations of rising revenues and improved profitability, even amid regulatory uncertainty. The poll, conducted by Deloitte’s Center for Health Solutions, included 80 C-suite leaders from health systems and health plans, 40 each. Nearly 60% of respondents expressed confidence in the sector's outlook for this year, up from 52% in the previous year.
A notable 69% of respondents anticipate revenue growth, while 71% expect better profitability in 2025. Key priorities for these executives include growth and enhancing consumer affordability. Many organizations are focusing on organic growth by attracting new consumers rather than pursuing mergers and acquisitions. Improving the consumer experience, engagement and trust emerged as a top strategy, with 53% of the leaders prioritizing these areas to draw in new customers.
While the sector’s financial outlook is brighter, challenges persist. Regulatory uncertainty remains a major concern, with 44% of executives indicating it could impact their strategies for this year.
Regulatory Shifts & Potential PBM Shakeup
The incoming administration under President-elect Donald Trump’s expected regulatory steps is introducing an additional layer of uncertainty to the healthcare sector. Trump has signaled plans to overhaul pharmacy benefit managers (PBMs), entities that negotiate drug prices on behalf of insurers. This has sent ripples through healthcare companies with significant PBM operations, including UnitedHealth Group Incorporated (UNH - Free Report) , Elevance Health, Inc. (ELV - Free Report) , The Cigna Group (CI - Free Report) and Humana Inc. (HUM - Free Report) .
PBMs play a critical role in controlling healthcare costs and improving drug access. However, they often face criticism over their opaque pricing models and alleged contribution to rising drug costs. Any regulatory reforms targeting PBMs could pressure profitability in the sector.
Other Challenges Facing Healthcare Giants
The broader healthcare industry is grappling with additional headwinds beyond regulatory risks. In November 2024, orthopedic providers filed a lawsuit against Elevance, UnitedHealthcare and others, accusing them of participating in a price-fixing scheme involving MultiPlan. Companies like Humana and Elevance suffered a decline in their Medicare Advantage Star Ratings, potentially jeopardizing future quality bonus payments and enrollment numbers. Elevance, however, managed to win a Medicare Star Ratings lawsuit.
Cigna recently abandoned its pursuit of acquiring Humana in a deal that would have been valued at over $140 billion but faced significant antitrust hurdles. It is also facing lawsuits from other major companies. UnitedHealth faced a public relations crisis following the tragic murder of one of its executives. Social media users took this opportunity to voice frustrations about the healthcare system, adding to the company’s challenges. However, UNH recently provided a response to the Wall Street Journal’s report, which focused on improved outcomes thanks to Medicare Advantage at lower costs.
Stock Price Results: UNH, ELV, CI, HUM, Industry & S&P 500
Image Source: Zacks Investment Research
While UnitedHealth, Elevance and Humana currently have a Zacks Rank #3 (Hold) each, Cigna has a Zacks Rank #4 (Sell). The health maintenance organizations or HMO industry is currently placed in the Bottom 15% of the Zacks Industry Rank out of around 250 industries.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Many expect the new Congress to not extend the enhanced subsidies provided under the Affordable Care Act exchanges. This could negatively impact hospitals and insurance enrollment rates.
Despite the optimistic outlook shared by healthcare executives, these challenges underline the complexities the industry must navigate. Investors should keep an eye on the evolving regulatory landscape now and weigh these risks carefully while making investment decisions in the healthcare sector.