Health-Care's Dilemma

Even health-care stocks can't win in the current market. Today, Quest Diagnostics announced it would begin offering a coronavirus test, starting Monday. That would seem like a huge opportunity, but Quest shares finished the day flat. One Wall Street analyst called coronavirus testing "a blip."

Health-care stocks in the S&P 500 are down 1.8% over the last month. Barron's Josh Nathan-Kazis has been covering the counterintuitive dynamic that coronavirus brings to health care: 

The outbreak of the new coronavirus in the U.S. could send waves of patients out to seek medical care.

But in all but the worst-case scenarios, that won’t have a significant impact on the valuations of the country's largest health insurance companies, analysts say.

That’s in part because of the expectation that people who otherwise would have sought care for minor ailments choosing to stay away from the health-care system for fear of contracting the virus. And it is in part because the industry regularly deals with viral outbreaks.

“Increases in utilization from something that’s like the flu is really a normal course of business for managed care,” said Lance Wilkes, an analyst at Bernstein. “They price for that… It’s really the question on the magnitude of the [epidemic] that’s the key variable.”

As for testing, Josh writes: 

Some back-of-the-envelope math suggests that the coronavirus testing market in the U.S. is unlikely to be tremendous. Assuming two or three million individuals get tested, Kumar said, and given that government health plans generally pay around $50 for molecular diagnostic tests, that is only about $150 million in revenue.

There is one health-care stock that has been surging in recent weeks, a telemedicine company called Teladoc Health. Teladoc says its virtual service results in a resolution for 92% of visits, but telemedicine has struggled to gain widespread acceptance from patients for many years. Coronavirus could be a catalyst for changed habits.  At least that's what investors are betting on. The stock has risen 7.8% this week. It's up 25% over the last month and 60% this year.