(Bloomberg) — A warm winter is helping create the slowest start to the U.S. flu season in five years, during what is typically a dangerous time of year for the elderly and a costly one for health insurers.
The flu virus thrives in a dry, cold environment. It badly hurt insurers' financial results last year, when Aetna Inc. (NYSE:AET) and Anthem Inc. (NYSE:ANTM) blamed epidemic levels of influenza for exceeding fourth-quarter estimates of their spending on medical care. This year may be the opposite: Health insurer Centene Corp. (NYSE:CNC), for example, raised its 2015 earnings guidance by about 5 cents last month, thanks largely to the absence of flu.
On the other hand hospitals, whose business benefits as sick people show up in the emergency room, and companies like Alere Inc., which makes tests for influenza, will see fewer patients. Raj Denhoy, an analyst at Jefferies LLC, said Alere may have a $12 million to $14 million revenue shortfall because of the mild season. The hospital industry already has slumped as some Americans who signed up for insurance under the Patient Protection and Affordable Care Act (PPACA) dropped their coverage.
"It's definitely negative for hospitals, and much more positive for insurers," said Jason McGorman, an analyst at Bloomberg Intelligence. The severe flu season a year ago boosted emergency department visits and admissions at hospital chains including HCA Holdings Inc. (NYSE:HCA) and Community Health Systems Inc. (NYSE:CYH), helping their results during the final quarter of 2014.
Warm outlook
Hospital investors already may be anticipating a downturn. Raymond James Financial analyst John Ransom cut his rating for Community Health on Tuesday, in part due to the weak flu season and also because of tepid business from PPACA. The company's shares are down 14 percent this week to a 3 1/2-year low.
There is a high chance the northern and western U.S. will continue to have mild temperatures through March, in part because of El Nino, a warming of the equatorial Pacific Ocean that disrupts worldwide weather, according to the U.S. Climate Prediction Center in College Park, Md. The 48 contiguous U.S. states posted their warmest December in records going back 121 years, the National Centers for Environmental Information said Thursday.
In the eastern U.S., 29 states had their warmest December temperatures, the center in Asheville, North Carolina, said.
'Hard to predict'
The U.S. flu season typically runs from October through May, and over the past few years has peaked relatively early. It's still not clear if the current season is slow thanks to mild weather, or if the country is returning to a more traditional cycle when flu peaks in February or March, said Joseph Bresee, chief of epidemiology and prevention at the Centers for Disease Control and Prevention (CDC) in Atlanta.
"We are a little later than in the past couple of years, but it's too early to say if it will be a mild or a severe season," Bresee said in an interview. "While the weather may have something to do with it, it's always hard to predict when the flu will come."
In the U.S., about 397,000 people were hospitalized for conditions related to the flu during the 2013-2014 season that peaked that December, according to a CDC estimate. Hospitals and insurers declined to comment on the current state of influenza in the U.S., since the issue is material to the fourth-quarter earnings that haven't yet been released.
Small uptick
