Humana Inc.'s stock HUM fell 17% early Thursday, following the managed care company's announcement of a widened quarterly loss due to soaring medical costs. The company reported a loss of $491 million, or $4.42 per share, for the quarter. This is in contrast to the loss of $71 million, or 12 cents per share, posted in the year-earlier period. Although FactSet was expecting earnings per share (EPS) of 89 cents, Humana's adjusted per-share loss came to 11 cents.

Increased Medicare Advantage Medical Costs

The increased loss can be attributed to a rise in medical cost trends for Humana's Medicare Advantage program, especially in November and December. Inpatient utilization also exceeded expectations during this period, leading to additional increases in costs. This, combined with an increase in non-inpatient trends, contributed to Humana's wider quarterly loss.

A Generous Investment in Medicare Advantage

Humana and its competitors, including UnitedHealth Group Inc. UNH, have made significant investments in the government's Medicare Advantage program for seniors. While this investment has proven beneficial in many ways, it has also resulted in higher medical expenses for the company. In January, Humana warned that its fourth-quarter medical loss ratio had climbed to 91.4%, surpassing the 89% expectation of analysts.

Impressive Revenue Growth

Despite the widened loss, Humana's revenue rose substantially to $26.462 billion from $22.439 billion. This exceeded the FactSet consensus of $25.491 billion and demonstrates the company's ability to generate strong revenue even in challenging times.

Lower Expectations for Full-Year EPS

Humana now expects full-year EPS of about $14.87 and adjusted EPS of about $16.00. These projections are lower than the FactSet expectation of $29.14. It is important to note that these revised projections take into consideration the impact of the widened quarterly loss and the ongoing challenges in controlling medical costs.

Stock Performance and Market Comparison

In the last 12 months, Humana's stock has experienced a 20% decrease, while the S&P 500 has gained 21%. This performance highlights the challenges faced by the company in a volatile market and reinforces the need for effective cost management strategies.

Despite the setback, Humana remains committed to its mission of providing quality healthcare services to its members while actively addressing the financial pressures associated with rising medical costs.

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