CVS also lowered its 2024 earnings outlook and said investors should no longer rely on its 2025 target
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August 2, 2023
Key takeaways with statistics from the news about CVS Health’s restructuring plan and financial performance:
Profit Decline: CVS Health’s profit fell by 37% year over year to $1.9 billion in the second quarter.
Restructuring Initiative: CVS Health announced a company-wide restructuring plan to reallocate resources to growth areas like healthcare services and technology.
Earnings Target: CVS lowered its 2024 adjusted earnings target from $9 to between $8.50 and $8.70 due to cost pressures.
Job Cuts: CVS informed employees that it would be eliminating 5,000 jobs in a bid to cut costs.
Revenue Growth: CVS beat Wall Street expectations with second-quarter earnings of $88.9 billion, up more than 10% year over year.
Integration Costs: The falling income was partly due to a pre-tax restructuring charge of $496 million, connected to recent acquisitions of Oak Street Health and Signify Health.
Cost Savings: The restructuring plan is expected to generate more than $600 million in savings beginning next year.
Healthcare Benefits Segment: The healthcare benefits segment, including payer Aetna, posted $26.7 billion in revenue, up 18% year over year, but the adjusted operating income fell 20% due to rising medical costs.
Medical Loss Ratio (MLR): CVS’ MLR rose to 86.2% from 82.7% last year, attributed to increased outpatient volumes in Medicare Advantage.
Revenue Growth for Acquisitions: Oak Street and Signify saw revenue growth of 43% and 19%, respectively, in the quarter.
Pharmacy Claims: Pharmacy claims processed fell due to the impact of a lost Medicaid contract and a decrease in COVID-19 vaccinations in the health services segment.
Impact of COVID-19: Some headwinds from the pandemic, including drugmakers restricting sales of discount drugs and COVID-19 contributions dissipating more rapidly than expected, continued into the second quarter.
Future Outlook: CVS’ 2024 earnings guidance was lowered due to growing costs and higher medical expenses, and the company faces pressure on its MA bids assumptions.
New Oak Street Clinics: CVS plans to open new Oak Street clinics co-located with CVS pharmacies this year.
Overall, CVS Health experienced a significant decline in profit, leading to a restructuring plan aimed at reallocating resources and cutting costs.
The company’s acquisitions contributed to integration costs, and it faced challenges from the impact of the COVID-19 pandemic on healthcare utilization and expenses.
The company’s revenue growth in certain segments shows potential for future expansion. However, uncertainty remains as CVS navigates through cost pressures and changes in the healthcare landscape.
This is an Executive Summary of the article “CVS announces restructuring plan after profit falls 37%”, written by “Rebecca Pifer”, and published on “Healthcare Dive”, on August 2, 2023.
To continue reading: Originally published at https://www.healthcaredive.com on August 2, 2023.
Names mentioned
- CEO Karen Lynch
- Dan Finke, president of CVS’ healthcare benefits segment,
