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WOONSOCKET, R.I. — Struggles with its Medicare Advantage business in the second quarter led CVS Health to lower its full-year earnings outlook for the fourth time in less than a year.
The company announced that Aetna president Brian Kane has departed, and chief executive officer Karen Lynch would take over the Health Care Benefits segment. CVS chief strategy officer Katerina Guerraz was named the segment’s chief operating officer. Guerraz is a 20-year Aetna veteran with extensive commercial and Medicare experience and has a track record of operational excellence.
Adjusted operating income from the Health Care Benefits segment plummeted 39% in the quarter to $938 million, putting a drag on overall profit, which fell more than 7% to $1.77 billion. The segment has been hurt by increasing Medicare Advantage claims and a cut in the plans’ star ratings, which impacts their government funding.
CVS’ adjusted earnings of $1.83 per share for the quarter ended June 30 did beat analysts’ projection of $1.73 per share, but revenue of $91.2 billion just missed Wall Street’s estimate of $91.41 billion. The adjusted earnings per share were down 17% from the year-ago period.
The company projected adjusted earnings per share for the year of between $6.40 and $6.65. That was down from May’s lowered outlook for at least $7.
“We have many points of differentiation that position us to win now and into the future,” Lynch said. “Our innovation is accelerating more transparent pharmacy reimbursement models, increasing the use of biosimilars, and providing better patient outcomes through our connected health care delivery assets. Our integrated model and our strategy are enabling us to execute in a challenging environment and we are delivering the value our customers demand.”
She said the company was taking action “to ensure we make the most of our many opportunities, including leadership changes in the Health Care Benefits segment.”
Second quarter earnings per share were $1.41, down from $1.48 a year earlier. Total revenue increased 2.6%, largely driven by growth in the Health Care Benefits and Pharmacy & Consumer Wellness segments, partially offset by a decline in the Health Services segment.
Operating income decreased 5.8%, primarily due to the decrease in Health Care Benefits adjusted operating income, partially offset by the absence of a $496 million restructuring charge recorded in the prior year as well as a decrease in acquisition-related transaction and integration costs compared to the prior year.
Adjusted operating income decreased 16.4%, primarily driven by declines in the Health Care Benefits and Pharmacy & Consumer Wellness segments, partially offset by an increase in the Health Services segment.
Interest expense increased $46 million, or 6.7%, due to higher debt in the quarter, mainly from long-term debt issued in June 2023 to fund the acquisition of Oak Street Health.
