Table of Contents
WOONSOCKET, R.I. — CVS Health has confirmed plans to lay off about 2,900 workers as part of a cost-cutting effort.
The confirmation came a day after members of CVS’ management team, including chief executive officer Karen Lynch, met with major shareholder Glenview Capital to discuss ways to energize the company with operational upgrades.
CVS Health Corp.’s stock rose 1.7% on the day that news emerged of the meeting. Initial press reports suggested that CVS was exploring a range of options, including a possible breakup of the company to separate its retail and insurance units. Those reports were based on “sources familiar with the matter,” according to news stories.
Glenview Capital, though, issued a statement denying reports that it was pushing for a breakup of CVS Health.
The firm, in a press release, acknowledged the dedication of CVS Health employees in providing accessible and affordable health care to over 120 million people. While recognizing CVS as a key player in the health care industry, the firm nevertheless expressed concerns that it has underperformed in recent years due to shortcomings in its investment strategy and actuarial approach. These issues, they noted, have led to financial losses and instability, affecting employees, customers and shareholders alike, despite the company’s significant assets in various health care services.
“Glenview and CVS leadership are engaged in good faith and constructive conversations through which Glenview is offering suggestions to enhance the governance, culture, efficiency, sustainability and growth of CVS Health,” the firm stated. “This dialogue is ongoing but is private and should remain so. Press reports have represented that Glenview is pushing for a breakup of CVS Health — this is false. Our goals are those shared by all stakeholders — to work together to strengthen CVS’ culture and operating performance to enhance value for customers, associates and shareholders alike.”
The layoffs, meanwhile, are part of a previously announced cost-cutting effort.
“CVS Health’s management team and board of directors are continually exploring ways to create shareholder value,” said David Whitrap, vice president of external affairs at CVS Health. “We remain focused on driving performance and delivering high-quality health care products and services enabled by our unmatched scale and integrated model.
“Our industry faces continued disruption, regulatory pressures, and evolving consumer needs and expectations, so it is critical that we remain competitive and operate at peak performance. As we previously disclosed, we’ve embarked on a multiyear initiative to deliver $2 billion in cost savings by reducing expenses and investing in technologies to enhance how we work.
“To achieve this goal and position ourselves for sustainable growth, we will reduce our workforce by less than 1% (roughly 2,900 jobs). Impacted positions are primarily corporate roles; the reductions will not impact frontline jobs in our stores, pharmacies and distribution centers.
“Before taking this step, we prioritized finding cost savings everywhere we could, including closing open job postings. Decisions on which positions to eliminate were extremely difficult and do not diminish the value that impacted colleagues have brought to the company. We are committed to supporting these colleagues, who will receive severance pay and benefits, including access to outplacement services. The vast majority of impacted colleagues will be notified this week. We remain focused on our mission — continuing to provide the exceptional care and support our patients, members, clients and customers deserve and depend on,” Whitrap concluded.
The discussions with investors and the announcement of job cuts come after CVS Health cut its earnings outlook in August after reporting mixed second quarter results.
Total revenues in the quarter increased to $91.2 billion, up 2.6% compared to the comparable prior-year period. But GAAP diluted earnings per share (EPS) of $1.41 were down from $1.48 in the prior year, and adjusted EPS of $1.83 decreased from $2.21 in the prior year, primarily due to a decline in the Health Care Benefits segment’s operating results, “which reflect continued utilization pressure and the unfavorable impact of the company’s Medicare Advantage star ratings for the 2024 payment year within the Medicare product line.)
The company said it was revising its full-year GAAP diluted earnings per share, adjusted EPS and cash flow from operations guidance “to reflect continued pressure in the Heath Care Benefits segment, partially offset by strong performance in the Health Services and Pharmacy & Consumer Wellness segments.”
“We have many points of differentiation that position us to win now and into the future,” Lynch said in a statement announcing the second quarter results.” 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.”
Lynch added that Brian Kane was departing his role as head of Aetna, and that she would assume direct leadership of the Health Care Benefits segment, overseeing its day-to-day management with chief financial officer Tom Cowhey.
