CVS Health is changing its leadership and cutting costs as sales decline and hundreds of stores close.
This is the third time the healthcare company has lowered its forecast for 2024.
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On August 7, 2024, CVS Health announced that CEO Karen Lynch will lead the insurance segment replacing Executive Vice President Brian Kane The Associated Press reported.
Kane’s departure comes about a year after his arrival at the company.
The company suffered due to an increase in claims for its Medicare Advantage coverage, which helped in repeated reductions in its 2024 outlook.
Medicare Advantage plans are “private versions of the federal government’s coverage program,” primarily for people ages 65 and older, according to the Associated Press.
The healthcare company also said it was hurt by declining quality ratings for those plans and pressure from the Medicaid coverage it administers in several U.S. states, according to the publication.
CVS Health’s adjusted operating profit from its health benefits business fell 39% in the quarter to $938 million, which helped its overall profit plunge.
Adjusted operating profit, which does not include factors such as capital gains, also faced a 12% reduction in the company’s pharmaceutical business, which operates thousands of drugstores across the country.
CVS Health filled more prescriptions in the second quarter of the year, but had to administer stricter reimbursement for those medications, according to the outlet.
Excluding pharmacy, the company also said in-store sales declined partially due to customers purchasing fewer COVID-19 test kits.
CVS Health is planning a $2 billion, multiyear cost-cutting program, Lynch said, according to the Associated Press.
She said it will include a greater artificial intelligence and automation component, as well as “continuing to rationalize our business portfolio.”
The company is also finalizing its three-year plan to close 900 stores.
It has closed 851 so far, Lynch said.
In total, CVS’s profit fell more than 7% to $1.77 billion for the quarter.
CVS closes 900 stores
CVS Health is finalizing its three-year plan to close 900 stores.
CEO Karen Lynch said she has closed 851 so far, The Associated Press reported in August 2024.
The company announced the plan in November 2021, saying the closures would lead to a retail presence that would ensure it has “the right types of stores in the right locations for consumers and the business,” per CNN.
The shutdowns represent nearly 10% of CVS’ footprint, in response to changing “consumer purchasing patterns.”
The closures are part of a broader shift in strategy across the company’s nearly 10,000 locations.
Some stores were removed to include more health services, such as primary care, and an “enhanced version” of CVS’s HealthHub layout.
“We remain focused on the competitive advantage provided by our presence in thousands of communities across the country, which complements our rapidly expanding digital presence,” Lynch said in 2021.
The outages cost the company approximately $1 billion in the fourth quarter of 2021, according to CNN.
Adjusted earnings were $1.83 per share on revenue of $91.2 billion, according to the agency.
Despite the difficulties, CVS Health Corporation still operates one of the largest drugstore chains in America.
It also runs a huge pharmacy benefits management business that operates prescription drug coverage.
It also owns Aetna, a health insurer that covers nearly 27 million people.
Some buyers are unhappy with the company’s AI plan, although executives have said its use will be “limited.”
In August 2023, CVS closed a New Jersey location, to the consternation of customers and city leaders.
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