CVS’ earnings plummeted in the first quarter of 2024 as all segments experienced lower profits, while utilization and costs from Medicare Advantage affected growth.
In the quarter ended March 31, CVS’ net income dropped by 47.5% to $1.1 billion on higher consolidated revenues of $88.4 billion, an earnings report released Wednesday morning said. While revenues at CVS’ health benefits business grew by more than 17%, the segment’s operating income dropped nearly 70% to $428 million amid higher MA utilization and medical costs.
CVS’ management expressed disappointment at the Centers for Medicare & Medicaid Services’ proposed rate adjustment for 2025.
“We recently received the final 2025 rate notice, and when combined with the Part D changes prescribed by the Inflation Reduction Act, we believe the rate is insufficient,” Karen Lynch, president and chief executive officer of CVS, said during an earnings call Wednesday, according to a transcript. “This update will result in significant added disruption to benefit levels and choice for seniors across the country. While we strive to deliver benefit stability to seniors, we will be adjusting plan-level benefits and exiting counties as we construct our bid for 2025. We are committed to improving margins.”
CVS’ stock price dropped 17% on Wednesday, its worst performance in over a decade, according to financial analysts. The company revised its full-year guidance for 2024, reducing expected earnings per share and cash flow from original projections.
Optimism over CVS Healthspire
Meanwhile, its health services department, which was renamed to CVS Healthspire late last year, also hit a lull in the first quarter. Operating income fell nearly 26% to $1.2 billion behind revenues which fell 13.6% to $37.7 billion. These losses were primarily attributable to the loss of a large client, Lynch said during the call.
Despite the unit’s poor performance, CVS’ executives said Oak Street Health and Signify Health, the company’s primary care and home care subsidiaries, respectively, remain primed for growth.
Oak Street ended the quarter with 205 centers, an increase of 33 compared to the prior year quarter, and laid plans to build up to 60 more in 2024, company leader said. It also raised its census of at-risk patients by 34,000 year-over-year. Part of CVS’ strategy is creating greater synergy between its care delivery platforms and MA business, senior executives said.
“Between Signify and some of the capabilities we have at Oak Street, there’s a lot of boots on the ground in market capabilities that we have to really change the health trajectory of patients, whether that be readmissions to the hospital or managing your most complex chronic patients,” Tom Cowhey, CVS’ executive vice president and chief financial officer, said of Oak Street during the Wednesday call. “We have the resources, we have the program, we have the know-how. Now we can extend those over a lot more members, and so I think both Signify and Oak Street will bring a lot to the table over the coming years.”
