CVS Health Dials Back 2024 Projections, Pointing To Increased Utilization by MA Members


The company increased its projection for its 2024 medical-benefits to 87.7%.

CVS Health executives announced at an earning call yesterday that they were was raking back a slew of 2024 financial projections from those they made just two months ago at an investors day, citing growth in the use of healthcare services by its Medicare Advantage members and an increase in its medical-benefits ratio as main reason.

CEO Karen Lynch also expressed dismay at the Medicare Advantage rates that CMS has proposed paying in 2025, saying that “funding level was broadly consistent with our expectations” but doesn’t reflect added costs as result of benefits changes to the Part D prescription coverage, which include $2,000 cap on out-of-pocket costs for beneficiaries starting in 2025.

“We believe that changes to Part D as a consequence of the Inflation Reduction Act necessitate adding funding to cover the comprehensive member benefits provided and the increased risk that plans are assuming as result of the redesign,” said Lynch, adding that the company will make official comments on the CMS rates in the coming weeks,

Lynch and Thomas F. Cowhey, executive vice president and chief financial officer, said Medicare Advantage increased utilization of outpatient services and supplemental dental and vision services in the fourth quarter of 2023. They also mentioned increasing number of vaccinations, driven by the Arexvy and Abrysvo, the two new vaccines for respiratory syncytial virus for older adults.

At the company Dec. 5 investor day, CVS officials projected that adjusted operating income in 2024 would be $17.24 billion. They lowered that to $16.90 billion. The investor day projection for adjusted earnings per share in 2024 was $8.50. They lowered that to $8.30. Projections for GAAP earnings per share was lowered from $7.26 to $7.06. And the 2024 cash flow from operations was dialed back from $12.5 billion at the investor’s day to $12 billion at yesterday’s earnings call. The company’s top executives also revised its estimation of its 2024 medical-benefits ratio. At the December investors day, they foresaw a medical-benefits ratio of 87.2% this year. During yesterday’s earning call, they estimated it climb to 87.7%.

Notwithstanding the utilization trend, Lynch described Medicare Advantage, which is sold under the company’s Aetna brand as being “integral” to CVS Health, and she and Cowhey said after successful enrollment period they expect to have 800,000 additional Medicare Advantage members this year, three-quarters switched from other plans, bringing the total number of Medicare Advantage customers up to approximately 26.9 million beneficiaries.

Other insurers have also reported increased utilization by people enrolled in Medicare Advantage plans and worry about CMS rates. Centene has said it may scale back benefits. Cigna announced that it is selling its Medicare Advantage business to Health Care Services Corporation. United Healthcare and Humana have also reported a squeeze of higher utilization in late 2023 and CMS’ proposed benchmark payments in 2025.

Lynch spoke optimistically about CVS Health’s healthcare delivery business, Oak Street Health, the primary care business it acquired last year, and Signify Health, an acquisition it announced in late 2022 and completed in 2023. Lynch said Oak Street now has 202,000 at-risk lives, an increase of 27% over the prior, and that the number of Aetna members enrolled in the Oak Street’s clinics had doubled. She said that Signify had done 649,000 in-home evaluations in the fourth quarter of 2023, an increase of 20% compared to the fourth quarter of 2023, according to Lynch.

CVS has been reducing the number of retail pharmacies it operates. Lynch said Wednesday that the company had “made progress on its store closure initiative,” closing 630 stores so far with a goal of reaching 900 by the end of the year.

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