CVS Well being expects medical prices to stay excessive via the 12 months By Reuters
By Sriparna Roy and Leroy Leo
(Reuters) -CVS Well being mentioned on Wednesday that top demand for medical care amongst older adults hit its second-quarter outcomes, a pattern that continued into July, inflicting it to slash its 2024 revenue forecast.
CVS lowered its annual revenue forecast to $6.40 to $6.65 per share from its prior view of least $7.00, marking no less than the fourth time the healthcare conglomerate lowered its outlook for the 12 months.
“We’re disillusioned by the present efficiency and outlook for the Well being Care Advantages section, and I’ve determined to make management adjustments efficient instantly,” CEO Karen Lynch mentioned on a name to debate the monetary outcomes.
Brian Kane, chief of the healthcare advantages unit that runs insurer Aetna, is leaving the corporate, and Lynch, who was the president of Aetna earlier than being promoted to CVS’ high put up, will assume management of the unit.
CVS additionally appointed Katerina Guerraz, chief technique officer and a 20-year Aetna veteran, because the chief working officer of the insurance coverage unit.
The corporate additionally introduced a multi-year plan to save lots of $2 billion in prices via measures reminiscent of “streamlining” its operations and utilizing synthetic intelligence and automation throughout its enterprise.
Along with Aetna and its Caremark pharmacy advantages unit, CVS has one of many largest retail pharmacy chains within the U.S.
Like different well being insurers, Aetna has been fighting elevated medical prices since late final 12 months as older adults make amends for delayed procedures, and lower-than-expected funds from the federal government for managing healthcare damage its margins.
The corporate expects its medical prices to be greater within the second half of the 12 months than the primary half, primarily based on early indicators in July, Chief Monetary Officer Thomas Cowhey mentioned throughout the name.
Baird analyst Michael Ha mentioned he questioned if CVS had accounted for the continued rise in medical companies use seen in July into its proposed premium charges for 2025 Medicare Benefit plans that had been because of the authorities in June.
“We start to query simply how a lot decrease can CVS commerce despite the fact that we have seen misexecution time and time once more this 12 months,” Ha mentioned.
CVS shares, which have fallen greater than 26% this 12 months, had been off about 0.5% in late morning buying and selling at $58.03.
Final week, Humana (NYSE:) additionally flagged more-than-expected inpatient admissions in late June, and instructed that prices would stay elevated for the 12 months.
Prices from Medicaid plans for decrease revenue folks have additionally been excessive because of sicker sufferers gaining protection.
The corporate reported a pointy decline in second-quarter revenue to $1.83 per share, from $2.21 a 12 months earlier.
The revenue, nonetheless, was 10 cents forward of analysts’ estimates, which had come down sharply previously month, based on LSEG information.
The corporate’s healthcare profit ratio – the share of premiums spent on medical care – additionally rose greater than 3 proportion factors to 89.6%, however was decrease than estimates of 90.5%.
CVS raised its forecast for 2024 healthcare profit ratio to 90.6% to 90.8%, from about 89.8% it estimated in Might.
“It is one other irritating quarter,” mentioned James Harlow, senior vice chairman at Novare Capital Administration, which owns 101,522 shares of CVS.
“The truth that they’ve to chop their outlook but once more actually damages administration’s credibility.”