CVS Health chopped its 2024 forecast for a third time and changed the leadership of its health insurance business where it continues to struggle with rising costs.
CEO Karen Lynch will lead the insurance segment, replacing Executive Vice President Brian Kane, who is leaving the company, the health care giant said Wednesday.
Rising claims from the company’s Medicare Advantage coverage have hurt CVS Health for much of this year and contributed to repeated trimmings of its outlook for 2024. Medicare Advantage plans are privately run versions of the federal government’s coverage program mainly for people age 65 and older.
CVS Health also said Wednesday that it has been hurt by a drop in quality ratings for those plans and pressure from Medicaid coverage it manages in several states.
The company’s adjusted operating income from its health benefits business plunged 39% in the quarter to $938 million, helping to drag down overall profit.
Adjusted operating income, which excludes things like capital gains, also dropped 12% for CVS Health’s pharmacy business, which runs thousands of drugstores nationally. The company filled more prescriptions in the second quarter, but it has been dealing with tighter reimbursement for those drugs.
Store sales outside the pharmacy slumped partially because customers have been buying fewer COVID-19 test kits, CVS Health said.
Lynch told analysts on Wednesday that the company is planning a multi-year, $2 billion cost cutting program. She said it will involve more use of artificial intelligence and automation as well as “continuing to rationalize our business portfolio.”
CVS Health is wrapping up in 2024 a three-year plan to close 900 stores. Lynch said Wednesday the company has closed 851 so far.
CVS Health Corp. still runs one of the nation’s largest drugstore chains and a huge pharmacy benefit management business that operates prescription drug coverage. It also covers more than 26 million people through its Aetna insurance arm.
Overall, the company’s profit dropped more than 7% to $1.77 billion in the quarter. Adjusted earnings totaled $1.83 per share on $91.2 billion in revenue.
Analysts projected earnings of $1.73 per share on $91.41 billion in revenue, according to FactSet.
CVS Health now expects adjusted per-share earnings for the year to be between $6.40 and $6.65. The company in May cut its per-share expectations to at least $7 after previously reducing the forecast in February.
Wall Street had been expecting per-share earnings of $6.96, according to FactSet.
Shares of the Woonsocket, Rhode Island, company slid 4 cents to $58.30 in premarket trading.
The stock has already shed a quarter of their value this year while the Standard & Poor’s 500 index has climbed about 10%.