CVS Health Corp. turned in a better-than-expected first quarter as revenue grew from all parts of its business. But the health care giant chopped 2023 earnings projections after closing a pair of multi-billion dollar deals that push it deeper into providing care.
The company also absorbed another hit from a struggling long-term care business it wants to unload.
Inside Scoop on PC’s Sports Administration Program
This past August Providence College announced its newest graduate program, an online Master of Science…
Learn More
CVS Health said Tuesday that it completed a roughly $10.6 billion acquisition of primary care provider Oak Street Health that it had just announced in February.
CVS on Feb. 8 said it would pay $39 per share in cash for each share of Oak Street. CVS financed the transaction with the borrowing of $5 billion from a term loan agreement entered into on May 1 and existing cash and available resources.
Oak Street Health is a Medicare-based primary care provider with 169 centers across the country that provide care for more than 159,000 patients. The company has four locations in Rhode Island – two in Providence, one in Warwick and one in Woonsocket.
Oak Street Health will continue to operate as a multipayer primary care provider as part of CVS Health.
It also closed in March an approximately $8 billion deal to buy home health care provider Signify Health.
Both deals reflect spending priorities for the company. CVS Health runs drugstores, provides insurance and manages prescription drug benefits.
It also has been moving more into providing care as part of a broad push to cut costs and improve patient health. That’s something bill payers like insurers and employers want to see.
After closing the deals, CVS Health said Wednesday that it now expects adjusted earnings of $8.50 to $8.70 per share for the year. That’s down 20 cents on both ends of the range from a forecast it debuted in November and reaffirmed in February.
It’s also short of the $8.76 Wall Street had been projecting, according to a poll of analysts by FactSet.
CVS Health runs a drugstore chain with nearly 10,000 locations. It manages prescription drug plans for big clients like insurers and employers, and it provides coverage for more than 25 million people through its Aetna arm.
A drop in COVID-19 vaccinations balanced those gains.
Sales also increased in the business that includes CVS drugstores. But CVS Health also said that segment was affected by a drop in coronavirus testing and continued to feel pressure from tight prescription reimbursement.
CVS Health has been adjusting its store count based on factors like population shifts and customer buying patterns. CEO Karen Lynch told analysts Wednesday that the company has shuttered more than 100 locations so far this year.
It’s on track to close 300 this year and a total of 900 by 2024.
The company’s total revenue jumped 11% to $85.3 billion in the first quarter. Adjusted earnings totaled $2.20 per share.
Analysts predicted earnings of $2.09 per share on $80.79 billion in revenue.
“We delivered another strong quarter while executing on the strategy we outlined in December 2021, leading to the close of the Signify Health acquisition followed quickly by Oak Street Health,” said CVS CEO and President Karen S. Lynch. “These additions are core to our strategy and will help unlock future growth as we push further into value-based care, which prioritizes keeping people healthy.”
CVS Health Corp. also said Wednesday that operating income fell nearly 3% to $3.45 billion in the quarter due to another write-down from its Omnicare long-term care business. CVS Health CEO Karen Lynch said last fall that the company was exploring strategic alternatives for that business.
(Update: Comment from Lynch added in 14th paragraph)
Tom Murphy is a health writer for The Associated Press.
