Home Economy Economic Activity CVS sees Q3 profit narrow to $87M on restructuring, higher medical costs

CVS sees Q3 profit narrow to $87M on restructuring, higher medical costs

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PBN Staff

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11/06/2024

Earns CVS Health — CVS HEALTH CORP. On Wednesday reported a profit of $87 million in the third quarter of 2024, a decline from $2.26 billion the year prior. /ASSOCIATED PRESS FILE PHOTO / MARCIO JOSE SANCHEZ

WOONSOCKET – CVS Health Corp. on Wednesday reported a profit of $87 million in the third quarter of 2024, a decline from $2.26 billion a year ago due to hefty restructuring charges and higher medical costs. During the third quarter of 2024, CVS recorded premium deficiency reserves of approximately $1.1 billion, primarily in its Medicare

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WOONSOCKET – CVS Health Corp. on Wednesday reported a profit of $87 million in the third quarter of 2024, a decline from $2.26 billion a year ago due to hefty restructuring charges and higher medical costs. During the third quarter of 2024, CVS recorded premium deficiency reserves of approximately $1.1 billion, primarily in its Medicare and individual exchange product lines related to anticipated losses for the 2024 coverage year. The $1.1 billion premium deficiency recorded was comprised of $394 million of operating expenses related to the write-off of unamortized acquisition costs and $670 million of health care costs. The company said it had profit of 7 cents per share, compared to $1.76 per share a year prior. Earnings, adjusted for one-time gains and costs, were $1.09 per share, also down from $1.73 the year prior. The results exceeded Wall Street expectations. The average estimate of three analysts surveyed by Zacks Investment Research was for earnings of $1.07 per share. The drugstore chain and pharmacy benefits manager posted revenue of $95.43 billion in the period, an increase of $89.7 million year over and also topping Wall Street forecasts. Nine analysts surveyed by Zacks expected $92.87 billion. “Our integrated model accelerates our ability to uniquely do what is most important to today’s health care consumers: deliver lower cost of care, a simpler experience and better outcomes,” said CVS CEO and President David Joyner. “Our third quarter results reflect strong performance in the health services and pharmacy & consumer wellness segments, and also highlight the continued need to work across our enterprise and address macro challenges to the health care benefits segment.” The health care benefits segment’s total revenue increased 25.5% to $32.9 billion for the three months ended September 30, 2024, compared to the prior year, driven by growth in the Medicare and commercial product lines. The health care benefits segment also had an adjusted operating loss of $924 million compared to adjusted operating income of $1.5 billion in the prior year. The change was primarily driven by increased utilization, the approximately $1.1 billion of premium deficiency reserves described above, the impact of higher acuity in Medicaid following the resumption of redeterminations and the unfavorable impact of the previously disclosed decline in the company’s Medicare Advantage star ratings for the 2024 payment year. These decreases were partially offset by an increase in net investment income. The pharmacy & consumer wellness segment adjusted operating income increased 14.9% to $1.5 billion in the third quarter compared to the prior year primarily driven by increased prescription volume, including increased contributions from vaccinations, as well as improved drug purchasing. These increases were partially offset by continued pharmacy reimbursement pressure and decreased front store volume in the three months that ended Sept. 30. Revenue for the company’s health services segment decreased 5.9% in the third quarter to $44.1 billion compared to the prior year primarily driven by the previously announced loss of a large client and continued pharmacy client price improvements. These decreases were partially offset by pharmacy drug mix, increased contributions from the company’s health care delivery assets and growth in specialty pharmacy. Adjusted operating income for the health services segment increased 17.4% to $2.2 billion in the third quarter compared to the prior year primarily driven by improved purchasing economics, partially offset by continued pharmacy client price improvements and the previously announced loss of a large client.