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WOONSOCKET, R.I. —CVS Health’s leadership team outlined a new strategy Thursday focused on making health care more convenient, personalized and affordable for consumers.
Karen Lynch
“Now is the time to undertake our next major evolution and capitalize on our role as the leading health solutions company in America,” CVS Health president and CEO Karen Lynch said at the company’s 2021 Investor Day. “By leaning into our high-growth foundational businesses and expanding our reach in areas like health services and primary care, we have an opportunity to shift care to be more centered around the consumer while capturing a meaningfully greater portion of health care spend. Ultimately, this plan is only possible with our unique combination of assets which will allow us to lower costs, increase access to quality care and improve health outcomes for consumers, patients and members — while delivering superior results for shareholders.”
Lynch and other executives detailed what they see as the priorities for strategic growth at CVS Health. They include:
- Maximizing growth in the company’s foundational businesses by continuing to position its existing assets to deliver market-leading health solutions and focusing on high-growth opportunities.
- Advancing primary care delivery capabilities by guiding consumers across the care continuum to sites and to providers that meet their needs — both in person and virtually. This approach will complement the traditional provider network and continue to expand ways to utilize risk-based arrangements and value-based care.
- Optimizing the retail portfolio to serve as community health destinations by pivoting the store footprint to focus on advanced primary care centers, enhanced HealthHUB locations and traditional CVS Pharmacy stores. As announced last month, the company will close approximately 900 stores over the next three years to reduce store density and ensure it has the right kinds of stores in the right locations for consumers and for the business.
- Launching new all-payer health products and services which will diversify the company’s growth portfolio with new health solutions for employers, consumers and health plans. This will include the expansion of home health services, the launch of health-related subscription models for broader populations, the commercialization of analytics and insights, and establishing all-payer and provider enablement services.
- Driving a digital-first, technology-forward approach that will expand the company’s reach and engagement with its more than 35 million online members, launching new consumer-centric services and offerings, enhancing the customer experience and streamlining business operations — leading to higher customer satisfaction levels and lower costs.
- Enhancing omnichannel health services to meet the needs of consumers when and where they want them, including at home, virtually and in the community. This will include execution of the company’s omnichannel pharmacy strategy, with integration across all fulfillment channels to make pharmacy interactions as personalized and seamless as possible.
Executives also discussed how the fully integrated company is creating measurable value for customers and shareholders. This included highlighting a multi-year observational study of Aetna’s commercial self-funded business that shows consistent improvement in utilization and cost of care when the member has both Aetna medical and pharmacy benefits. Integrated members were associated with a sustained 3 – 6% decrease in per member per month medical costs over a three-year period. Members who filled prescriptions at CVS Pharmacy locations were associated with 6% higher adherence across important chronic conditions, including congestive heart disease, diabetes, and hypertension, and demonstrated at least a 40% higher level of engagement in supportive care management programs in 2020.
CVS Health CFO and executive vice president Shawn Guertin looked at the company’s 2022 financial outlook in detail, the company’s capital allocation strategy and its long-term outlook and growth targets. As part of its long-term growth trajectory, CVS Health is targeting a return to low double-digit adjusted EPS growth in 2024 and beyond.
“We have a strategic financial approach that will focus on a combination of foundational business growth, new sources of incremental value and strategic capital deployment in order to reach our long-term growth targets and drive shareholder returns,” Guertin said. “We will also continue to prudently manage our balance sheet, while deploying capital against growth areas such as capability-focused M&A targets that will fit with our unique collection of assets and help accelerate our vision.”
2021 Guidance
The company has updated its 2021, full year projections:
- Total Revenues: at least $290.3 billion from a prior range of $286.5 to $290.3 billion
- Adjusted Operating Income: at least $16.6 billion from a prior range of $16.4 to $16.6 billion
- GAAP EPS: $5.50 to $5.61 from a prior range of $5.46 to $5.67
- Adjusted EPS: at least $8.00 from a prior range of $7.90 to $8.00
- Cash Flow from Operations: at least $13.5 billion from a prior range of $13.0 to $13.5 billion
2022 Guidance
The company is initiating 2022 full year projections:
- Total Revenues: $304.0 to $309.0 billion
- Adjusted Operating Income: $16.7 to $17.1 billion
- Adjusted EPS: $8.10 to $8.30
- GAAP EPS: $7.04 to $7.24
- Cash Flow from Operations: $12.5 to $13.0 billion
Capital deployment
In addition, the company said it will increase its yearly dividend by 10%, from $2.00 to $2.20, effective with the next dividend distribution on February 1, 2022. The company also has authorized a $10 billion share repurchase program, which will be used to at least offset share count dilution in 2022. This is the first time CVS Health has increased its dividend or repurchased stock since 2017.
