CVS Health on Wednesday cut its 2024 earnings outlook and announced its goal to cut $2 billion in costs through a multi-year productivity initiative as medical costs continue to rise.
CVS reported that its adjusted earnings for the year will now be in the range of $6.40 to $6.65 per share, down from its earlier projection of at least $7 per share. This change reflects the "continued pressure in the Health Care Benefits segment," the company said.
As part of its cost-cutting efforts, the retail pharmacy chain will accelerate the use of artificial intelligence and automation across its business as it consolidates and integrates platforms. It also plans to streamline and optimize its operations and processes.
The company did not provide specific details about the plan.
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Total revenues in the health services segment decreased 8.8% for the three months ended June 30 compared with the same period a year ago, which the company largely attributed to the loss of a large client and continued pharmacy client price improvements.
CEO Karen Lynch said in a statement that the company's integrated model and strategy enables the company "to execute in a challenging environment."
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"We are delivering the value our customers demand," Lynch said. "We are taking action today to ensure we make the most of our many opportunities, including leadership changes in the Health Care Benefits segment."
The retail pharmacy giant also said that the head of its Aetna insurance unit, Brian Kane, is leaving.
Lynch will assume direct leadership of the health care benefits segment effective immediately. Lynch, alongside CFO Tom Cowhey, will oversee the day-to-day management of this business.
Still, the health care industry is facing pressure, particularly with the insurance business.
Earlier this year, major health insurers warned that their profits are taking a hit as a growing number of people are disenrolled from Medicaid.
During the pandemic, the federal government ensured that people enrolled in Medicaid could maintain their coverage. After it subsided, states are once again re-determining eligibility.
"States began assessing eligibility for the 87 million Medicaid enrollees as early as February," according to the Commonwealth Fund. "As of late July, almost 3.8 million people lost coverage."
This comes at a time when medical care costs are rising.
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Over the past few years, CVS has shuttered hundreds of stores and laid off staff in order to re-prioritize its investments and adhere to the changing customer needs.
By the end of 2024, the company said it expects to complete its three-year plan of shuttering a total of 900 stores. The company has roughly 10,000 retail locations.
The company said Wednesday that "all remaining standalone stores across our national footprint are profitable."
