CVS Health delays 2024 forecast, shows increased utilization among MA members

CVS Health delays 2024 forecast, shows increased utilization among MA members

CVS Health executives announced on an earnings call yesterday that they would draw from a raft of 2024 financial forecasts made at an investor day two months ago, citing declining health care use among its Medicare Advantage members. growth, and its medical benefit ratio is the main reason.

CEO Karen Lynch also expressed disappointment with the Medicare Advantage rates CMS proposed to pay in 2025, saying “funding levels are broadly in line with our expectations” but did not reflect the impact of increased Part D prescription coverage. Increased costs due to benefit changes, including a $2,000 cap on beneficiary out-of-pocket expenses starting in 2025.

“We believe the changes to Part D due to the Inflation Reduction Act require increased funding to cover the full range of member benefits provided and the increased risk that plans assume as a result of the redesign,” Lynch said, adding , the company will have official comments on CMS rates in the coming weeks,

Lynch and Thomas F. Cowhey, executive vice president and chief financial officer, said Medicare Advantage increased utilization of outpatient services and complementary dental and vision services in the fourth quarter of 2023. They also cited rising vaccination numbers driven by Arexvy and Abrysvo, two new respiratory syncytial virus vaccines targeting older adults.

At the company’s investor day on Dec. 5, CVS officials projected adjusted operating income of $17.24 billion in 2024. They lowered that figure to $16.9 billion. The Investor Day forecast for 2024 adjusted earnings per share was $8.50. They lowered the price to $8.30. GAAP earnings per share forecast was lowered to $7.06 from $7.26. 2024 operating cash flow was revised down from $12.5 billion at the investor day to $12 billion on yesterday’s earnings call. Executives also revised their estimates for health benefit ratios in 2024. At its investor day in December, they expected the health-benefit ratio to hit 87.2% this year. During yesterday’s earnings call, they estimated the ratio would climb to 87.7%.

Despite the usage trends, Lynch described Medicare Advantage as an “integral part” of CVS Health, the plan sold under the company’s Aetna brand, and she and Cowhey said they expect 800,000 additional patients this year after a successful enrollment period. Medicare Advantage members, including three-quarters of those who switched from other plans, bring the total number of Medicare Advantage beneficiaries to about 26.9 million.

Other insurers have also reported increased utilization among people enrolled in Medicare Advantage plans and are concerned about CMS rates. Centene said benefits may be scaled back. Cigna announced the sale of its Medicare Advantage business to Health Care Services Corporation. United Healthcare and Humana also reported improved utilization in late 2023, while CMS proposed baseline payments in 2025.

Lynch expressed optimism about CVS Health’s health care services business, the primary care business Oak Street Health acquired last year, and the acquisition of Signify Health announced in late 2022 and completed in 2023. Lynch said Oak Street now has 202,000 high-risk patients, a 27% increase from before, and has doubled the number of Aetna members enrolled in the Oak Street clinic. According to Lynch, Signify conducted 649,000 home assessments in the fourth quarter of 2023, a 20% increase from the fourth quarter of 2023, she said.

CVS has been reducing the number of retail pharmacies it operates. Lynch said on Wednesday that the company was “making progress on its store closure plan,” with 630 stores closed so far and a goal of closing 900 stores by the end of the year.

Leave a Comment

Your email address will not be published. Required fields are marked *