CVS - Earnings call 4 2023 | CVS Health Corporation

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Operator

Good morning or good afternoon, and welcome to the CVS Health Q4 2023 Earnings Results Call. My name is Adam, and I'll be your operator today. [Operator Instructions] I will now hand the call to Larry McGrath to begin. Please begin when you're ready.

Larry McGrath

Good morning, and welcome to the CVS Health Fourth Quarter and Full Year 2023 Earnings Call and Webcast. Vice Development Senior for Investor McGrath, Health. CVS Larry President, and Business Relations I'm morning Lynch, by Executive this joined I'm Karen Tom Chief Officer; President Cowhey, Financial Officer. and Chief and

session remarks, host of prepared leadership team. include our Following our a question-and-answer additional that we'll members will

our release SEC. with X Today's our also broadcast XX-K press call website, presentation and website, been morning on will for slide is year. posted Our filed be where our this to have along Form the archived it with being

this statements. During make forward-looking call, certain we'll

forward-looking cautionary risks uncertainties, are and that regarding that statements file results. review particular, Form SEC to from Our statements risk risks to subject factors and we these projected the could differ in with to we and uncertainties concerning currently We morning. statement filed our significant you this reports forward-looking in in the results XX-K strongly encourage cause those actual the are described materially

financial about our we'll call, of use this reconciliation company's of morning's a measures find you these our During financial press when non-GAAP reconciliation in to Relations in Investor non-GAAP talking condition. document and the can this portion And the performance website. release measures posted and

call over With that, like Karen. to turn Karen? I'd to the

Karen Lynch

diversified the when solutions a morning, health our for strength to our financial want that made today. health In meets delivered strong challenging on Thank needs everyone, XXXX, they and environment you, integrated navigated joining a the Larry. consumers powerful we bringing of care. company. journey, -- Good thanks our commitments, and where together and call We on successfully of testament our

care supports healthier and building lives. enabling and We are access high-quality, individuals to convenient building that affordable platform, health America's

$X.X delivered quarter adjusted $X.XX. of billion XXXX, of In the adjusted EPS fourth of and income operating we

year power for morning, revenues $XX.X the EPS supporting of operations of delivered and cash billion, We at model operating total least strategy. of to demonstrating generated versus prior XX% XXXX the from operating $XXX billion. $XX increase guidance the billion adjusted $X.XX. our billion of adjusted year. business were and our and our EPS full adjusted We an flow of $X.XX year, at to This flow, income our revised full For we $XX.X cash least

Tom to While further in details have the of stance attributable Medicare on to our Medicare pressure our utilization Advantage was additional until the Advantage XXXX previously trends. cautious continues industry-wide guidance, taking categories are contemplated be a provide clarity we we same on we in will of which part components a have of outlook our utilization for highlighted, these guidance.

Advantage our While business the the of been this remains recently, market by long-term Medicare unchanged. has opportunity offered challenged view

targeted we discussed that our As are in begin Advantage to over X% Medicare will December, we in committed XXXX. margin time, X% we and in journey achieving to

significant value have Health, scale and personalize CVS to tremendous brands, serve. transform the the can CVS caring to powerful By care coverage bringing we we Caremark, including our and Pharmacy, At we deliver how of customers we our each communities and capabilities together ability to health the built serve is shareholders. Aetna, potential individual Healthspire and for for the CVS delivered unlock

outcome, to work of total engagement able of assets When we deepen loyalty. lower improve care, are increase the our cost all and health together, patient

engagement opportunities engage to offerings. We at across vast expand see through least multi-payer [ engage CVS of capability Health tremendous customers that two X million XX Xx have more business. one and our members to CVS value are we reach. in customers to more able Today, up enterprise CVS with more Health our ] with unlock to we consumer We than Health when than

our pressures consumers and new new and CVS that and we unveiled offerings models creating create This & business. in choice In innovative more [ with transparency model value Consumer in also CostVantage our for Pharmacy proactively compensated We're prescriptions December, health ] subsidization for Wellness and to care clients. eliminates industry. customers and value pharmacy dispensed. for and delivered retail creates cross fairly addresses a patients business It reimbursement in transparent the the all is pharmacy persistent that mode more durable

We pathway transparency have in discussions. in a We initial along made are the December. industry-leading several will model current and a recently since dramatic notable and our CostVantage improvement. progress reimbursement announced cost delivered while the of actively new we passing is to to engaged terms and greater to provide change conditions clear constructive model PBM goods CVS

on to administrators create CostVantage pharmacy sets We've April reached pricing to more X. card preliminary discount a cash using is counter step begin at consumers. predictable for with This CVS that foundational stage agreement multiple the the

best Caremark, CVS that have option stable new insure possible will national our client announced be provides help access also cost offers model. drugs TrueCost client benefit network. the with administrative This prescription members net reflects and that their continued into pharmacy of innovative the pharmacy confident We price to consumers true fees. pricing our visibility Simplified more pricing

reducing biosimilars template co-branded adoption to April Finally, clients serve. ensure will of we drugs patients of Cordavis supply greater for role HUMIRA a consistent will from Cordavis, high-quality a the drug remove and affordable, we X, product. critical our commercial we drive continue costs Caremark to formulary. specialty members. these biosimilars their major while plays Through an affordability the a HUMIRA offer and in increase for of important Beginning helping on

pivotal tremendous and steps models to we value will be for new that These truly unlock innovative our pharmacy clients members. look their and will are deliver the offerings as and

creating health We more are passionate about transparency choice expanding and lowering improving access and to care, costs, consumers. for outcomes

this will are deliver goals. and important to colleagues purpose these on committed Our

growth an over segment, lines, our each quarter. the the product million. the exchange, million continue including In utilization increase revenues to delivered Health highlights nearly Benefits million, $XX our we trends from billion, turn reflecting the Care the we and commercial. our navigate quarter, businesses XX.X of across members ended elevated now XX% X.X Medicare Medicare in increase In through multiple of of business. at individual operating $XXX to versus of Advantage adjusted I'll membership to grew an and in income prior year, Medical year

Medicare Advantage After least enrollment at strategy. is XXXX period, new very add XXXX. a integral we the annual members successful CVS XXX,XXX expect in Health to to

Our success assets strengthened by allowed the us targeted were value that by investments to -- driven was differentiated and members. for create

network. member on We and offering stable simplicity, by are improving experiences maintaining focusing unique design

with the Last week, cover We a sufficient we we believe consistent believe received current expectation, funding consequence changes The that to Part which as benefits Act that -- plans providing not risk the the assuming the member level look weeks. Inflation of to cost increased CMS to broadly forward the as the Reduction to provided cover is and necessitate the proposed funding rate notice. comments additional result D XXXX are of was a do our to trends. We coming in our comprehensive redesign.

Healthspire, than business quarter, Health $XX the and billion revenues Health. more Services increase CVS Oak of as Signify growth the grew grew in our acquisition well income strong Adjusted segment, to than $X.X billion. of Pharma X% to an than nearly reflecting our as Services Street XX%, more In in more operating

and welcome therapies. patients completed Caremark X we our new million medications specialty ensured recently had more their onboarded our critical than In a and season. highly successful We to members access business,

to experience exceptional Caremark customer marketplace. ability Our consistent the member makes a is in what deliver leader

Health in success drive Delivery to continue business. Care our We

Oak extensive Health in year Advantage member with points. ends Street XXX,XXX XX% momentum Aetna members engaging members Street Street CVS Oak versus has doubled. through multipayer an tremendous of clinics Medicare touch have enrolled at-risk Through Oak increase with the the prior We lives, year. of our the January, Clinic

clients all our are period by Signify an increase addressable other demonstrate in-home partner. the market Health and multiple its consumers our Signify and multipayer the evaluations We'll these of individual same in-home the Medicare capabilities of strong year. versus capabilities broadening expanding Among in exchange we Advantage with customers, and for continues our last to will Aetna value value deliver across completed Signify's capabilities be utilizing engaging XX% XXX,XXX including channels. of Medicaid. products, quarter, and other

$XX customers, nearly versus quarter nearly operational operating an our prior versus to the Wellness generated than in performance serves execution. billion, by In year. & the quarter, prior up of million increase in which was Consumer driven year. XXX PCW's strong grew adjusted X% of billion Pharmacy more the fourth segment, revenues $X XX% than income more We the

the to play continue We we serve measures access in delivered to communities important and for on an pharmacy performance immunization critical role plan in providing partners. health our

X% to by the quarter sales executing versus in progress and made the were on on quarter year. the year. of to total comparable XXX than versus XX% On the end We volumes up store more basis, store XXX our in were Same-store a more are prior close last initiative, than same having year. up closed the same track prescription closure stores date

business. exceptional power XXXX of the highlighted our our execution diversified and

strong Our momentum into financial creates performance and XXXX. differentiated strategy

communities integrated we Our in customers, importance relevance and model and consumers, grow health the the day shareholders serve. every for

I will the to Tom Tom? call details to guidance. on results our now our and more turn provide over

Tom Cowhey

Thank you, good Karen, morning, and everyone.

flow the such unwavering and strong results results diversified businesses. with earnings operations. execution of on and Our the cash power fourth quarter metrics ended highlight share truly year from key our our adjusted We per focus as in revenue,

quarter strong businesses. prior Fourth Care delivered company nearly year. of were the operating in lower by These Health $X.X in representing total the strong as year primarily our Services Consumer of as due continued across our well reflecting prior of XX% and increases expenses, EPS growth results businesses approximately billion each over We Wellness approximately a few X% revenues A of Pharmacy of $XX nearly and $X.XX, partially Pharmacy offset adjusted versus highlights. to income increased pressure growth Benefits. & billion adjusted quarter, corporate

generate $XX.X full cash billion. of with cash year operations flow Our to ability outstanding from remains

the segment. million, revenue reflecting our for more lines XX,XXX Membership across businesses. the We Fourth product a of impact than was exchange prior offset XX% by individual $XX.X another slight Care all in members growth details year. and partially particularly versus of quarter year-over-year, Shifting reflecting our to growth decrease Medicaid XX.X exchange. Benefits growth quarter strong revenue Health Medicare sequentially, redeterminations in of billion of delivered individual increased

was for quarter of decline utilization prior operating related fourth including growth million. by primarily individual $XXX the business, offset income. exchange the adjusted in net increased and Adjusted Advantage driven impact The higher seasonality was the in partially income Medicare operating by versus year investment in income the

basis Utilization the reflecting primarily attributable points increased such be of same vision. pressure ratio Medicare lower a quarter, from benefits as benefit categories including prior XXX the period prior continues medical and in and from higher positive quarter, year Advantage to supplemental contribution and outpatient highlighted the XX.X% dental utilization to previous we Our development.

immunizations, our with previous remain consistent in launched medical RSV vaccine. related an trend largely We including categories the newly seasonal also cost saw uptick to costs assumptions. Other

returning to what and the of levels periods Days Overall, of at of end adjusting in the pre-COVID after we the remain down consistent experienced XX.X, payable with reserves. X.X confident normalized for payments. sequentially the was claims our in pass-through quarter days impact adequacy Medicaid we

Pharmacy Our partially segment, and specialty was offset Health growth year-over-year. and Care by improvements. driven which of generated This our and pharmacy, an price than of by Services drug billion, brand revenue impact Services the Oak more Delivery increase pharmacy increase of includes continued $XX Street. Signify inflation These approximately XX% were of Health in client the addition businesses, mix, increases

ongoing growth Adjusted improvements. X% offset year-over-year nearly economics by and by partially price $X.X approximately specialty billion of pharmacy, in improved primarily grew operating income purchasing driven client

The new claims business prior year. was the offset increase quarter by was the versus as XXXX, and loss to of a New million pharmacy is increase January members, of the processed net Medicaid the utilization. approximately down impact driven large membership Total of increased primarily York client. in The increased slightly XX due by Total previously pharmacy carve-out. primarily the announced X, largely

last Delivery and growth We ended our revenue be in an Street the increase the of with the Health by XX% generated year. continue in encouraged compared XXX to quarter to XXXX. centers centers, of assets. quarter Care XX Signify performance Oak growth of

add to XX% quarter increased in the compared Oak to year. growing revenue continue same XX also We to to XX expect quarter, Street last significantly the centers XXXX. in

revenue generated We These of XX% over up mix, revenue drug a offset on of in versus pressure store our from were year the generic to and by over volume, pharmacy nearly impact reflecting the prescription $XX decrease brand continued impact and partially and Pharmacy billion, same-store the prior reimbursement & basis, of counts. Consumer segments. vaccinations. Shifting increased inflation a increased Wellness contributions recent introductions, X% increases

an sales were the These by increase increases operating versus billion, driven Adjusted operating improved income approximately was quarter pharmacy in prescription $X and purchasing, Same-store nearly the year. Same-store XX% of down offset pharmacy sales partially drug increased volume contributions by increased front up expenses. the same year reimbursement described [ from increased were X% year, prescription above store prior lower continued by vaccinations, same-store versus prior were and XX.X% ]. by about versus X.X%. the last volumes

Shifting to the balance sheet.

position capital remained and liquidity Our excellent.

Our We committed ended of remain while unrestricted our cash cash to remains generate current $XXX a core billion. strategically. investment-grade parent year were with We of capital deploy ability XXXX to organization. $XX.X ratings at to approximately our the flow from subsidiaries. million preserving cash flow the maintaining strength Full flexibility and operations year

In the $XXX dividend. quarterly fourth shareholders our we quarter, to million returned through

repurchase We billion on which $X January became also X, dollar entered effective XXXX. a transaction, into accelerated share fixed

we uncertainty our of to revised now XXXX recognition full Turning In to least Medicare guidance $X.XX. for Advantage, utilization the marketplace XXXX. EPS our in year adjusted outlook around trends at

to approximately expect XXXX we from previous our an segment, Benefits guidance. XX.X%, medical points ratio be basis XX benefit Care Health the now In of increase our

medical I mix business benefit approximately of our remaining year offsets in our the full which previously higher ratio in projected. in observed largely Advantage by quarter revenue points the trends a Medicare function As than basis we fourth already pressured we guidance. pressure XXXX The elevated relative was quarter, cost to prior our XX noted, and medical

medical on in cost fourth guidance to medical will cost our have basis our this review we XXXX year XXXX pressure. full elevated for recently approximately trends Based forward of increased we observed that assuming points analysis, MBR prudently by the quarter into we're account completed the Accordingly, XXXX. XX our carry trend quarter

included elevated we more utilization guidance the Advantage utilization for benefit a ratio we'll have that our hold had throughout to provision on in continue XXXX, medical we discussed XXXX provision As and until environment. Medicare clarity

least of in Medicare Advantage Our new revised outlook at members an expectation also reflects XXX,XXX XXXX.

switching previously expected is plans. we these and members new these X/X As plans mature about have of from attractive, the in with members other discussed, profile nearly members X/X of D-SNP of

from We with the but projecting, are membership the XX our continue of earnings XX guidance mix basis we cost new we incremental expect neutral represents by points to pressure basis points to MBR combined approximately of XX XX.X%. have XXXX impact members these MBR XXXX And will projection points be today's new additional medical increased revision. basis to

up number for to the a from projected will elevated favorable partially the the expected higher Care anticipate and our higher-than-previously levels we $X.X expect at billion, adjusted of commercial We Health pieces, utilization least income membership. of items offset be including impact prior Adding of segment investment income a the all now decrease estimates. Benefits million operating $XXX

Wellness portion the segment, our persist to XXXX. into In Consumer the from a & we now outperformance XXXX of of Pharmacy expect end

we prior least of project guidance. $XX result, increase billion, adjusted of at a our income approximately As an operating $X.X million from now

our a at approximately In XXXX Services adjusted segment, to $XX Health operating billion, we're income million. $X.X decrease least updating of

risks, trend utilization recognize for we have pressures payer emerging our businesses were clarity prudent XXXX successfully potential our medical cost is trends. we until think it on While to further Delivery Health Care through in able the manage to XXXX, partners,

operations, a made from to this we've least will project adjustment cash to we year. billion which corresponding $XX Finally, at now be flow

expect of Medicare Advantage As year XXXX, our XX% you adjusted the XXXX, period This in of half. XX% of to roughly EPS pattern More utilization earnings cadence think way due the the in XXXX specifically, to to course adjusted the we EPS full timing less quarter. of over generate about generate development. first will expect first than the we impact be and than primarily in of different the prior emerged and

increase fourth As smallest MBR and the in the a quarter quarter. will in Health first Benefits XXXX the year-over-year the see result, Care largest

guidance our additional XXXX updated on Relations page. Investor our on web You components the of details find can

are to we XXXX returning returns while to our Medicare to our on margins projected target our the XXXX, preserving of X% Advantage committed Beyond acquisitions. X% also for capital

notice, adequately Medicare cost Our recent which trends. enhance Stars Advantage trajectory work will recovery to XXXX our the cover rate account our as not adjust medical to preliminary XXXX for we plans does in even earnings

XXXX low our growth EPS goal adjusted of to XXXX, is deliver guidance. our For double-digit updated

goal. We progress later year expect investors this this to against our on update

year the CVS of Health diversified was our To where conclude, a demonstrated enterprise. XXXX power

remain we advance we begin XXXX, leading and on health consumers. execution the growth of sustainable becoming As operational we focused goal solutions company as our for

now the Operator? we'll questions. that, your to call open With

Operator

[Operator from today Instructions] Gill Our JPMorgan. comes first Lisa question from

Lisa Gill

happened 'XX? about quarter, that's color. December I thanks you're what all XXXX? But that from a bit you I just Day thinking of coming in understand how in Tom, is you're throughout how little really how for in just how December and Investor about see thinking What to influencing fourth that your want do the about happened go influenced? deeper really that think claims influencing Did

on us And risk wondering color little about the that was around coding can how the then if so they're any bit of have there, you impact and and you just fact members and this dipping XX points more touched the just just to comfort But that membership? there. a the you adding switchers level much basis new give on think

just lastly, when cost medical supplemental then about 'XX? think I And think benefits trend about how versus we do

Tom Cowhey

Maybe ask -- take the Lisa. that, Sure. I'll first of Brian I'll back parts. and thanks, Maybe part the take to

when our you And in we as of saw half what the your really of paid appeared at back we changed Day, claims in high from about So levels Investor we actually conference think noted December. January. that

the into we've deeper of dove on me fourth went maybe seen quarter, kind walk just in through we what aggregate. in let what As you

performance. about XXXX impact full the start you and year think with on of if the quarter fourth So just its let's

not is pressure So was we basis Roughly into than XXXX. about higher do XX.X%, which half year should carry points things guidance. ended that XX that at believe the we of our

membership. things would be SEP So key and Medicaid payments like that also pass-through higher drivers of

we also the half, know, pressure end this the to see And you shouldn't of that our we've in the in board individual. back in once repositioned portfolio half of across same start sort redeterminations first year. As

other think in XX related to the about that pressure that trend that's the you half, saw Medicare. all we As basis points,

all and ahead same of though, a that to it's we've about that year So in been guidance. categories, lot get been talking our of the we've trying actively

outpatient hips the quarter, and fourth slightly knees. trend so accelerated So in

saw the and continue year. in benefits, trends elevated really some that OTC which cards dental related. it's pressure is we earlier supplemental finally, also in more We to about this talked really vaccinations, but vision we than the RSV see quarter from And

across other the themselves essentially dollar trends a look with we would cost categories, is where it the line that we As on they they're be. in basis, thought that

So it that pulled points translate how pressure, baseline. taken does 'XX? then basis through XXXX that of into We've into the we've and XX

So medical accordingly, estimate forward we've increased $XXX for our in over our 'XX. by for million costs guidance

about With the a that XX talked from what we've this of totality that that plus done that, about mix new the point which is think additional increase, impacts the you additional Day, basis members, to Investor gets XXX,XXX we we've morning. since

we in additional an at I'd we said I provision talked guidance. our about call, talking guidance you, into putting the prepared just started for our for in provision first about second quarter that when the We've enhanced utilization. XXXX As remarks, maintained remind XXXX

to see And are prudent that will hope where posture but so be that, going we want a we to settle. trends

I'll will you the be Medicare looking and Brian. to we something turn over I'd think that also to marginally only in profitable bids. with that that's just our actively XXXX, be to XXXX that business it now, note address is book now about projected as

Unknown Executive

are pause. There's The members I your those would give mentioned we The on just that a book component us we've new question. big X/X, because that new members, important a fact orders the so portion Yes. of would seen his of reasonable. Stars have that. have we as in The Lisa, fact look members that D-SNPs, add that a are Tom in risk in don't matters switchers business. issue the that many is remarks, to really that nothing of

the feel good membership. about we new overall, So

distribution new those wear off as the for of just that for add next and the XXXX also important get that, very cost year membership And coded has I XXXX. would members a tailwind as

members Tom through. new is we we feel our us So there. received. nothing There's pause guide, as fully we've that that XXXX seen good went that very we about the everything reflected gives think And in

and benefits on us that mentioned been fully And on of With respect that cards question those 'XX has your assumed we've challenges vision-type our effectively reflected a this cost we've in also our the reflected flex fully the we of those giving We were year. utilization supplemental call to full lot guide. pressure dental- guide. last in benefits, of believe quarterly the

our top baseline. we Tom normalized, that fully in the numbers. baseline increase Again, put reasonable on put And We reflected a the MBR. good, that that XX top we dollars through very we as trend today, additional feel on said, of 'XX the in of

all, good we about all 'XX. for and positioned how So feel we're

Karen Lynch

our want we'll and Yes. And that margin we about the Tom for XXXX, Medicare our said I in just in recovery reemphasize Lisa, remarks, and made Advantage I that point XXXX, prepared for bids. in account to for this committed that are

Operator

from Wolfe comes next Lake Justin The from Research. question

Justin Lake

quickly that's that, I benefit be recapturing you know beyond you to wanted comments I that whatever for Stars rates going and should the beyond have X% the do the cost pressure X% you start And positioning going about think could I from XXXX. margin expect benefits beyond and for in But found to on XXXX? to I strategy. XXXX a reductions. trend? that. your do know beyond improvement some get And would to cause about cut to higher think that to back how rates, wanted we in to Stars the How that specifically, margin bidding suggest helpful I tailwind you're margin? ask

Karen Lynch

One with Ryan think I I expectations There's about in the bids. being say notice of comment want because that's to to our on second, rate to XXXX flat. just to we in here. critical Justin, things line three this it's it's a I'll and hand Karen, relative over would kind but we is how believe

that have Advantage. Medicare been overall do trends cost we emerging it not However, believe in covers

around know We risk the model. that there's also complexity

be that as our we'll think so about bids. we And contemplating

how D, we we'll under well some that there's uncertainty Inflation Act relative points. comments as that Reduction And bids taking finally, impacts to then around to CMS our providing and be do the Part and consideration these when

driving Brian detailed to process, specifically we your all in of will bid those let for our recovery. but questions. answer margin So will And have factor me be

Unknown Executive

Thanks, And Karen. there. top that again reiterate margin. just that get to It's I'll important mind the committed Sure. are we X% to extremely and of X% we

As we've in disciplined also but journey a pricing. multiple to make times, and said be business reflecting that's significant to to while get our the take see it intend the there, we multiyear that very will target we fully in ground against XXXX, in trends sure that reflected being

the and headwinds have some notice that's mentioned enhanced There will Karen meaningfully that are through risk believe in that don't are the the and rate layer we to as industry, to Part we And be do. taking it need around catastrophic meaningfully also benefit as bids, par work a IRA. been more has fully in medical that on as to D respect trend. with something issues we reflects some an of our to of the we, reflected intend the

We we to through that are we're could, we by some or beneficiary do. what margin are you total being intend limitations extent, do TBC that limited, able said, change as also to actions. take That additional constrain to working know,

do excess of Our goal so is tailwind our in have. that to Stars we

think again, coding that been a will this expensive in that as the are fully XXXX. in year members haven't members it's asked, wear prior mentioned I perspective, very documented a throughout question these because to getting we're and the XXX,XXX I important meaningful Lisa the note, tailwind also about off costs because distribution that from as to really XXXX would

get there. nice so And tailwind a you

MA. I'd likely did notwithstanding said make, think result relative will model which I although increases in point about made think help we XXXX. on PDP, as of Part the on an premium the last of that we I important the some IRA risk think actually MA be, attractiveness side, as were important that believe for attractiveness D, is And the result changes the that's the likely the will The component benefits, will is meaningful of which PDP enhance we for

which significant for some I'd I only and intend our coordination, of that we doesn't thing about not around proposition it choosing benefits, industry, point MA enough on our customers. care make, talked that But the result plan, superior for that be system offer believe of MA still is last is the does of far around the that the a think making, will top members even as And Medicare compelling we and as with we health important, will a get changes to that the fee-for-service care be benefits navigating value something that's is get traditional superior that plan mind us. an

we And XXXX. for our that is continue to our retain intention to enhance experience, make sure that especially with new members them to

Operator

UBS. comes Caliendo question next from from The Kevin

Kevin Caliendo

question. go or we're it's time, think worried to to over just about Justin's or bit a X% maybe getting understand further trying I to when little their all And trying to maybe talk what what on enhance how know? about want little X% I you strategy, still the the Maybe -- Can you and knowing a take What to is positioned in versus marketplace. bit about like CVS are your advantages ability in and others your share positioning. you disadvantages? margin, guess bid

and or to targets better with And you, grow your Stars line not, the growth? margin expected in get can than market but can you still coming or back

Unknown Executive

about where shakes in handle where will terms look, disciplined of can see that. around rate we trend still the be to the obviously of go Well, overall think very out There's questions for notice and got final a We some be there. appreciate margins question. out real XXXX, where I course, get

recovery. calculus And so that we think will important be margin as about an

Medicare we to Stars about we As enterprise do with does provide bring proposition can an as we margin, our have compelling bear the share, members. think relative an We our believe advantage that a the assets all there. for back we various value think look, that coming on

reiterate some gives in into we that will I XXXX again, XXXX. membership significant also us tailwinds growth got As the going

first believe as And the said to are customer question. we and we those a the this market grow, compelling prior foremost provide be want We we assets believe and compelling the is Obviously, you, a competition. have tell will experience recovering believe gains secondary we share to for to members in superior consideration. I space. I is relative But it's members. margin and to able on We manage

well very a consequence, grow share. take As think I and over our business we're time to positioned

Operator

The next from Goldman from question Rich comes Sachs. Nathan

Nathan Rich

hands to around challenging companies It's obviously been for this of their get kind many year utilization.

early played fourth So to I supplemental don't of the well quarter out trend have on January kind how on any maybe both the comments as as know if benefits? relative outpatient you

face? from for, as it think, up XXXX headwind the price in there think also that level, Stars between basis the relates have, the you utilization you And the impact the at the MBR that that Or risk points. pressure is MBR? contribute just high And will that something be XXX that to to you members model? down we components guess 'XX different would is new break pressure, I being there that able to a now, a about then increase I as

Tom Cowhey

and then the second don't question part Nate, of back I'll Brian. take turn it why over first, I to your

the look you entirety almost is as increase, at it MBR to So business. Advantage related the the Medicare of year-over-year

items. smaller some are there So

there's have But reserve year we we about guidance, then never our our in also we there. And project we think exchange So individual -- an development. as offsets improvement business. prior other some

two, those -- the that part, that's for so net. most And

the related so majority of with were is increase Medicare. what to the vast you is And left

a MBR specifically it And is provisions the the be there Stars we're because And utilization breakeven rest member relates of for remainder pressure. XX minus new will headwind basis then a assuming or mix for so we about of to that that really plus have. $XXX and then that and that, higher combination is a provision the points million the of Medicare

Unknown Executive

absolutely our get respect to pause early comment seen you today. guidance Obviously, There's closely, with share to with And the monitor that trends, in that given as it's we've to information, will relative you. going very too data that. on it as we're really January imagine. more January to way And gives us we that can that we've we nothing

we obviously something about just quick that's that's year, of growing impacted relative would just important and over I these to as player the make risk an low a risk we're more that And by not comment this a It's we've population Investor said, model our this. we're our of under-indexed way by think been -- a at that's every VXX because impacted this same changes. but I we Day, significantly have competitors. way the and relatively duals way about D-SNPs. comment to element is on model, D-SNP talked some And portion visions, the

we have by something, relative fact the relationships than in, an we're is We VXX on and critical of this opportunity, us. would respect full-risk expand of we impact bigger we types over also result think relationships. And the our model underpenetrated VBC we but much with ultimately -- also and change, benefited it is our to type for also non-VBC to priority This those penetration again, when a that say, a some actually to strategic peers. comes a are want But I relationship. time, lower it's to risk

Tom Cowhey

are on Nate, expectations. spent was time I whole, category might things that there the with inpatient. the just And we remains of at specifically takes say there. and But lot of looking consistent some one puts that our a

January both a obviously rule. That's that closely that with in bids consistent the therefore -- and come which it's guidance very and our that see make what -- something to midnight sure the guide, through is to we going in encapsulated make because did the inside is provision estimate system. our we're watching we're incorporated our of from changes would happen the for two fully Now in

Operator

Ann question from comes next Mizuho. from Hynes The

Ann Hynes

model shift just discussions just MLR you're ability of away and the more any on give timing? new the receiving I initial know from and I'll Have focus in Maybe the discussed on the retail to on can you model. your details view your but changed change the from comments, payers. feedback you pricing us your

clarify, is And just to mandatory this program. a

payer basically want risk you. don't guess, So relationships switch that with payers to? they And to the what's of have I

Karen Lynch

I'll say here. generally And through. give and we're would comments But detail with lot a there's to the details little Initially, reaction. through with and of really bit feedback positive to been to a I pleased discussions. the more work Yes, the ask go initial of sort that obviously, the Prem have you

Prem Shah

we engaged progress question, conditions discussions really and them. terms Analyst the and and We've I'd model the benefit the made. the Thanks we're pharmacy been constructive what is of And the Day with are managers we've for of course all Yes. week, delivered in about Ann. say launched at over to excited to, able the initial several of last

our way is our What through in in passing goods we're pricing to greater me through transparency and model. really of the excites payers in cost drug leading leading providing new

through So consumers received costs we payers transparent scale effectively this to prices. go and and It's to as continuing is forward. and model we that not and raising acquisition pass that benefit a our provide back about size the can payers about

the drugs. these our now the biggest is, pharmacy driving the face health what ecosystem, not get the of specialty majority that we It's of payers it's sponsors. for -- fact you drugs of is point think through the about to drugs kind of cost the plan and and pain the think one Remember, And the problems payers that's reimbursement constitute as about that. brand that challenges rising biggest passed care if brand the you

data -- So quick on points some that. and just

was GLP-X right? If impact continues you XXXX to million, the think that about the grow. $XX system, about of to And it

pharmaceuticals be eliminating systems path in discussions driving as continue the -- problems to the as on the allow to quarters. we more of over progress payers much their a of of and We're the make my good from perspective, to couple the come an subsidization receive next easier course some pharmacy with transparent to key So payers. creating U.S. path in forward and more have we consumers and such cross and

Karen Lynch

would with and this. forefront industry the lot has at about of the of TrueCost a And been And simplicity. cost for is I model, support items. out talked transparency and Ann, really are to of importance kind and continually everyone the model this those our leading just And the we support driving I has market, think there in remind Prem affordability that as

Operator

next Nephron Josh Research. question from from Raskin comes The

Joshua Raskin

Here hopefully MA to loop on close going with the the Eric as side. well. I'm

consider your from the that So to benefit does MA can Or talk of on have the segment X% you you And growth? margin? you about to stand speak overall HCB when the philosophy just X% on enterprise to bids? do its own

Street a And growing about growth creates but enterprise bid headwind you MA in impacts specifically long-term short-term thinking the how probably speak can impact your your strategy? to and assets that Healthspire I'm Oak value? of

Karen Lynch

way needs our we the get bear Josh, we So to that the company. all benefit from [ assets other to at for be to is about it bring we of X% the think margin And X% ]. then ABB can growth the

that's our bids. MA philosophical approach So to

to then relative Healthspire to I'll can the give MA, that. ask Mike And on how assets you some support comments

Unknown Executive

Yes.

Health key levers outcomes then the disease the of Signify Aetna, impact one more we but right? burdens partnership delivering costs, on payers to be in-home of levers identify And all care have be lower So Oak at And with of pull we having patient and as positively we PCP HCB appropriately. of we can with Street defer lower the impact have parts can to positively medical MOR. our that that additional treat quality, can assessments it can patient

is to all better payer job substantially provide our care. our for So partners of

care becomes of share, tailwind the think delivery at are the we And advantages cost. down And us. growing for is group implemented Rubicon couple Oak program example obviously, more so when and Street. as right, in fully a trickles Oak that a provide is r to access of health ago, the our levers MD leverage one the lot better lowe one have And we care e-consult taking to to I XXXX and help pull. payer But at organization years bought and for called growth a a us Street partners we company of we and e-consult to specialty

implementation, And saw increase book. able well. across and that a on lower profitability the through we X% were Street to that reason expectations that one to as were trend lot in despite utilization Oak MLR entire our and we discussed able categories is hit And Tom the our we to of

so higher quality of think our And lot and a is levers. strategy lower dependent those upon able I to through drive cost being

Tom Cowhey

Josh. -- to all capital. up. cost from their wrap the Maybe of earn capital this think and about earn enterprise need let businesses to return on The as of we their me need perspective, our that this they

noted, our for billion targeted think we on profitable. And marginally X% that. revenue And so that X% XXXX. clearly as a business mid-$XXs at for you a it's didn't I We we achieve XXXX, to about look as only margin Medicare, projections as it's

think high-teens premium. behind and dollar every you of a of putting As dollars we're about that percentage capital business, risk-based

to be we we about on target committed margins of to imperative perspective. returns it And returns which in with its so that how be those expect achieving That's believe of business we've earn just we And of capital. its each very capital margin and it's And to achieving businesses develop XXXX about of which them, specific we lot been we're to that, we're capabilities, course additive. that enterprise means acquired. the we earn capital on money a have will investors over committed what time, over to from those cost an think spent and

Operator

from ISI. comes Elizabeth question next The from Anderson Evercore

Elizabeth Anderson

I you Pharmacy that versus of for into tenets guidance are your in maybe wanted the there Day XXXX the bit Services changed sort the go profit just assumptions little Can that through what you more dig at of in to gave December? guidance the a Investor detail. key

Tom Cowhey

Elizabeth, Health did you I segment, presume. mean Services the

changed So really there... what

Elizabeth Anderson

Yes. [indiscernible].

Tom Cowhey

Yes.

we as it impacts you to that business. as that little there in remarks, As the about this external through was prepared into what business, looks prudent think could the recognize we a a outside like, that our that multipayer bit think pull that, felt noted about environment be might utilization I ecosystem

of a lot a that in the saw we outlook, what what Care it own Oak reserving But it we across we thought about insights our their time and hearing into pull and book what potential quarter, said, other businesses. spent -- cost is Street spends trends we about can in with time ACO the medical we're seeing what to primarily also Health our thinking as through inside some thought pressure Mike marketplace, was we And our our we As utilization assets. fourth that he to are try the prudent we're as of our supplement at that the book. lot are of what Delivery in about practice

Operator

The from question Fargo. from next Stephen Wells Baxter comes

Stephen Baxter

wanted of basis look does follow XXX to I about like for your reduction that When guidance precisely. kind business, the for just we implied MA it's at point less you're book on talking think, own up business. of than, MLR services that it on the the I look up question guide

little hoping are of the specifically could XXXX included loss a an Oak then Street what's some your potentially more outlook the increased you ratios business? for And XXXX carrying offset? expand in you as just the outperformance into So also

Tom Cowhey

appropriate segmental so the Steve, provisions the important as we I much Health larger realized guide about that it's might that is Yes, two look one, things. a believe think Care you And think the for like. of guidance Number there segment, part right? pressures we've that you in potential made Delivery what

in that thing those had businesses. you very just remind is we a I successful second would XXXX The

businesses successfully able in And in through and manage Advantage were peers those still achieve targets saw of XXXX. that the we most of businesses and the for Medicare so looking we those that our to pressures were out

the outlook So performance. thought prudent that we And where XXXX we based with external and environment. outlook might were pleased about cautious on land as took a but -- very we hopefully,

Operator

The America. Allen Lutz from next question of comes from Bank

Allen Lutz

or Prem. for One Tom

On pharmacy strong. pharmacy really was side, the volume retail script

are So growth of bankruptcy you end of one benefits ex-COVID? any the through of how the should we the then peers? your year think and And seeing from there noticeable about

Prem Shah

driven a pharmacy can experiences and One, we've mentioned the our and things. QX, we in before, pharmacy great entered service we year provide And are sticky, the by as had extremely we've few tell for this businesses. at question. strong are the Thanks throughout as they relationships counter. really you I'll

So we as And to as done market time. to the continue we expectations said. that a historically the right our our perspective, in as our for stores you performance mentioned our good with we've at invest sure certain there's in and disruptions, feel it's about From they at been to make markets this year really good as we relates we'll we feel service. And as it going way, our experiences, marketplace. we in this. few into opportunistic I -- buys, look look over in the make year, coming sense, line really But script if prioritizing

Tom Cowhey

as was of growth. you consistently think offset I'm as Allen, share this help that said had quarter, one we've same-store sorry, we've about the to you to grow things we -- that to business, we at And Nate, tried to pressures. reimbursement that the is had we certainly certainly look -- fourth had

about what think versus our X% in overall the But really that to of about in market as got mid-Xs. was market the grew impact closures be You might in range had store kind growth you that of high prescriptions a think share. we same-store

results really us continue the trajectory in execute Investor we teams Day. outlined And we like feel to that to really get long-term onto the at that so the to drive ultimately helping well

Karen Lynch

which been good critical also that on been and said the as colleagues, store I'd we in of making the remarks Allen, was And we've closures success this retaining retaining and scripts and progress closures, our note, to store we've those prepared well.

Operator

question comes next The from TD Cowen. from Charles Rhyee

Charles Rhyee

-- a making of a mentioned minus sort for drug we've that or market pharmacy acquisition class more no -- of think have CostVantage global setting little costs, about raised cost the we here, you about right, that. I wanted or XX like passing something potential one generics how to the can caps costs because for the up was in more a I AWP just is setting And issues X to one higher solutions that you're of the on is little what through? when back they're here. for of regards go heard prefer to let's concerns sort could higher than, think how bit been you're reaction a incentives, seeing reimbursement those bit of acquisition talk maybe up potentially up the numbers say, and drugs,

that ensure that that? aligned incentives I what the the really sort of something to you with are And sort because are interested payers discussing that are of in are the contemplating measures you payers? Is imagine are

Prem Shah

Yes.

I I a -- think few think first the your foremost, and there's to question. parts

For and -- our delivered we've conditions. -- terms

ability work. now payers the understand to have our model the will how So

pharmacy someone based our many by reminder, acquisition the down and where procurement so in acquisition is operating markup Retail payers a your other different this the transparent the model can dispensing transparent operating there's that's discipline way of that underlying benefits on the -- we've defined to plus receive very upon fee. To and formula we like CVS a As generics built cost through the on way our point is ways this defined on pricing. of a My have scale the perspective drive on approached strategies. is costs in a simple drug, further and Pharmacy,

so the always marketplace to say that accountable be pharmacy would price across communities the possible. reducing I size will payers deleveraging time, held same the for delivering we acquisition what At and serve. that need at do we And community care also and all across costs, scale lowest viable that our also can performing and services consistent is a the provide

So it's meet both of to critical those.

months go continue of all the over but going these and and in payer had course we'll a the excited it's with that industry made over describing still this discussions things we're payers the we contemplating progress journey, about the we've that the last coming challenges so and payer discussing forward. an look, weeks the decades. Day, some early X, few has very update to Analyst as that course And eliminate to And and way we're of this we're provide since in February negotiations the things you're transparent we're of are and

Operator

next from Raymond James. The from Ransom question comes John

John Ransom

It's And guy in drag How for I enterprise just franchise. embedded bad a RSV. to for about just what's net question the is It's net to outlook do or benefit at the a fourth your HCB. have guy think good The retail your we quarter? 'XX RSV?

Tom Cowhey

relative did saw about about more differences That because quarter between don't market bit vaccinations. say a We in our in pressure but the think that on to in the inside our a tends RSV. I see inside Aetna Pharmacy we a business, we're tailwind Correspondingly, business. & share the Consumer net as those going Medicare specific pharmacy John, -- of the fourth segment. net the would enterprise. I also be and business in give you that business Aetna benefit as think you commercial little know in to of the a particular, for Wellness

outperformance what newness about is think what doesn't that see of as raise outlook we given of that's 'XX. more pull-through we've we match We'd lean that beat like to little you As And as here fourth to in the more the XXXX, bit the in history some thought we a these think why vaccines, about tried might take for the a little about be the on projection. quarter. cautious before do bit

Karen Lynch

that has the retail immunization developed of you And strong and business to I one that John, kind strategically, value think RSV franchise wouldn't about creating want I really business. about for just think vaccine. really which of an type is

Operator

Erin is Stanley. The Wright final question from Morgan today from

Erin Wilson Wright

guidance? I'm the Or relative is Cordavis, to how On And embedded just playing how just is out that your generally that your is how meaningful in meaningful curious segment to profit? contribution expectations?

on a just just and then one transparency. And quick PBM

year Just in around your -- across and the what what that? terms passed of latest to you we ability regulatory see thoughts PBM, gets potentially could what potentially this can changes manage on

Tom Cowhey

pleased we've have positive Services from talk a the progress And Health very we'll contribution this date. Thanks, more Erin. that the with little do Maybe a bit But the with And I'd Karen we on over segment. And that for we to I'll inside about disclosed Cordavis. been to PBM get haven't start say projection that business transparency. give contribution through a as details to it maybe I'll at turn more specific year. we point. continue to

Karen Lynch

on with transparency. transparency. tell in action I about transparency. discussions -- of what's overall If that TrueCost outcome. would to I helpful continued does I driving is that obviously, Washington, this get going given both CostVantage, going going to taking And but some that I around and that overall in can't the with have that do be there. you But it we on the and passed, predict think legislators resonating on cost will is anything know they're we're think taken is relative are I talking improve actions in D.C., what's Yes,

Operator

today's concludes Q&A This session...

Karen Lynch

deliver I joining Thank all for commitment to want and you Thank for colleagues call performance. continued to the our thank Yes. today, our on their you.

Operator

very call. concludes attendance. for today's This you your Thank much

You may your lines. now disconnect

CVS Health (CVS) 7 Feb 242023 Q4 Earnings call transcript