CVS Health in the first quarter recorded a $349 million loss on assets held for sale associated with its Omnicare long-term care pharmacy business, Executive Vice President and Chief Financial Officer Shawn M. Guertin said Wednesday during the Woonsocket, RI-based company’s latest earnings call.
Overall operating income in the quarter decreased 2.8%, primarily due to the write-down of the Cincinnati-based Omnicare business, a decrease in adjusted operating income and an increase in acquisition-related transaction and integration costs compared with 2022, he said.
The decrease in operating income was partially offset by the absence of a $484 million opioid litigation charge recorded last year and a decrease in the amortization of intangible assets compared with the prior year, according to Guertin.
‘Long-term care’ removed from segment name
A renaming and reshuffling of business segments in the first quarter at CVS, announced Wednesday, finds Omnicare now part of the company’s newly named Pharmacy and Consumer Wellness segment. The segment also includes retail pharmacy operations and related pharmacy services as well as CVS’ retail front store operations.
The businesses in the new segment, President and CEO Karen Lynch said Wednesday during the call, serve more than 120 million people, deliver more than 1.6 billion prescriptions annually, include more than 220,000 employees and in 2022 reported combined revenues of almost $109 billion.
Formerly, Omnicare was part of a segment called Retail/Long-Term Care.
The changes to the operating model and financial reporting “more accurately reflect how our businesses are managed” and “allow us to be more nimble in our execution and more innovative when expanding our products and services,” Lynch said.
The removal of “long-term care” from the name of the segment that includes Omnicare comes six months after Lynch announced that CVS plans to sell the long-term care pharmacy business, saying it is “no longer a strategic asset.” Omnicare serves senior living communities, skilled nursing facilities and Programs of All-Inclusive Care for the Elderly (PACE).
At the time, the CEO said the company would “make investments” related to its goal “to be in the home,” and acquisitions made since then help realize that goal.
Home-based care services are part of CVS’ new Health Services segment, which also “unifies most of the former operations of our Pharmacy Services segment as well as our healthcare delivery operations, including primary care, retail health clinics, home-based care services and provider enablement capabilities,” Lynch said. The Health Services segment’s specialty and mail order pharmacy offerings will be fulfilled by the Pharmacy and Consumer Wellness segment.
The company’s overall adjusted operating income in the first quarter decreased 5.1%, primarily driven by declines in the Pharmacy and Consumer Wellness segment, partially offset by increases in the Health Services segment, Guertin said.
The earnings call came a day after CVS announced the completion of its $10.6 billion acquisition of Oak Street Health, a multi-payer, value-based primary care company serving older adults that will be part of the Health Services segment. Plans for the purchase had been announced in February.
The acquisition, CVS said, will “significantly” advance the company’s value-based care strategy.
“From the Oak Street side, we couldn’t be more excited, getting to work with CVS,” Oak Street Health CEO Mike Pykosz told analysts Wednesday during the earnings call. “The breadth and the number of older adults that CVS is interacting with across all the different business units is really unprecedented in the US, and that creates an incredible opportunity for us to meet more people and introduce what we do at Oak Street Health.”
CVS completed the $8 billion acquisition of Signify Health in March, describing Signify as a “technology and services company focused on provider enablement and bringing clinicians into the home to identify chronic conditions, close gaps in care, and address social determinants of health.”
“This transaction advances our value-based care strategy by enhancing our presence in the home,” Lynch said at the time.
