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CVS reported strong results for its healthcare segment in 2023, showing a 10.2% increase in revenue compared to the prior year. Still, executives lowered the segment’s 2024 guidance in anticipation of rising medical costs, according to earnings released this month.
CVS has spent billions building out its healthcare segment—which comprises the Cordavis division, MinuteClinic, pharmacy benefits manager Caremark, provider network Signify Health, and primary care clinic operator Oak Street Health—to compete with Walgreens, which has also invested billions to transform itself into a healthcare company rather than just a chain of pharmacies.
“We continue to be encouraged by the performance and growth of our healthcare delivery assets,” Thomas Cowhey, EVP and CFO at CVS, said during an earnings call.
The healthcare segment, which CVS recently branded as Healthspire, brought in $186.8 billion in FY 2023, according to the earnings report, making up roughly 52% of the company’s total revenue. Overall company revenue increased roughly 11% in 2023 compared to the prior year.
In comparison, Walgreens executives said in October 2023 they were “not satisfied” with their healthcare segment’s performance in FY 2023. The company’s healthcare segment includes primary care clinic operators VillageMD and Summit Health–CityMD, specialty pharmacy company Shields Health Solutions, and post-acute care services company CareCentrix.
Walgreens’s healthcare segment brought in $6.6 billion in FY 2023, or about 4.7% of the company’s total revenue. In Q1 2024 earnings released on January 4, Walgreens said the healthcare segment brought in $1.9 billion, up from $989 million in Q1 2023.
Despite a strong performance from Healthspire in 2023, CVS lowered its anticipated adjusted operating income for the segment in 2024 to $7.4 billion, a decrease of roughly $90 million, citing an expected increase in medical costs.
“While our healthcare delivery businesses were able to successfully manage through medical cost trend pressures in 2023, we think it is prudent to recognize the potential for emerging risks […] until we have further clarity on 2024 utilization trends,” Cowhey said in the earnings call.