CVS Health Corp. executives will lean on both acquisitions and partnerships to expand the scope of its primary care offerings in coming years to include care coordination and mental health services.
Speaking to analysts and investors Dec. 9, CVS CEO Karen Lynch and her top lieutenants laid out their vison for the Woonsocket, Rhode Island-based company’s evolution, which calls for profit growth to accelerate in the middle of the decade as investments begin to pay off. A key element, Lynch said, is growing primary care, which accounts for about 10 percent of U.S. health care spending but can drive extensive use of other parts of the system.
CVS already markets preventive, acute and chronic care services and plans to use doctors, nurses, pharmacists, social workers and others – many already employed by CVS – to round out its offerings with a primary focus on seniors. The plan includes evolving CVS’ retail store base to feature one of three formats announced last month and rolling out new risk-based management services, expanding at-home offerings and introducing more subscription services.
Alan Lotvin, president of CVS’ pharmacy services division, said the COVID pandemic has made it “an opportune time” to add to CVS’ lineup of at-home care services, which already includes infusion and virtual care. On top of that, he said, a recent survey showed that more than 70 percent of people would consider CVS for more health care services in the future.
“We have the permission from consumers to do this,” Lotvin said.
CFO Shawn Guertin told analysts CVS’ core growth scenario includes having a network of between 250 and 350 owned and/or enabled care centers by 2024. Most of those will be acquired or partnered with, he added, because that strategy will more quickly leverage CVS’ customer base. The company’s growth strategy, Guertin emphasized, is not focused on growing margins as much as on broadening its revenue base and capitalize on the advantage it has by owning insurance company Aetna.
“We don’t have to build a consumer platform or have consumer knowledge [...] We don’t have to learn how to manage risk,” he said during the investor day’s Q&A session. “No strategic pivot is ever risk-free but, because I think we’re uniquely across this continuum today, I think that lessens the risk.”
Guertin said CVS’ plans call for its organic growth initiatives to draw about 30 percent of its roughly $45 billion in deployable cash in the next three years and be able to contribute $400 million annually in 2024.
CVS’ push to grow its health care business is similar to that of its main rival, Walgreens Boots Alliance Inc., whose leaders recently sketched out their plans to grow their new Walgreens Health business unit to $10 billion in revenue by 2025. Walgreens’ strategy focuses on its own version of higher-service store offerings and at-home services but, rather than having Aetna as a foundation to drive engagement, leans more on what CFO James Kehoe recently called “a loose confederation” of ancillary companies in which the company has invested.
Investors reacted favorably to the CVS plan. After climbing nearly 5 percent on the heels of execs’ presentation, shares of the company (Ticker: CVS) were up another 1.6 percent on the afternoon of Dec. 10, growing the company’s market capitalization past $130. They have risen about 15 percent over the past six months.