01—Abstract
Summary
Summary of the 10-K filed February 8, 2023. Cited figures are marked; the original filing is the authoritative source.
CVS Health Corporation reported strong revenue growth in 2022, with total revenues increasing by 10.4% year-over-year to $322.5 billiona.
This growth was primarily driven by increased membership in the Health Care Benefits segment, higher prescription volumes and specialty pharmacy growth in the Pharmacy Services segment, and robust prescription and front store sales in the Retail/LTC segment. However, operating income saw a significant decrease of 41.3% to $7.7 billionb, largely impacted by $5.8 billion in opioid litigation charges and a $2.5 billion loss on assets held for sale related to the long-term care business. The company also experienced a notable decline in its Medicare Advantage star ratings, with only 21% of members in plans rated 4 stars or higher for 2023, down from 87% in 2022, impacting future bonus payment eligibility.
Despite the decrease in operating income due to specific charges, CVS Health demonstrated resilience across its core businesses. The company's outlook for 2023 anticipates continued Medicare and Commercial membership growth, improved purchasing economics in Pharmacy Services, and increased prescription volume in Retail/LTC, although offset by pharmacy reimbursement pressures and a decline in COVID-19 related revenues. The company is also pursuing strategic acquisitions, notably Oak Street Health and Signify Health, which are expected to close in 2023, signaling a focus on expanding its care delivery capabilities.
02—Key points
Key Highlights
- Total revenues grew 10.4% to $322.5 billion in 2022.
- Operating income declined 41.3% to $7.7 billion due to significant opioid litigation charges ($5.8 billion) and a loss on assets held for sale ($2.5 billion).
- Medicare Advantage star ratings saw a significant decrease, with only 21% of members in 4-star or higher plans for 2023, impacting future quality bonus payments.
- Health Care Benefits segment revenues increased 11.2%, driven by membership growth across Commercial and Medicare, though Medicaid membership declined.
- Pharmacy Services segment revenues increased 10.6%, supported by higher claims volume and specialty growth, though impacted by client price improvements.
- Retail/LTC segment revenues rose 6.5%, with strong same-store sales in Pharmacy and Front Store, but adjusted operating income decreased due to lower COVID-19 related services and pharmacy reimbursement pressures.
- The company is proceeding with strategic acquisitions of Oak Street Health and Signify Health, expected to close in 2023.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2022, CVS Health Corp kept $0.01.
- Revenue$322.47B100.0%
- Cost of revenue−$196.89B61.1%
- Gross profit$125.58B38.9%
- Operating costs−$117.62B36.5%
- Operating income$7.95B2.5%
- Interest, other & tax−$3.63B1.1%
- Net income$4.33B1.3%
Where FY2022 revenue went
$322.47B- Cost of revenue: $196.89B, 61% of revenue
- Operating costs: $117.62B, 36% of revenue
- Net income: $4.33B, 1.3% of revenue
- Interest, other & tax: $3.63B, 1.1% of revenue
Kept 1.3% as net incomeNet income $4.33B · 1.3%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2022filed February 8, 2023Financial Statements
FY2022 against FY2021
| Line item | FY2022FY2021 | Change |
|---|---|---|
| Revenue | $322.47B$292.11B | +10.4% |
| Cost of Revenue | $196.89B$175.80B | +12.0% |
| Gross Profit | $125.58B$116.31B | +8.0% |
| Operating Expenses | $314.51B$278.80B | +12.8% |
| Operating Income | $7.95B$13.31B | −40.2% |
| Interest Expense | $2.29B$2.50B | −8.6% |
| Net Income | $4.33B$7.99B | −45.8% |
| EPS (Basic) | $3.29$6.07 | −45.8% |
| EPS (Diluted) | $3.26$6.02 | −45.8% |
| Shares Outstanding (Basic) | 1.31B1.32B | −0.5% |
| Shares Outstanding (Diluted) | 1.32B1.33B | −0.5% |
05—Questions
Frequently Asked Questions
What was the primary driver behind the significant decrease in CVS Health's operating income in 2022?
The primary driver for the substantial decrease in operating income was the recognition of $5.8 billion in opioid litigation charges and a $2.5 billion loss on assets held for sale related to the long-term care business. These significant one-time items significantly impacted the company's profitability for the year.
How did CVS Health's Medicare Advantage star ratings change, and what is the impact?
CVS Health experienced a significant decline in its Medicare Advantage star ratings for 2023. Only 21% of Medicare Advantage members are in plans rated 4 stars or higher, a substantial drop from 87% in 2022. This decrease means many of the company's plans will no longer be eligible for CMS quality bonus payments in 2024, which could impact revenue and profitability.
What are the company's key strategic initiatives for growth in 2023?
CVS Health is focusing on continued membership growth in its Health Care Benefits segment (Medicare and Commercial), driving improvements in purchasing economics in its Pharmacy Services segment, and increasing prescription volume in its Retail/LTC segment. Additionally, the company is actively pursuing strategic acquisitions of Oak Street Health and Signify Health, which are expected to enhance its care delivery capabilities.
How did COVID-19 impact CVS Health's financial performance in 2022, and what is the outlook?
In 2022, the impact of COVID-19 within the Health Care Benefits segment stabilized due to pricing adjustments. However, the Retail/LTC segment saw lower contributions from COVID-19 vaccinations and testing as the pandemic transitions to an endemic stage. The company anticipates this trend to continue, with COVID-19 related revenues expected to decline further in 2023.
06—Continue