CVS to launch 1,500 new health centers amid continued scrutiny of $68B Aetna deal
CVS Health plans to open over a thousand new health centers, pursue offerings catered to patients suffering from complex ailments and upgrade its technology infrastructure in the coming years, as the pharmacy chain seeks to assuage investor concerns following its still disputed $68 billion merger with Aetna.
The firm is under pressure to prove the value and long-term competitive advantage of the acquisition on two high-profile fronts on Tuesday, coming as shares of CVS Health have fallen nearly 7 percent since it reported earnings last month.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| CVS | CVS HEALTH CORP. | 67.76 | -0.74 | -1.08% |
Executives at the Woonsocket, Rhode Island-based company will lay out the transformational plan at its annual investor day. Meanwhile, company officials will also defend the combination with Aetna in Washington, D.C., in front of a federal judge that has raised concerns over the Department of Justice’s clearance of the deal.
CVS has long said the combination with the insurer will complement its existing pharmacy and middleman benefit management businesses to improve care for consumers at a lower cost.
"We have combined with Aetna to build a powerful and unique business model that will guide our journey to becoming the most consumer-centric health company,” CEO Larry Merlo said in a statement.
On the earnings front, CVS reaffirmed its 2019 financial guidance in advance of the investor meeting. The company continues to expect yearly revenue up to $254.4 billion and adjusted profits to high as $6.90 per share.
In 2020, the pharmacy chain expects profits to be a minimum of $7 per share, with net income dipping in 2021 and beyond.
To achieve those metrics, the company plans to open new HealthHUBs in 2019 in cities, including Atlanta and Tampa, ultimately reaching 1,500 locations by the end of 2021.
The centers, which are currently only available in Houston, aim to be a one-stop health shop for those with chronic conditions, offering personalized advice and care to patients with diabetes, sleep apnea and other ailments.
“The various product and service offerings are performing at or above our expectations,” Merlo told investors in May. “Our vision is for these consumer experiences to be seamlessly connected across digital and clinical interactions resulting in elements of health becoming part of one's regular routine.”
CVS also is aiming to introduce new products catered to chronic kidney disease and other complex medical issues, as well a new technology infrastructure that will harness patient data to determine the most effective communication methods for specific customers.
While executives lay out the long-term strategic vision, other officials will be trying to convince a federal judge that the Aetna merger does not hinder competition in the rapidly consolidating health care industry.
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U.S. District Judge Richard Leon is skeptical of the deal and previously refused to sign off on the Justice Department’s approval for it, despite the mandate that CVS sell its Medicare Part D business.
The three-day hearing that begins on Tuesday will allow both critics of the deal, including the American Medical Association, and the firms to outline their views of the merger.