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08/04/2022

CVS Health plans to enter primary care by end of 2022

CVS Health said that it plans to acquire or take a stake in a primary care company by the end of the year.
Sandra Levy
Senior Editor
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CVS Health plans to become a big player in primary care. During CVS Health’s Q2 earnings call on Wednesday, CEO Karen Lynch indicated that the company wants to team up with a provider that has a strong management team and tech background and the ability to grow quickly, CNBC reported.

Pointing out that CVS is the largest provider of retail health services in the nation, Lynch said in her remarks during the Q&A with analysts following the company's earnings results, "We have a strategy that is we are expecting to enhance our health services in three categories ... primary care, provider enablement and home health. And as we've talked about in the past, there are multiple pathways for us to make a mark on our community health care and our ability to achieve our strategic goals ... we have very specific criteria that we look at as we're evaluating our many options. We look to see if there's a strong management team, which we are looking to see if there's a very strong tech stack. Obviously, the ability to scale, given the size of the company that we are and a pathway to profitability ... M&A can be very fluid. You don't necessarily design exactly how these deals and what gets announced. We are committed to extending our health services in categories. And we are very encouraged and confident that we'll take the next step on this journey by the end of this year."

[Read more: CVS Health appoints chief strategy officer]

Lynch went on to say, "As you would expect, we are being very disciplined, both strategically and financially, as we pursue kind of our M&A strategy. We can't be in the primary care without M&A. We've been very clear about that." 

During the Q&A, Shawn Guertin, executive vice president and chief financial officer of CVS, said, "So we have been very active in evaluating a wide range of assets in and around the care delivery space. And what I would reiterate is that our priority areas remain primary care provider enablement and home health. It's really of paramount importance and a capability-based play that we fully evaluate their defining characteristics, which would include their capabilities to drive real and lasting value, the financial dynamics of these different business models and the optionality and growth levers that they provide us with, including our own ability to deploy our existing assets and create value in these entities. And as Karen mentioned, we've consistently stated that there are multiple pathways to follow to achieve our vision. Our vision is something new and differentiated, as you know. And thus, there is no one-and-done asset there."

Guertin continued, "And so while certainly no asset is perfect, there are differences, as Karen highlighted, when you look at the criteria among the available assets, particularly in terms of financial performance, the opportunities for future growth and our ability to drive value. I continue to believe that we can execute on our strategic vision via M&A and begin to execute on that vision in 2022. And the strength of our capital generation is part of what makes this possible, but also provides a powerful lever to supplement our core earnings via share repurchase. And I think we can still — it still remains our goal to — and commit to the targets that we talked about at Investor Day for '23 and '24."

[Read more: CVS Health launches CVS Health Virtual Primary Care]

CVS already has made headway into health care beyond its pharmacies, with the acquisition of insurer Aetna and pharmacy benefits manager Caremark. At its MinuteClinics, the retailer offers urgent care and immunizations, and it has introduced mental health services at some stores. The retailer recently launched CVS Virtual Primary Care.

At an investor day last year, Alan Lotvin, executive vice president of CVS Health and president of CVS Caremark, said he envisioned CVS standing out in primary care. The company wants to offer longer hours at its doctor offices so people can visit as early as 6 a.m., as late as 9 p.m. or on the weekends. It also wants to utilize simple, streamlined tech, so customers don’t have to fill out piles of paperwork, the CNBC report noted.

CVS Health’s indication that it is planning to move into primary care comes as Walgreens Boots Alliance is opening hundreds of doctor offices in partnership with VillageMD and became the majority owner of the company. Walmart has a small but growing number of clinics where people can visit a doctor, dentist or therapist for a low price. Amazon last month that it would acquire primary care provider One Medical for about $3.9 billion.

Pointing out that CVS has a competitive edge with the size of its business, Lynch said nearly 4.8 million customers interact with the company each day at CVS locations. She also noted that MinuteClinic visits increased 12% in the second quarter. CVS can build “from the strong foundation that we already have,” Lynch said.

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