CVS Health lowered its adjusted profit forecast for 2024 on Wednesday after an increase in medical care among older adults in the United States drove up fourth-quarter costs at its insurance business.
The healthcare conglomerate cited a late-year rise in medical care, including outpatient procedures among those enrolled in Medicare Advantage plans, under which insurers are paid a set rate to manage healthcare for people 65 and older, or those with disabilities.
The new forecast of at least $8.30 per share, from at least $8.50 per share it had forecast in December, factors in the potential for medical costs being elevated in 2024, it said.
Medical costs have been elevated through 2023 and insurers such as Humana and UnitedHealth have said they rose even more at the end of the year, as older adults sought medical services that were deferred during the pandemic.
Rival Humana has cut its 2024 and 2025 profit forecasts because it expects increased costs next year.
Aetna, CVS's insurance business, recorded a medical benefit ratio - the percentage of premiums spent on medical care - of 88.5% in the fourth quarter ended Dec. 31, from 85.8% a year ago.
It earned $2.12 per share on an adjusted basis, beating Wall Street estimates of $1.99 per share, driven by strength in its drugstores and its pharmacy benefits management $(PBM)$ unit, which negotiates drug prices between insurers and manufacturers.
Revenue at its health services business, under which CVS operates the PBM, rose 12%, to $49.15 billion, helped by growth in specialty pharmacy and higher branded drug prices.
CVS's shares gained 1.76% at $75.06 in volatile premarket trading.
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