Long Term Care
CVS Health’s Dilemma with Omnicare Continues
Nov
CVS Health purchased Omnicare in 2015 for $12.9 billion. Looking back at the rationale for the acquisition: Omnicare’s complementary specialty pharmacy platform and clinical expertise will augment CVS Health’s capabilities; and CVS Health will significantly expand its ability to dispense prescriptions in facilities serving the senior patient population, which is expected to grow significantly.
Three years have passed since the acquisition and CVS Health executives continue to blame industry performance in the nursing home market as causing ongoing headaches in a review of its third quarter 2018 financial results. CVS Health is struggling with their financial performance at the same time that their attention and Wall Street attention is focused on the company’s impending acquisition of Aetna.
CVS Health’s year-two synergy plan dealing with the acquisition is largely complete and the company is ready to begin implementation upon the transaction closing. CVS Health has developed a foundational plan that will benefit post-close from a deeper dive into Aetna’s strategies and operations, leading to longer term value-creation.
CVS Health experienced a $2.56 billion loss for the second quarter of 2018 and blamed its performance partly on the “deteriorating financial health of numerous skilled nursing facility customers.” Most recently CVS Health reported operating profit in its long-term care segment declined 6.3% during the third quarter of 2018 to $1.5 billion.
The most recent quarter was the first since CVS Health began to take significant steps to shore up their nursing home business, including:
- Installing a new leadership team
- Targeting ways to better retain clients
- Finding efficiencies to help lower costs for skilled care customers
CVS Health is also turning their attention to what they see as growth opportunities in the assisted living market, although the company has struggled to take advantage of these opportunities at this point in time. Most importantly for companies in the long-term care pharmacy market, CVS Health is targeting upward of $150 million in “cost takeout opportunities,” utilizing automation and better leveraging of its local presence looking to become a low-cost operator of LTC pharmacies.