Karen Lynch exits CVS, David Joyner appointed president and CEO

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CVS Health President and CEO Karen Lynch is out at the company amid Friday's release of preliminary financial guidance for the third quarter that fell short of Wall Street forecasts.

Lynch stepped down from her position per agreement with the company's board of directors, according to CVS Health.

She has been replaced by Caremark president David Joyner, who became president and CEO, effective October 17. Joyner also joined the board of directors.

Shares of CVS Health sold off in the premarket on Friday after the company announced the news, according to Seeking Alpha.

CVS warned that its coming earnings will once again fall short of Wall Street expectations, sending shares of the company down 13% in premarket trading, according to The Wall Street Journal.

CVS has repeatedly cut guidance this year.

Q4 earnings are expected to be announced on November 6. 

WHY THIS MATTERS

Medical cost trends continue to plague the company. These trends in the third quarter are in excess of those projected in its prior outlook, CVS said.

"In light of continued elevated medical cost pressures in the Health Care Benefits segment, investors should no longer rely on the company's previous guidance provided on its second quarter 2024 earnings call on August 7, 2024," CVS said.

Results for the third quarter include charges to record premium deficiency reserves primarily related to the company's Medicare and individual exchange businesses inside its Health Care Benefits segment, of approximately $1.1 billion. This lowered third quarter 2024 adjusted earnings per share by $0.63, CVS said.

The premium deficiency reserves are expected to be substantially released during the fourth quarter of 2024, benefiting results in that period.  

The company's results also include a restructuring charge of approximately $1.2 billion, related to incremental store closures in 2025, as well as cost reduction actions discussed during the second quarter 2024 earnings call. 

The company said its other segments performed consistently with prior projections in the quarter.   

Joyner was most recently executive vice president of CVS Health, and president of CVS Caremark. He led the pharmacy services business.

Joyner has 37 years of healthcare and pharmacy benefit management experience, and has also served on the boards of several private equity-backed healthcare companies. He began his career at Aetna as an employee benefit representative before joining Caremark Prescription Services as a regional sales manager. He then served as executive vice president of sales and account services at CVS Caremark and executive vice president of sales and marketing at CVS Health.

CVS also announced that current chairman of the board, Roger Farah, will now be executive chairman.

THE LARGER TREND

In Q2, CVS announced that Brian Kane, president of CVS subsidiary Aetna, would be departing the company, with Lynch overseeing day-to-day operations of the Health Benefits segment, along with Chief Financial Officer and EVP Tom Cowhey.

During a Q1 earnings call, the healthcare-benefits medical costs came in approximately $900 million above expectations, primarily due to higher-than-expected Medicare Advantage utilization. 

Other Medicare Advantage insurers have also been challenged by higher-than-expected utilization of services. 

ON THE RECORD

"The board believes this is the right time to make a change, and we are confident that David is the right person to lead our company for the benefit of all stakeholders, including customers, employees, patients, and shareholders," said Roger Farah, executive chairman of the board. "The board also recognizes the many contributions Karen made to our company, both during her tenure at Aetna and then as President and CEO of CVS Health. We are grateful for her consistent, customer-focused leadership, especially during the COVID-19 pandemic when our pharmacies provided needed tests and vaccines. We also appreciate her work to advance CVS Health's modernization and transformation to become a diversified, connected, technology-driven health care company, allowing us to do even more for the people we are privileged to serve."

"There is no greater honor than to lead a company whose mission and purpose are completely focused on improving health," said Joyner. "I came back to CVS Health in 2023 because I believed I could give more to the company, and I take this opportunity today for the same reason. I am proud to continue working side by side with our 300,000 colleagues who are building a world of health around every consumer." 

Email the writer: SMorse@himss.org