In November, CVS Health finalized its $78 billion acquisition of big health insurer Aetna. (The equity value of the deal totaled $70 billion, but CVS Health also assumed $8 billion of Aetna's debt.)
Synergies expected from the integration of Aetna into CVS Health. He stressed that a federal court's review of the deal under the Tunney Act won't impact the anticipated timeline for achieving more than $750 million in synergies in the second year following the acquisition.
Those synergies will be attained in three ways: The combination of corporate functions is already well underway and should begin to produce savings in early 2019; further integration of the two businesses, including aligning formularies and revamping the design of health plans, is expected to start yielding benefits in the first half of the year; and medical cost savings should kick in later in 2019.
But synergies are basically a side benefit from the integration that will create much bigger opportunities to reward shareholders (said the CEO).
Potential for higher profits. CVS Health makes a lot of revenue, but its profit margin is only 1.65%. Aetna's profit margin in 2017, by comparison, was over 3%.
The CEO said to expect a significant impact on the company's front store (only time will tell us).
CVS Health plans to create "a new front door to healthcare."
The company intends to scale back on underperforming products in its stores and reallocate up to 20% of space to more profitable healthcare service offerings.
CVS Health intends to improve customer engagement, improve health outcomes, and reduce total healthcare costs through a variety of [REMOVIDO]s. For example, the CEO said the company will integrate CVS and Aetna clinical programs to support patients during and after discharge from the hospital to reduce readmissions. CVS Health will also expand its MinuteClinic services to help patients manage chronic diseases.
The results ? Only time will tell us.
The company took on a lot of debt to fund the Aetna acquisition. This has consequences for the company, including paying an estimated $3.1 billion in interest expense this year, and halting the stock buyback program.
CVS Health is also increasing its investments as a result of the Aetna integration with the [REMOVIDO]s to expand service offerings.
The company hopes provide significant cost savings, higher profits, and faster growth for shareholders.
What would this mean?
One needs to wait for next releases.
