Larry Merlo will step down as CEO of CVS Health in February when he will be replaced by Karen Lynch, the current president of Aetna, the organization announced Friday.
Merlo will serve on CVS' board and help the leadership transition in through May when he retires, capping his 10-year tenure as chief executive and 40 years at the company. On a third quarter earnings call Friday morning, Merlo highlighted CVS' pharmacy benefit management growth, expanding its retail footprint, building the MinuteClinic business and its "industry disrupting" acquisition of Aetna two years ago.
"I am grateful to our entire CVS Health team for their dedication and hard work in helping us build a powerful, integrated health services company that will enable us to transform how healthcare is delivered across the country," Merlo, said in prepared remarks. "Karen has been a key partner to me in our foundational work over the last two years, and her experience and vision will be critical in driving forward CVS Health's journey of enhancing value for our customers as the nation's leading health care company for years to come."
Lynch helped launch the Aetna Connected Plan, which offers certain MinuteClinic services at no cost, grow Medicare Advantage membership and incorporate HealthHUBs into Aetna's offerings, which focus on chronic care management. HealthHUBs will begin to offer in-person behavioral health services next year.
CVS is on track to convert 40,000 Medicare Part D beneficiaries to Medicare Advantage members in 2020, Merlo said on the call, adding that he is confident that CVS will be able to expand those conversions.
The company has about 450 HealthHUBs in 30 states, and aims to reach 1,300 in 2021. Those services, combined with pharmacist interventions, have helped boost medication adherence by 8%, reduce unnecessary emergency department visits by 12% and lower out-of-network and non-preferred provider utilization by 8%, Merlo said.
CVS reported an operating income of $3.3 billion on revenue of $67.1 billion in the third quarter, up from $2.9 billion of operating income on $64.8 billion of revenue from the same prior-year period. Its net income dipped from $1.5 billion to $1.2 billion over that span.
Healthcare utilization started to return to pre-pandemic levels, which slowed profit growth. But that was partially offset by 16.7% operating income grown in its pharmacy services segment, driven by new customers and branded drug price inflation. The company expects up to $900 million in "integration synergies" this year from the CVS-Aetna merger.
Merlo's supplemental executive retirement plan was worth $40.3 million in 2019, as CVS tallied $256.8 billion in revenue.
Tara Bannow contributed to this report.