Shares of pharmacy and insurance giant CVS Health (NYSE: CVS) slid on Wednesday after executives reported a $2.2 billion impairment charge related to its long-term health care business.
The Woonsocket, R.I.-based CVS took the hit in the fourth quarter of 2018 due to troubles at its Omnicare arm, which provides pharmacy services to long-term health care providers, including skilled nursing facilities.
“These challenges include lower occupancy rates in skilled nursing facilities, significant deterioration in the financial health of numerous skilled nursing facility customers which resulted in a number of customer bankruptcies in 2018, and continued facility reimbursement pressures,” the company wrote in a statement announcing the quarterly results.
CVS bought Omnicare, the nation’s largest such pharmacy firm, in 2015 for $12.9 billion; the skilled industry has suffered significant setbacks since then, with reimbursement pressures and staffing issues contributing to high-profile bankruptcies and general financial stress.
Still, executives on Wednesday insisted that CVS didn’t buy Omnicare to enter the skilled nursing market.
“The growth opportunity with Omnicare was always focused on the independent and assisted living spaces,” president and CEO Larry Merlo said during a call with investors and analysts. “And those opportunities still exist.”
The company has also implemented a variety of plans to help right the long-term care ship, including new account management personnel and technology designed to streamline communications between Omnicare and its clients.
“While progress is being made in the identified areas, the benefits are being offset by the external factors impacting the skilled nursing business. And work is underway to accelerate the action plan timeline to achieve the benefits more quickly,” Merlo said.
But CVS also reported that it would see no immediate financial benefit related to its $70 billion acquisition of health insurance giant Aetna in 2018, as CVS continues to invest in the ongoing integration process. This forecast contributed to CVS Health’s share price dropping 8% on Wednesday to its lowest point since November 2016, according to CNBC.
Tim Mullaney contributed to this report.