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Significant Accounting Policies (Tables) | 9 Months Ended
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Sep. 30, 2023
Accounting Policies [Abstract] |
Schedule of reconciliation of cash and cash equivalents | The following is a reconciliation of cash and cash equivalents on the unaudited condensed consolidated balance sheets to total cash, cash equivalents and restricted cash on the unaudited condensed consolidated statements of cash flows:
In millions | September 30, 2023 |  | December 31, 2022 |  |
Cash and cash equivalents | $ | 13,043 |  |  | $ | 12,945 |  |  |
Restricted cash (included in other current assets) | 96 |  |  | 144 |  |  |
Restricted cash (included in other assets) | 236 |  |  | 216 |  |  |
Total cash, cash equivalents and restricted cash in the statements of cash flows | $ | 13,375 |  |  | $ | 13,305 |  |  |
Schedule of accounts receivable, net | Accounts receivable, net at September 30, 2023 and December 31, 2022 was composed of the following:
In millions | September 30, 2023 |  | December 31, 2022
Trade receivables | $ | 10,424 |  |  | $ | 8,983 |
Vendor and manufacturer receivables | 16,646 |  |  | 12,395 |
Premium receivables | 3,254 |  |  | 2,676 |
Other receivables | 2,603 |  |  | 3,449 |
Total accounts receivable, net (1) | $ | 32,927 |  |  | $ | 27,503 |
_____________________________________________ (1)Includes accounts receivable of $227 million which were accounted for as assets held for sale and were included in assets held for sale on the unaudited condensed consolidated balance sheet at December 31, 2022. See Note 2 ‘‘Acquisitions and Assets Held for Sale’’ for additional information.
Rollforward of deferred acquisition costs | The following is a roll forward of deferred acquisition costs for the nine months ended September 30, 2023 and 2022:
|  |  | Nine Months Ended September 30,
In millions |  |  |  |  | 2023 |  | 2022
Deferred acquisition costs, beginning of the period |  |  |  |  | $ | 1,219 |  | $ | 879
Capitalizations |  |  |  |  | 414 |  | 423
Amortization expense |  |  |  |  | (196) |  | (163)
Deferred acquisition costs, end of the period |  |  |  |  | $ | 1,437 |  | $ | 1,139
Schedule of disaggregation of revenue | The following tables disaggregate the Company’s revenue by major source in each segment for the three and nine months ended September 30, 2023 and 2022:
In millions | Health Care Benefits |  | Health Services |  | Pharmacy & Consumer Wellness |  | Corporate/ Other |  | Intersegment Eliminations |  | Consolidated Totals
Three Months Ended September 30, 2023 |  |  |  |  |  |  |  |
Major goods/services lines: |  |  |  |  |  |  |  |  |  |  |
Pharmacy | $ | — |  |  | $ | 44,985 |  |  | $ | 22,977 |  |  | $ | — |  |  | $ | (11,764) |  |  | $ | 56,198 |
Front Store | — |  |  | — |  |  | 5,371 |  |  | — |  |  | — |  |  | 5,371 |
Premiums | 24,645 |  |  | — |  |  | — |  |  | 12 |  |  | — |  |  | 24,657 |
Net investment income (loss) | 187 |  |  | — |  |  | (2) |  |  | 92 |  |  | — |  |  | 277 |
Other | 1,464 |  |  | 1,906 |  |  | 526 |  |  | 1 |  |  | (636) |  |  | 3,261 |
Total | $ | 26,296 |  |  | $ | 46,891 |  |  | $ | 28,872 |  |  | $ | 105 |  |  | $ | (12,400) |  |  | $ | 89,764 |
Health Services distribution channel: |  |  |  |  |  |  |  |
Pharmacy network (1) |  |  | $ | 27,981 |  |  |  |  |  |  |  |  |
Mail & specialty (2) |  |  | 17,004 |  |  |  |  |  |  |  |  |
Other |  |  | 1,906 |  |  |  |  |  |  |  |  |
Total |  |  | $ | 46,891 |  |  |  |  |  |  |  |  |
Three Months Ended September 30, 2022 |  |  |  |  |  |  |  |
Major goods/services lines: |  |  |  |  |  |  |  |  |  |  |
Pharmacy | $ | — |  |  | $ | 42,652 |  |  | $ | 21,084 |  |  | $ | — |  |  | $ | (11,361) |  |  | $ | 52,375 |
Front Store | — |  |  | — |  |  | 5,581 |  |  | — |  |  | — |  |  | 5,581 |
Premiums | 20,989 |  |  | — |  |  | — |  |  | 14 |  |  | — |  |  | 21,003 |
Net investment income (loss) | 101 |  |  | — |  |  | (10) |  |  | 110 |  |  | — |  |  | 201 |
Other | 1,406 |  |  | 602 |  |  | 582 |  |  | 18 |  |  | (609) |  |  | 1,999 |
Total | $ | 22,496 |  |  | $ | 43,254 |  |  | $ | 27,237 |  |  | $ | 142 |  |  | $ | (11,970) |  |  | $ | 81,159 |
Health Services distribution channel: |  |  |  |  |  |  |  |
Pharmacy network (1) |  |  | $ | 26,334 |  |  |  |  |  |  |  |  |
Mail & specialty (2) |  |  | 16,318 |  |  |  |  |  |  |  |  |
Other |  |  | 602 |  |  |  |  |  |  |  |  |
Total |  |  | $ | 43,254 |  |  |  |  |  |  |  |  |
In millions | Health Care Benefits |  | Health Services |  | Pharmacy & Consumer Wellness |  | Corporate/ Other |  | Intersegment Eliminations |  | Consolidated Totals
Nine Months Ended September 30, 2023 |  |  |  |  |  |  |  |
Major goods/services lines: |  |  |  |  |  |  |  |  |  |  |
Pharmacy | $ | — |  |  | $ | 133,428 |  |  | $ | 67,371 |  |  | $ | — |  |  | $ | (36,754) |  |  | $ | 164,045 |
Front Store | — |  |  | — |  |  | 16,597 |  |  | — |  |  | — |  |  | 16,597 |
Premiums | 74,079 |  |  | — |  |  | — |  |  | 38 |  |  | — |  |  | 74,117 |
Net investment income (loss) | 556 |  |  | — |  |  | (4) |  |  | 333 |  |  | — |  |  | 885 |
Other | 4,285 |  |  | 4,269 |  |  | 1,614 |  |  | 5 |  |  | (1,854) |  |  | 8,319 |
Total | $ | 78,920 |  |  | $ | 137,697 |  |  | $ | 85,578 |  |  | $ | 376 |  |  | $ | (38,608) |  |  | $ | 263,963 |
Health Services distribution channel: |  |  |  |  |  |  |  |
Pharmacy network (1) |  |  | $ | 83,050 |  |  |  |  |  |  |  |  |
Mail & specialty (2) |  |  | 50,378 |  |  |  |  |  |  |  |  |
Other |  |  | 4,269 |  |  |  |  |  |  |  |  |
Total |  |  | $ | 137,697 |  |  |  |  |  |  |  |  |
Nine Months Ended September 30, 2022 |  |  |  |  |  |  |  |
Major goods/services lines: |  |  |  |  |  |  |  |  |  |  |
Pharmacy | $ | — |  |  | $ | 123,627 |  |  | $ | 61,496 |  |  | $ | — |  |  | $ | (33,932) |  |  | $ | 151,191 |
Front Store | — |  |  | — |  |  | 16,630 |  |  | — |  |  | — |  |  | 16,630 |
Premiums | 63,848 |  |  | — |  |  | — |  |  | 46 |  |  | — |  |  | 63,894 |
Net investment income (loss) | 278 |  |  | — |  |  | (44) |  |  | 281 |  |  | — |  |  | 515 |
Other | 4,205 |  |  | 2,180 |  |  | 1,799 |  |  | 51 |  |  | (1,844) |  |  | 6,391 |
Total | $ | 68,331 |  |  | $ | 125,807 |  |  | $ | 79,881 |  |  | $ | 378 |  |  | $ | (35,776) |  |  | $ | 238,621 |
Health Services distribution channel: |  |  |  |  |  |  |  |
Pharmacy network (1) |  |  | $ | 76,358 |  |  |  |  |  |  |  |  |
Mail & specialty (2) |  |  | 47,269 |  |  |  |  |  |  |  |  |
Other |  |  | 2,180 |  |  |  |  |  |  |  |  |
Total |  |  | $ | 125,807 |  |  |  |  |  |  |  |  |
_____________________________________________ (1)Health Services pharmacy network is defined as claims filled at retail and specialty retail pharmacies, including the Company’s retail pharmacies and LTC pharmacies. Effective January 1, 2023, pharmacy network also includes activity associated with Maintenance Choice®, which permits eligible client plan members to fill their maintenance prescriptions through mail order delivery or at a CVS pharmacy retail store for the same price as mail order. Maintenance Choice activity was previously reflected in mail & specialty. Prior period financial information has been revised to conform with current period presentation. (2)Health Services mail & specialty is defined as specialty mail claims inclusive of Specialty Connect® claims picked up at a retail pharmacy, as well as mail order and specialty claims fulfilled by the Pharmacy & Consumer Wellness segment. Effective January 1, 2023, mail & specialty excludes Maintenance Choice activity, which is now reflected within pharmacy network. Prior period financial information has been revised to conform with current period presentation.
Schedule of receivables and contract liabilities from contracts with customers | The following table provides information about receivables and contract liabilities from contracts with customers:
In millions | September 30, 2023 |  | December 31, 2022
Trade receivables (included in accounts receivable, net) | $ | 10,424 |  |  | $ | 8,983 |
Contract liabilities (included in accrued expenses) | 167 |  |  | 71 |
Below is a summary of such changes:
| Nine Months Ended September 30,
In millions | 2023 |  | 2022
Contract liabilities, beginning of the period | $ | 71 |  |  | $ | 87 |
Rewards earnings and gift card issuances | 250 |  |  | 250 |
Redemption and breakage | (267) |  |  | (263) |
Acquired contract liabilities | 109 |  |  | — |
Other | 4 |  |  | — |
Contract liabilities, end of the period | $ | 167 |  |  | $ | 74 |
Schedule of adjustments resulting from applying new accounting standard | The following summarizes changes in the balances of long-duration insurance liabilities as a result of the adoption of the long-duration insurance standard effective January 1, 2021:
In millions | Large Case Pensions |  | Long-Term Care |  | Other
Balance at December 31, 2020, net of reinsurance | $ | 3,224 |  | $ | 1,142 |  | $ | 480
Add: Reinsurance recoverable | — |  | — |  | 274
Balance at December 31, 2020 | 3,224 |  | 1,142 |  | 754
Change in discount rate assumptions | 604 |  | 553 |  | 44
Removal of shadow adjustments in accumulated other comprehensive income | (181) |  | — |  | —
Adjusted balance at January 1, 2021 | 3,647 |  | 1,695 |  | 798
Less: Reinsurance recoverable | — |  | — |  | 308
Adjusted balance at January 1, 2021, net of reinsurance | $ | 3,647 |  | $ | 1,695 |  | $ | 490
Impact of Long-Duration Insurance Standard Adoption on Financial Statement Line Items As a result of applying the long-duration insurance standard using a modified retrospective method, the following adjustments were made to amounts reported in the unaudited condensed consolidated statement of operations for the three and nine months ended September 30, 2022:
| Impact of Change in Accounting Policy
In millions | As Reported September 30, 2022 |  | Adjustments |  | Adjusted September 30, 2022
Three Months Ended |  |  |  |  |
Condensed Consolidated Statement of Operations: |  |  |  |  |
Operating costs: |  |  |  |  |
Health care costs | $ | 17,419 |  | $ | (18) |  | $ | 17,401
Operating expenses | 9,606 |  | 6 |  | 9,612
Total operating costs | 85,090 |  | (12) |  | 85,078
Operating loss | (3,931) |  | 12 |  | (3,919)
Loss before income tax benefit | (4,456) |  | 12 |  | (4,444)
Income tax benefit | (1,047) |  | 2 |  | (1,045)
Net loss | (3,409) |  | 10 |  | (3,399)
Net loss attributable to CVS Health | (3,416) |  | 10 |  | (3,406)
Net loss per share attributable to CVS Health: |  |  |  |  |
Basic | $ | (2.60) |  |  | $ | 0.01 |  |  | $ | (2.59) |
Diluted | $ | (2.60) |  |  | $ | 0.01 |  |  | $ | (2.59) |
Nine Months Ended |  |  |  |  |
Condensed Consolidated Statement of Operations: |  |  |  |  |
Operating costs: |  |  |  |  |
Health care costs | $ | 52,976 |  | $ | (162) |  | $ | 52,814
Operating expenses | 28,128 |  | (5) |  | 28,123
Total operating costs | 234,493 |  | (167) |  | 234,326
Operating income | 4,128 |  | 167 |  | 4,295
Income before income tax provision | 2,519 |  | 167 |  | 2,686
Income tax provision | 654 |  | 37 |  | 691
Net income | 1,865 |  | 130 |  | 1,995
Net income attributable to CVS Health | 1,847 |  | 130 |  | 1,977
Net income per share attributable to CVS Health: |  |  |  |  |
Basic | $ | 1.41 |  |  | $ | 0.10 |  |  | $ | 1.51 |
Diluted | $ | 1.40 |  |  | $ | 0.09 |  |  | $ | 1.49 |
As a result of applying the long-duration insurance standard using a modified retrospective method, the following adjustments were made to amounts reported in the unaudited condensed consolidated balance sheet as of December 31, 2022:
| Impact of Change in Accounting Policy
In millions | As Reported December 31, 2022 |  | Adjustments |  | Adjusted December 31, 2022
Condensed Consolidated Balance Sheet: |  |  |  |  |
Other current assets | $ | 2,685 |  | $ | (49) |  | $ | 2,636
Total current assets | 65,682 |  | (49) |  | 65,633
Intangible assets, net | 24,754 |  | 49 |  | 24,803
Total assets | 228,275 |  | — |  | 228,275
Health care costs payable | 10,406 |  | (264) |  | 10,142
Other insurance liabilities | 1,140 |  | (51) |  | 1,089
Total current liabilities | 69,736 |  | (315) |  | 69,421
Deferred income taxes | 3,880 |  | 136 |  | 4,016
Other long-term insurance liabilities | 6,108 |  | (273) |  | 5,835
Other long-term liabilities | 6,732 |  | (2) |  | 6,730
Total liabilities | 156,960 |  | (454) |  | 156,506
Retained earnings | 56,145 |  | 253 |  | 56,398
Accumulated other comprehensive loss | (1,465) |  | 201 |  | (1,264)
Total CVS Health shareholders’ equity | 71,015 |  | 454 |  | 71,469
Total shareholders’ equity | 71,315 |  | 454 |  | 71,769
Total liabilities and shareholders’ equity | 228,275 |  | — |  | 228,275
As a result of applying the long-duration insurance standard using a modified retrospective method, the following adjustments were made to amounts reported in the unaudited condensed consolidated statement of cash flows for the nine months ended September 30, 2022:
| Impact of Change in Accounting Policy
In millions | As Reported September 30, 2022 |  | Adjustments |  | Adjusted September 30, 2022
Condensed Consolidated Statement of Cash Flows: |  |  |  |  |
Reconciliation of net income to net cash provided by operating activities: |  |  |  |  |
Net income | $ | 1,865 |  | $ | 130 |  | $ | 1,995
Adjustments required to reconcile net income to net cash provided by operating activities: |  |  |  |  |
Depreciation and amortization | 3,198 |  | (17) |  | 3,181
Deferred income taxes and other noncash items | (2,250) |  | 37 |  | (2,213)
Change in operating assets and liabilities, net of effects from acquisitions: |  |  |  |  |
Other assets | (311) |  | 67 |  | (244)
Health care costs payable and other insurance liabilities | 4,687 |  | (211) |  | 4,476
Other liabilities | 7,377 |  | (6) |  | 7,371

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