CVS CEO Karen Lynch’s ends another complex chapter with departure
Get Starting Point
It was an epic undertaking — and the CVS board didn’t give her much time.
Ken Kaufman, the managing director of health care consulting firm Kaufman Hall, said he doesn’t envy Lynch’s position — nor that of David Joyner, the longtime executive chosen to replace her. Companies like CVS have become so complicated and unwieldy, he said, that they’ve become almost too difficult to run.
“These organizations … are basically unmanageable at the moment, and that creates a certain level of chaos inside the boardroom and inside the operations of the organization,” Kaufman said.
Woonsocket, R.I.-based CVS, which had been considering breaking up its holdings and potentially spinning off its stores, now says it will remain in one piece.
CVS’s holdings include the major insurer Aetna, 9,000 retail stores, and CareMark, a massive pharmacy benefits manager. Lynch spent another $19 billion on primary care and home health care businesses last year. But combining those disparate businesses into a cohesive, profitable entity has been an elusive goal.
“Five million people walk into our stores every single day,” Lynch told the Globe in an interview before her ouster, explaining the philosophy behind her chosen strategy. “Yes, healthcare is complicated, and healthcare is hard. But why it’s hard is because it’s not connected. And we have the ability to connect those experiences and make sure that we’re delivering care purposefully and intentionally when and where you need it.”
Neither Lynch nor Joyner could be reached to comment following her departure, though she wrote in a letter to to CVS’s 300,000 employees that “It has been a privilege to lead this company, and I am confident the team will continue to live its mission and purpose to help people on their journey to better health.”
Meanwhile, Joyner told The Wall Street Journal Friday that CVS was better as the sum of its parts.
“We believe that we have a really important part to play in terms of simplifying and delivering a better healthcare experience for this country,” Joyner said. Keeping the assets Lynch assembled, he continued, will allow the company to “actually deliver on the promises that we’ve made, and now it’s all about execution.”
Put another way, Lynch’s vision for CVS will continue — for now at least — wIthout her driving it.
Lynch is a native of Ware and a graduate of Boston College and Boston University. Craig F. Walker/Globe Staff
—
Lynch’s decision to link the future of CVS to her own personal history wasn’t a easy one.
It’s a theme that emerged early in her memoir, Taking Up Space, which was released earlier this year. Lynch spent most of her life as an intensely private person — an outlook that was shaped by the profound losses she faced growing up in Ware.
Lynch’s mother had worked as a nurse and had been diagnosed with schizophrenia, but no one in the family regularly saw doctors, psychiatrists, or even dentists. Like millions of Americans, her family found themselves lost in the fragmented, uneven mess that is the U.S. healthcare system. When Lynch was 12, she said, she returned home from school one day to find her mother dead from suicide.
The lack of access to health information and services “devastated my family,” Lynch wrote. And the death of her Aunt Millie, who raised her and her siblings, only exacerbated her frustrations with the health care system.
“Sitting at her bedside in the hospital, I felt helpless, not knowing what to ask or how to advocate for her,” she wrote. “It was then that I made a commitment to myself that somehow I could try to make a difference in healthcare.”
Over time, as Lynch moved up through the ranks at companies including Cigna, Magellan Health Services, and Aetna, she began to open up more, and become more vulnerable, her husband, Kevin Lynch, a mental healthcare advocate, told the Globe in an interview earlier this year.
When Aetna promoted Karen Lynch to president in 2015, both she and Kevin saw an opportunity for her to use her platform to tell her story. They also understood the risk that she could lose some control over her narrative. “You’re going to be judged,” Kevin Lynch said. “And it could hurt her career.”
It was a particularly potent decision for a female CEO, said Patricia Lenkov, an author and president of Agility Executive Search in New York.
Women are held to a higher standard than men because they have been historically stereotyped as emotionally and mentally inferior to the opposite sex, she said. And as for traditionally taboo topics like suicide and depression, “we just didn’t discuss those things at work,” Lenkov said.
But during a town hall meeting with Aetna employees in 2015, Lynch spoke publicly about her mother’s suicide for the first time. She would come to use those experiences to articulate her vision as she built CVS into a $160 billion healthcare giant.
—
Ultimately, it wasn’t Lynch’s own vulnerability that left her on the sidelines, but her company’s rocky performance. She was susceptible to the same pressures facing major health care groups and hospitals as they’ve continued to consolidate in recent few years.
Major hospitals have struggled with reimbursements from Medicare. Joyner and other executives who oversee pharmacy-benefits managers, which orchestrate three-way, real-time negotiations among payers, pharmacies, and drug manufacturers, were hauled into Congress earlier this year to face FTC allegations of price-rigging drugs such as insulin. (The agency followed with a lawsuit filed last month.) And this week, CVS rival Walgreens announced it would close 1,200 stores over the next three years, as its CEO promised to “reorient” the company to its “legacy strength as a retail pharmacy-led company.”
The move to replace Lynch was a signal to Wall Street that CVS was aware of its problems, and was attempting to right the ship, said Ran Duchin, a finance professor at Boston College’s Carroll School of Management. He believes breaking up the company at this point would only put it at greater risk, and new leadership allows CVS to buy some time.
“Certainly they’ve made a huge investment in consolidation and acquisitions along the supply chain. It’s reasonable to think it’s still too early to talk about a breakup even when facing myopic short-termism from Wall Street.”
One of the more than 9,000 CVS locations across the US, which the company has aimed to turn into a central touchpoint for customers’ health needs.David Paul Morris/Bloomberg
Stuart Piltch, president of Risk Strategies Consulting, who closely follows CVS, said it was ultimately Lynch’s management choices, not her story, that jeopardized her job. He questioned her decision to spend nearly $20 billion to acquire Oak Street Health, a senior-focused chain of health care clinics, and Signify Health, a home-visit service, arguing both were overvalued.
Piltch also pointed to high turnover in the ranks of the insurance arm of the company as evidence there were issues with hiring. “Aetna is underperforming,” he said. “And (CVS has) retail stores that nobody knows what they want to do with.”
So while vulnerability was “her brand, and she’s genuine to her brand,” he said, in the end, “it was a matter of did she have the right business strategy and did she execute on it?”
In Lynch’s few years a the top, he added, that strategy “just didn’t perform.”
Janelle Nanos can be reached at janelle.nanos@globe.com. Follow her @janellenanos. Thomas Lee can be reached at thomas.lee@globe.com.
No Byline Policy
Editorial Guidelines
Corrections Policy
Source