Abstract

The case describes how CVS Health CEO Karen Lynch took swift action to address financial and operational challenges at Aetna, CVS Health’s insurance division, after a financial report showed a 39% decline in Aetna’s operating income and a 9% drop in CVS Health’s net income. Lynch responded by making leadership changes that included the exit of Aetna’s president, Brian Kane, and assuming direct oversight of Aetna alongside CFO Tom Cowhey, drawing on her prior experience as Aetna’s former president. The case focuses on the complex factors contributing to Aetna's financial difficulties, such as Medicaid redeterminations, risk adjustment accruals, increased service utilization, and a decline in Medicare Advantage star ratings. The case also discusses Lynch’s strategic response, which included a $2 billion cost-saving initiative and plans to open new Oak Street Health clinics, emphasizing both cost control and investment in growth areas. The case then touches upon the leadership challenge of balancing decisive action with the risk of disrupting stability, raising critical questions about timing, leadership transitions, and the need to reassure shareholders. Targeted at MBA and Executive MBA students, this case study is ideal for courses in Strategic Management, Leadership, and Corporate Governance. It offers opportunities to students to explore topics like crisis management, stakeholder engagement, performance improvement strategies, and the complexities of leading in a challenging environment.

Learning Objectives

The case is structured to achieve the following Learning Objectives:

• Examine how leaders manage financial setbacks
• Evaluate crisis response and strategic decision-making of leaders
• Discuss the importance of balance between short-term interventions and long-term strategy
• Explore the need for leaders to effectively communicate with stakeholders during times of rapid market change

Keywords

Strategic decision-making; Growth Strategy; Crisis management; Turnaround Strategy; Customer Experience; Corporate governance; Stakeholder communication; Cost-saving strategies; Insurance; Pharmacy Benefits Management; Karen Lynch; Healthcare Maintenance Organization (HMO)