Thomas F. Cowhey
Executive Vice President & Chief Financial Officer at CVS Health
Thank you, Karen, and good morning, everyone. Our fourth quarter results truly highlight our unwavering focus on execution and the power of our diversified businesses. We ended the year with strong results in key metrics such as revenue, adjusted earnings per share and cash flow from operations.
A few total company highlights. Fourth quarter revenues of nearly $94 billion increased by nearly 12% over the prior year quarter, reflecting strong growth across each of our businesses. We delivered adjusted operating income of approximately $4.2 billion and adjusted EPS of $2.12, representing growth of approximately 4% versus the prior year. These increases were primarily due to strong results in our Pharmacy & Consumer Wellness and Pharmacy Services businesses, as well as lower corporate expenses, partially offset by continued pressure in Health Care Benefits. Our ability to generate cash remains outstanding, with full year cash flow from operations of $13.4 billion.
Shifting to details for our Health Care Benefits segment, we delivered another strong quarter of revenue growth versus the prior year. Fourth quarter revenue of $26.7 billion increased more than 16% year-over-year, reflecting growth across all product lines, particularly in our Individual Exchange and Medicare businesses. Membership was 25.7 million, a slight decrease of 29,000 members sequentially, reflecting the impact of Medicaid redeterminations, partially offset by growth in Individual Exchange.
Adjusted operating income for the fourth quarter was $676 million. The decline in adjusted operating income versus the prior year was primarily driven by growth in the Individual Exchange business, including the related impact of seasonality and increased utilization in Medicare Advantage, partially offset by higher net investment income.
Our medical benefit ratio of 88.5% increased 270 basis points from the prior year quarter, primarily reflecting higher Medicare Advantage utilization and a lower contribution from positive prior period development. Utilization pressure continues to be attributable to the same categories we highlighted in the previous quarter, including outpatient and supplemental benefits such as dental and vision. We also saw an uptick in costs related to seasonal immunizations, including the newly launched RSV vaccine. Other categories remain largely consistent with our previous medical cost trend assumptions.
Days claims payable at the end of the quarter was 45.9, down 4.4 days sequentially and returning to normalized levels, consistent with what we experienced in pre-COVID periods after adjusting for the impact of Medicaid pass-through payments. Overall, we remain confident in the adequacy of our reserves. Our Health Services segment, which includes our Pharmacy Services and Health Care Delivery businesses, generated revenue of approximately $49 billion, an increase of more than 12% year-over-year. This increase was driven by pharmacy drug mix, growth in specialty pharmacy, brand inflation, and the addition of Signify and Oak Street. These increases were partially offset by the impact of continued client price improvements.
Adjusted operating income of nearly $1.9 billion grew approximately 4% year-over-year, primarily driven by improved purchasing economics, and growth in specialty pharmacy, partially offset by ongoing client price improvements. Total pharmacy claims processed in the quarter increased slightly versus the prior year. The increase was primarily driven by net new business and increased utilization. The increase was largely offset by the impact of the New York Medicaid carve-out.
Total pharmacy membership as of January 1st, 2024 is approximately 89 million members, down primarily due to the previously announced loss of a large client.
We continue to be encouraged by the performance and growth of our Health Care Delivery assets. Signify generated revenue growth of 39% in the quarter compared to last year. Oak Street ended the quarter with 204 centers, an increase of 35 centers in 2023. We continue to expect to add 50 to 60 centers in 2024. Oak Street also significantly increased revenue in the quarter, growing 36% compared to the same quarter last year.
Shifting to our Pharmacy and Consumer Wellness segment, we generated revenue of over $31 billion, up nearly 9% versus the prior year and over 11% on a same store basis, reflecting the impact of pharmacy drug mix, increased prescription volume, brand inflation and increased contributions from vaccinations. These revenue increases were partially offset by the impact of recent generic introductions, continued reimbursement pressure and a decrease in store counts.
Adjusted operating income was approximately $2 billion, an increase of nearly 10% versus the prior year, driven by improved drug purchasing, increased contributions from vaccinations, the increased prescription volume described above, and lower operating expenses. These increases were partially offset by continued pharmacy reimbursement pressure.
Same-store pharmacy sales were up 15.5% versus the prior year and same-store prescription volumes increased by 4.4%. Same-store sales in front store were down by about 3% versus the same quarter last year.
Shifting to the balance sheet, our liquidity and capital position remain excellent. Our ability to generate cash flow remains a core strength of our organization. Full year 2023, cash flow from operations were $13.4 billion. We ended the year with approximately $735 million of cash at the parent and unrestricted subsidiaries. We remain committed to maintaining our current investment grade ratings while preserving flexibility to deploy capital strategically.
In the fourth quarter, we returned $779 million to shareholders through our quarterly dividend. We also entered into a $3 billion fixed dollar accelerated share repurchase transaction which became effective on January 3rd, 2024.
Turning now to our full year outlook for 2024. In recognition of the marketplace uncertainty around utilization trends in Medicare Advantage, we revised our 2024 adjusted EPS guidance to at least $8.30. In the Health Care Benefits segment, we now expect our 2024 medical benefit ratio to be approximately 87.7%, an increase of 50 basis points from our previous guidance. As I already noted, we observed elevated medical cost trends in our Medicare Advantage business in the fourth quarter, which pressured our full year 2023 medical benefit ratio by approximately 10 basis points relative to our prior guidance. The remaining pressure in the quarter was largely a function of mix and higher revenue offsets than we previously projected.
Based on our review of our recently completed fourth quarter 2023 medical cost trend analysis, we are prudently assuming that the elevated medical cost trends we observed in the fourth quarter will carry forward into 2024. Accordingly, we have increased our full year 2024 MBR guidance by approximately 40 basis points to account for this pressure. As discussed throughout 2023, we had included a provision for elevated utilization in our 2024 medical benefit ratio guidance and will continue to hold that provision until we have more clarity on the Medicare Advantage utilization environment.
Our revised outlook also reflects an expectation of at least 800,000 new Medicare Advantage members in 2024. As we have previously discussed, the profile of these new members is attractive, with nearly three quarters of these members switching from other Medicare plans and about a third of members expected in D-SNP plans. We continue to expect these new members will be neutral to earnings, but the mix impact from incremental new membership represents approximately 10 basis points of today's 2024 MBR guidance revision. When combined with the additional 40 basis points of medical cost pressure we are projecting, we have increased our 2024 MBR projection by 50 basis points to 87.7%.
We anticipate a number of favorable items will partially offset the impact of the expected elevated utilization levels, including higher investment income and higher than previously projected commercial membership. Adding up all the pieces, we now expect adjusted operating income for the Health Care Benefits segment to be at least $5.4 billion, a decrease of $370 million from our prior estimate.
In our Pharmacy & Consumer Wellness segment, we now expect a portion of the outperformance from the end of 2023 to persist into 2024. As a result, we now project adjusted operating income of at least $5.6 billion, an increase of approximately $90 million from our prior guidance.
In our Health Services segment, we are updating 2024 adjusted operating income to at least $7.4 billion, a decrease of approximately $90 million. While our Health Care Delivery businesses were able to successfully manage through medical cost trend pressures in 2023, we think it is prudent to recognize the potential for emerging risks at our payor partners until we have further clarity on 2024 utilization trends.
Finally, we've made a corresponding adjustment to cash flow from operations, which we now project to will be at least $12 billion this year. As you think about the cadence of earnings in 2024, we expect to generate less than 50% of our adjusted EPS in the first half. More specifically, we expect to generate roughly 20% of full year adjusted EPS in the first quarter. This pattern will look different than 2023, primarily due to the way Medicare Advantage utilization emerged over the course of 2023 and the timing and impact of prior period developments. As a result, Health Care Benefits 2024 MBR will see the largest year-over-year increase in the first quarter and the smallest in the fourth quarter. You can find additional details on the components of our updated 2024 guidance on our Investor Relations webpage.
Beyond 2024, we are committed to returning our Medicare Advantage margins to our target of 4% to 5%, while also preserving the projected returns on capital for our 2023 acquisitions. Our stars recovery in 2025 will enhance our earnings trajectory even as we work to adjust our plans to account for the preliminary 2025 Medicare Advantage rate notice, which does not adequately cover recent medical cost trends.
For 2025, our goal is to deliver low double-digit adjusted EPS growth of our updated 2024 guidance. We expect to update investors later this year on our progress against this goal.
To conclude, 2023 was a year where CVS Health demonstrated the power of our diversified enterprise. As we begin 2024, we remain focused on operational execution and sustainable growth as we advance our goal of becoming the leading health solutions company for consumers.
With that, we'll now open the call to your questions. Operator?