CVS CEO Karen Lynch ends another complex chapter with her departure

It was an epic undertaking – and the CVS board didn't give her much time.

Ken Kaufman, chief executive of health care consulting firm Kaufman Hall, said he doesn't envy Lynch's position — nor that of David Joyner, the longtime executive tapped to replace him. Companies like CVS have become so complicated and unwieldy that they have become almost too difficult to operate.

“These organizations … are fundamentally unmanageable right now, and that's creating a certain level of chaos in the boardroom and within the organization's operations,” Kaufman said.

Woonsocket, Rhode Island-based CVS, which had been considering breaking up its holdings and possibly spinning off its stores, now says it will remain in one piece.

CVS's holdings include major insurer Aetna and 9,000 retail insurers branches and CareMark, a large pharmacy benefit manager. Lynch spent another $19 billion on primary care and home health services last year. But combining these disparate companies into a cohesive, profitable entity was an elusive goal.

“Five million people walk into our stores every day,” Lynch told the Globe in an interview before her ouster, explaining the philosophy behind her chosen strategy. “Yes, healthcare is complicated and hard. But why it's difficult is because there is no connection. And we have the ability to connect those experiences and ensure we deliver care in a targeted and focused way, when and where you need it.”

Neither Lynch nor Joyner could be reached for comment after her departure, but she wrote a letter to to CVS's 300,000 employees: “It has been a privilege to lead this company and I am confident that the team will continue to live its mission and purpose of helping people on their path to better health.”

Meanwhile, Joyner told The Wall Street Journal on Friday that CVS is better as a sum of its parts.

“We believe we have a really important role to play in simplifying and providing better health care for this country,” Joyner said. Retaining the assets collected by Lynch, he continued, will allow the company to “actually deliver on the promises we made, and now it's just a matter of execution.”

In other words, Lynch's vision for CVS will continue – at least for now – without her driving it forward.

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Lynch's decision to tie the future of CVS to her own personal history was not an easy one.

It's a theme that emerged early on in her memoirs, take up spacewhich was released earlier this year. Lynch spent most of her life as a very private person – an attitude shaped by the severe losses she suffered while growing up in Ware.

Lynch's mother had worked as a nurse and was diagnosed with schizophrenia, but no one in the family regularly saw doctors, psychiatrists or even dentists. Like millions of Americans, her family was lost in the fragmented, unequal mess that is the U.S. health care system. When Lynch was 12 years old, she said, she came home from school one day to find her mother dead, having committed suicide.

The lack of access to health information and services “has devastated my family,” Lynch wrote. And the death of her Aunt Millie, who raised her and her siblings, only deepened her frustration with the health care system.

“As I sat at her bedside in the hospital, I felt helpless and didn’t know what to ask or how to advocate for her,” she wrote. “That’s when I decided that I could somehow try to make a difference in healthcare.”

Over time, as Lynch rose through the ranks at companies like Cigna, Magellan Health Services and Aetna, she began to open up more and become more vulnerable, her husband Kevin Lynch, a mental health advocate, told the Globe in an interview early on of the 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 were also aware of the danger that she might lose control of her narrative. “You’re going to be judged,” Kevin Lynch said. “And it could hurt her career.”

It was a particularly important decision for a CEO, said Patricia Lenkov, author and president of Agility Executive Search in New York.

Women are held to higher standards than men because they have historically been viewed as emotionally and mentally inferior to the opposite sex, she said. And for that matter Traditionally taboo topics like suicide and depression, “we just didn't discuss these things at work,” Lenkov said.

But during a town hall meeting with Aetna employees in 2015, Lynch spoke publicly for the first time about her mother's suicide. She would use these experiences to formulate her vision as she grew CVS into a $160 billion healthcare giant.

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Ultimately, it wasn't Lynch's own vulnerability that sidelined her, but her company's poor performance. It has faced the same pressures faced by large health care groups and hospitals that have continued to consolidate in recent years.

Large hospitals are struggling with Medicare reimbursements. Joyner and other executives who oversee pharmaceutical benefits managers who orchestrate real-time, three-way negotiations between payers, pharmacies and drugmakers were hauled into Congress earlier this year to face FTC allegations of price manipulation on drugs like insulin . (The agency subsequently filed a lawsuit last month.) And this week, CVS competitor Walgreens announced it would close 1,200 stores over the next three years as its CEO vowed to restore the company to its “legacy strength as a retail pharmacy.” “realign” managed company.”

The move to replace Lynch is a signal to Wall Street that CVS is aware of its problems and is trying to turn things around, 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 increase risk and that CVS can buy some time with new leadership.

“Certainly they have made huge investments in consolidation and acquisitions along the supply chain. It is reasonable to assume that it is still too early to talk about a separation, even when faced with the short-sightedness of Wall Street.”

Stuart Piltch, president of Risk Strategies Consulting, which follows CVS closely, said it was ultimately Lynch's management decisions, not her story, that put her job at risk. He questioned their decision to spend nearly $20 billion to acquire Oak Street Health, a senior-focused chain of health clinics, and Signify Health, a home visiting service, arguing both were overvalued.

Piltch also pointed to high turnover in the company's insurance division as evidence of problems hiring employees. “Aetna is underperforming,” he said. “And (CVS has) retail stores that no one knows what they want to do.”

While vulnerability was “her brand and she is honest about her brand,” he said in the end, “it was about did she have the right business strategy and was she executing on it?”

In Lynch's few years at the helm, that strategy “just didn't work,” he added.

Janelle Nanos can be reached at [email protected]. Follow her @janellenanos. Thomas Lee can be reached at [email protected].