Thomas F. Cowhey
Senior Vice President and Interim Chief Financial Officer at CVS Health
Thank you, Karen, and good morning, everyone. Our third quarter results continue to demonstrate the power of our execution and the value of our diversified enterprise. This quarter, we saw strength across key metrics such as revenue, adjusted earnings per share, and cash flow from operations. A few total company highlights. Third quarter revenues of nearly $90 billion, increased by double-digit percentages over the prior year quarter, reflecting strong growth across each of our businesses. We delivered adjusted operating income of nearly $4.5 billion and adjusted EPS of $2.21, representing growth of approximately 2% versus the prior year. These increases were primarily due to continued strong execution in our Pharmacy Services operations, partially offset by pressure in Healthcare Benefits and the inclusion of Oak Street Health results.
Our ability to generate cash remains outstanding with year-to-date cash flow from operations of $16.1 billion. Cash flows benefited from the timing of CMS payments that are expected to normalize in the fourth quarter. Excluding this impact, our year-to-date cash flows from operations remained strong at approximately $11 billion.
Shifting to the details for our Healthcare Benefits segment. We delivered strong revenue growth versus the prior year. Third quarter revenue of $26.3 billion increased nearly 17% year-over-year, reflecting growth across all product lines, but primarily attributable to Medicare and our individual exchange products. Membership grew to 25.7 million, an increase of 54,000 members sequentially, reflecting growth in our individual exchange and Medicare businesses, partially offset by the impact of Medicaid redeterminations.
Adjusted operating income of $1.5 billion in the quarter declined approximately 6% versus the prior year. This decline was driven by a higher medical benefit ratio, partially offset by higher net investment income. Our medical benefit ratio of 85.7% increased 230 basis points from the prior year quarter, primarily reflecting lower prior-period development, as well as higher Medicare Advantage utilization inside the quarter. Utilization pressure was primarily attributable to the categories Karen highlighted earlier, including outpatient and supplemental benefits such as dental, behavioral health, OTC, and flex cards. Further, we also experienced individual exchange growth in the special enrollment period that exceeded our expectations. These members, particularly when added late in the year, will drive a higher MBR. As a result, our higher individual exchange growth is also contributing to our updated MBR guidance for the full year.
We continue to closely watch utilization trends in our other lines of business. But at this stage, we have not observed any other trends that we would consider inconsistent with our total expectations. Days claims payable at the end of the quarter was 50.3, up 3.4 days sequentially, and reserve growth exceeded premium growth sequential. Overall, we remain confident in the adequacy of our reserves.
Our Health Services segment, which includes our pharmacy services business and our health services operations, generated revenue of approximately $47 billion, an increase of more than 8% 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 11% year-over-year, primarily driven by strong execution and improved purchasing economics, partially offset by ongoing client price improvements.
Total pharmacy claims processed in the quarter declined by less than 1% versus the prior year, and were only down 40 basis points when excluding COVID-19 vaccinations. This decline was primarily attributable to the New York Medicaid carve-out and lower COVID 19 vaccinations, partially offset by net-new business. Total pharmacy membership remained steady at approximately 110 million members. We continue to be encouraged by the performance and growth of our health services assets. Signify completed 655,000 in-home evaluations in the quarter, an increase of 7% versus the same period last year, and generated revenue growth of 21%. Oak Street ended the quarter with 192 centers and 191,000 at-risk lives. They have grown by 31 centers versus the prior year quarter, and are on track to open a total of 35 new centers this year, ramping to 50 to 60 centers in 2024.
Oak Street also significantly increased revenue in the quarter, growing 44% compared to the same quarter last year. Oak Street's clinical model continues to demonstrate exceptional performance. Last week, CMS released the 2022 savings performance of all ACO REACH participants. Oak Street was among the top-5% of program participants, generating a meaningful gross savings rate of 21%.
Moving to our Pharmacy and Consumer Wellness segment. We generated revenue of nearly $29 billion, up 6% versus the prior year, nearly 9% on a same-store basis, reflecting the impact of pharmacy drug mix, increased prescriptions, and brand inflation. These revenue increases were partially offset by continued reimbursement pressure, the impact of recent generic introductions, a decrease in store count, and decreased COVID-19-related volume. Adjusted operating income of $1.4 billion was in line with the prior year, driven by continued reimbursement pressure and lower COVID contributions, largely offset by improved drug purchasing, increased prescription volumes, and lower expenses.
Same-store pharmacy sales were up nearly 12%, driven by drug mix and 2.7% increase in same-store prescription volumes and brand inflation. The increase in same-store prescription volumes, excluding the impact of COVID-19 vaccinations, was 3.5%. As we continue to execute on our store closure initiatives, hacing closed 564 out of 900 planned stores, we encourage investors to focus on same-store metrics to understand underlying growth.
Our front-store business continues to exhibit resiliency in the face of industry challenges, underscoring the value we offer consumers. Same-store sales for the front store were down 2.2%, primarily due to declines in cough, cold, and flu, and OTC test kits. Excluding the impact of OTC test kits, same-store sales were in line with the prior year.
Shifting to the balance sheet. Our liquidity and capital position remained excellent. Our ability to generate cash flow remains a core strength of our organization, and the enterprise continues to identify new opportunities to further optimize our balance sheet. Through the third quarter, we generated cash flow from operations of $16.1 billion, including the CMS prepayment I discussed earlier. We ended the quarter with approximately $2.7 billion of cash at the parent and unrestricted subsidiaries. This quarter, we returned $779 million to shareholders through our quarterly dividend. We remain committed to maintaining our current investment-grade ratings, while preserving flexibility to deploy capital strategically.
Turning now to our full-year outlook for 2023. We are reaffirming our adjusted EPS of $8.50 to $8.70. This primarily reflects our performance through the third quarter and the continuation of higher Medicare Advantage medical cost trend for the remainder of 2023, offset by strength in our Pharmacy and Consumer Wellness, and Health Services segments.
In the Healthcare Benefits segment, we now expect our 2023 medical benefit ratio to be approximately 86%, primarily driven by the previously mentioned impact of higher Medicare Advantage utilization as well as the impact of higher-than-expected individual exchange growth during the special enrollment period. As a result, we now expect adjusted operating income for the segment to be in a range of $5.63 billion to $5.76 billion. Our individual exchange business is expected to reduce adjusted operating earnings in 2023, largely a function of late-year growth. However, this business is now poised to reach an annualized run rate of more than $6 billion of revenue, and we are well-positioned to earn a positive margin in this business in 2024 based on specific actions our teams are implementing, including pricing adjustments.
In our Health Services segment, we are updating our adjusted operating income guidance to a range of $7.18 billion to $7.31 billion, reflecting the strong execution year-to-date in our Pharmacy Services business and our expectation of continued strength for the remainder of the year. In our Pharmacy and Consumer Wellness segment, we now expect adjusted operating income in a range of $5.76 billion to $5.86 billion, primarily driven by higher contributions from seasonal immunizations, partially offset by lower-than-expected script volume, primarily attributable to Medicaid redeterminations.
Shifting to our cash flow. Given our strong performance year-to-date, we now anticipate full-year 2023 cash flow from operations to be at the upper end of our range of $12.5 billion to $13.5 billion. Our expectation for capital expenditures is now $2.5 billion to $2.7 billion. We're also updating our adjusted effective tax rate to 24.9% and our share count to 1.291 billion. You can find additional details on the components of our updated 2023 guidance on our Investor Relations webpage.
Before I conclude my prepared remarks, I want to give you an update on headwinds and tailwinds for 2024, starting with the headwinds. As we previously discussed, the decline in our star ratings for benefit year 2024 will pressure our Medicare Advantage margins. We now expect the impact to be closer to the low end of our previously communicated range of $800 million to $1 billion. We continue to expect the current level of elevated utilization in our Medicare Advantage book to persist, and out of an abundance of caution, are maintaining a provision for further utilization pressure in 2024. As previously discussed, contributions from Centene will decline as the contract ends on January 1, 2024. We expect a lower contribution in our PCW segment related to COVID, consumer softness, and incremental labor investments, and we expect the 340B headwind from 2023 to annualize in 2024.
Shifting to the tailwinds for 2024. We expect underlying growth in our core businesses. We now expect the savings from our previously-announced actions and cost initiatives coming in at the higher end of our guidance. We expect a positive contribution from the pricing of our individual exchange business as well as commercial pricing actions. We believe we have the opportunity to capture value from our newly-created Cordavis business. And we expect incremental contributions from our health services businesses net of the impact from previously discussed clinic expansion. At this distance, based on the sum total of these headwinds and tailwinds, including the uncertainty created by our recent utilization trends, we believe it is prudent for investors to ground their expectations for 2024 adjusted EPS at the low end of our previously communicated preliminary guidance range of $8.50 to $8.70. At our Investor Day in December, we will provide detailed 2024 guidance and updated views on our long-term growth algorithm.
To conclude, we remain focused on operational execution and sustainable growth as we advance our goal of becoming the leading health solutions company for consumers. We look forward to providing more detailed updates on our progress against our strategy in December.
With that, we'll now open the call to your questions. Operator?
