Shawn Guertin
Executive Vice President and Chief Financial Officer at CVS Health
Thank you, Karen and good morning, everyone. I will first take some time to detail our results and 2023 guidance before discussing this morning's announcement of the Oak Street transaction.
Our fourth quarter results reflect the continuation of our excellent performance from each of our core business segments, as we exceeded our expectations for revenue, cash flow generation and adjusted earnings per share. A few highlights regarding total company performance. Total fourth quarter revenues of $83.8 billion, increased by 9.5% Year-over-Year, reflecting growth at or above internal expectations for each of our foundational businesses. We reported fourth quarter adjusted operating income of $4 billion and adjusted EPS of $1.99.
For full-year 2022, we reported total revenue of $322.5 billion, an increase of 10.4%, with solid growth across each of our foundational businesses. This led to a full year adjusted EPS of $8.69, representing an increase of 9.7% off our 2021 adjusted EPS baseline of $7.92. And importantly, CVS Health's ability to generate cash remains strong. For full-year 2022, we generated $16.2 billion in cash flow from operations.
Looking at performance by business segment. Health Care Benefits delivered strong revenue and adjusted operating income growth versus the prior year. Fourth quarter revenue of $23 billion, increased by 11.3% Year-over-Year. We grew membership by 548,000 lives in 2022, driven by strong growth in our commercial and Medicare businesses, offsetting the divestiture of a portion of our Aetna International business earlier this year and a decline in Medicaid membership due to a previously disclosed contract loss.
Our Medical Benefit Ratio of 86% improved 100 basis points Year-over-Year. Adjusted operating income of $858 million grew 68.2% Year-over-Year. Both of these measures were driven by the net favorable impact of COVID-19 compared to the prior year and strong underlying performance, partially offset by the unfavorable impact of the flu. Outside of an elevated flu season, medical costs remain in line with expectations as has been the case throughout 2022. Consolidated days claims payable at the end of the quarter was 52.5, up 3.4 days versus the prior year. Overall, we remain confident in the adequacy of our reserves.
In the Pharmacy Services business, our ability to deliver industry-leading drug trend for our clients, our specialty management capabilities and excellent customer service levels continue to drive growth. During the fourth quarter, revenue of $43.7 billion, increased by 11.2% Year-over-Year, driven by increased pharmacy claims volume, growth in specialty pharmacy and brand inflation, partially offset by continued client price improvements.
Total pharmacy claims processed increased by 3.1% above the prior year and 4.6% when excluding COVID-19 vaccinations, primarily attributable to net new business, increased utilization and the impact of an elevated cough, cold and flu season. Adjusted operating income of $2 billion, grew 9% Year-over-Year, driven by improved purchasing economics, including increased contributions from the products and services of the company's group purchasing organization, partially offset by continued client price improvements.
In our Retail Long-Term Care segment, we delivered strong revenue growth despite mixed COVID-related trends and continued economic uncertainty. Specifically, during the fourth quarter revenue of $28.2 billion grew 4%, reflecting increased prescription in front store volume, including the impact of an elevated cough, cold and flu season, pharmacy drug mix and brand inflation. These items were partially offset by decreased COVID-19 vaccinations and diagnostic testing, the impact of recent generic introductions and continued pharmacy reimbursement pressure.
Adjusted operating income of $1.8 billion, declined 25.1% versus prior year, but was largely in line with internal expectations, driven by decreased COVID-19 vaccinations and diagnostic testing, continued pharmacy reimbursement pressure and increased investments in the segment's operations and capabilities, including the vast majority of a discretionary bonus payment to frontline colleagues. These decreases were partially offset by increased prescription volume and improved generic drug purchasing. Pharmacy prescription volume grew 0.8% Year-over-Year, reflecting increased utilization and the impact of an elevated cough, cold and flu season, partially offset by decreases in COVID-19 vaccinations. Excluding the impact of COVID-19 vaccinations, pharmacy prescription volume increased by 4% Year-over-Year.
Turning to the balance sheet. Our liquidity and capital position remain excellent. We ended the year with approximately $5.4 billion of cash at the parent or unrestricted subsidiaries and an adjusted net-debt to EBITDA of about 2.9 times. Excluding the adjustment for cash at the parent or unrestricted subsidiaries, our adjusted debt to EBITDA is approximately 3.1 times. Through our quarterly dividend, we returned $719 million to shareholders and repurchased $1.5 billion of our common stock in the fourth quarter. We also entered into a $2 billion fixed dollar accelerated share repurchase transaction, which became effective on January 3, 2023.
A few other items worth highlighting for investors. We continue to experience the impact of market volatility on our investment portfolio and recorded net realized capital losses of approximately $37 million in the quarter. We recorded $117 million of office real estate optimization charges in the quarter related to the reduction of corporate office real estate space in response to our new flexible work arrangement. We also recognized a $250 million gain related to the sale of our bswift business in November and we recorded $99 million of incremental charges related to opioid litigation to address the final terms and other implications of the global settlement executed in December.
Shifting to our outlook for 2023. We expect revenue growth of 3% to 5% and we are reaffirming our full year adjusted earnings per share guidance range of $8.70 to $8.90. We believe this range is prudent at this stage in the year and reflects approximately 5% to 8% growth versus our 2022 adjusted EPS baseline of $8.25. We detailed the adjustments reflected in our 2022 baseline in the earnings materials posted on our IR website.
I want to point out three things on our 2023 adjusted EPS guidance. First, consistent with past practice, our projections do not assume the recurrence of prior year reserve development. Second, these projections do not include a specific provision for our pending Signify transaction, which is expected to close in the second quarter of this year. But which we project will have a small impact on 2023 adjusted EPS. And third, I want to remind everyone that beginning this year, we are shifting to a reporting convention that excludes net realized capital gains and losses from adjusted operating income.
Now, let's turn to some of the segment details. In our Health Care Benefits segment, we expect to see membership growth of 2% to 4% with increased membership in both Medicare and Commercial, partially offset by declines in Medicaid, due to the impact of redeterminations in 2023. Overall, we expect to generate revenue growth of 11% to 13%. Our projected Medical Benefit Ratio for 2023 is 84.7% plus or minus 50 basis points. As I just noted, we do not assume prior year reserve development in our projections. We are providing a cautious outlook for HCB adjusted operating income, expecting growth in a range of about 2% to 4% and reflecting a prudent assumption regarding the performance of our individual exchange business, lower individual MA enrollment and investments in our Stars improvement initiatives.
Moving to our Pharmacy Services segment. We expect revenue in a range from 1% to 2% growth, driven by a successful 2023 selling season and strong retention, partially offset by lower Medicaid volume. For the full year of 2023, we expect pharmacy claims to range from flat to growth of 1%. Overall, we expect these results to generate adjusted operating income growth of 4% to 5%.
Finally, shifting to our retail LTC segment. As we discussed previously, this segment will be burdened by the lower contribution from COVID, as we transition into the endemic stage as well as continued reimbursement pressure in the pharmacy. We expect revenue growth of 1% to 3%. And prescription growth is 2% 4%, despite continuing decreases of COVID-19 vaccines. Overall, for the retail LTC segment, we expect 2023 adjusted operating income to decline from 2022 to between $5.95 billion and $6.05 billion. For items below adjusted operating income, we expect our interest expense for 2023 to be approximately $2.23 billion. Our tax rate is expected to be approximately 25.5%.
I want to make a few comments, as you think about the cadence of our earnings throughout the year as retail returns to earnings seasonality more aligned to pre-pandemic patterns. We are currently projecting the lowest contribution to earnings in the first quarter of the year. The remaining three quarters will be relatively consistent with slightly more than half of our earnings coming in the second half of the year.
Shifting to shares. We expect our diluted weighted average share count to be approximately 1.298 billion, reflecting the impact of both our fourth quarter 2022 repurchase activity as well as the accelerated share repurchase that is currently underway. We anticipate another strong year of cash generation. We expect cash flow from operations of $12.5 billion to $13.5 billion. Capital expenditures are expected to be in the range of $2.8 billion to $3 billion.
Turning to the Oak Street transaction. We committed to investors that we would be diligent when deploying our capital, seeking assets with the best technology, capabilities and cultural alignment to our vision. After a thorough and robust review of the market, Oak Street was the primary care asset that proved to be the most strategically and financially compelling. Oak Street will operate as a payor agnostic business within CVS Health, focused on improving outcomes and experiences for the Medicare population it serves. CVS Health has a strong and proven track record of helping its payer client succeed and we will continue to prioritize that success after this transaction.
What we saw when we looked into Oak Street's portfolio of clinics, was a remarkably consistent path to clinic profitability. This trend was true across diverse geographies, populations and payers. As Oak Street drive strong patient experiences and engagement, their patient panels grow. And as Oak Street's providers engage with those patients, they improve outcomes and increase patient contributions overtime. These two factors combine to drive clinics to maturity, achieving profitability within the first three years and unlocking the annual adjusted EBITDA potential of approximately $7 million per clinic using Oak Street's definition of adjusted EBITDA.
Within the 169 clinics, Oak Street has today, we have high-visibility into embedded adjusted EBITDA of over $1 billion. We also recognize the tremendous opportunity to scale Oak Street's clinics to reach more seniors across the nation. At their current rate of expansion, we expect Oak Street to have over 300 clinics by 2026 at which point we project they will have more than $2 billion of embedded Oak Street adjusted EBITDA.
Shifting to synergies. We envision five main opportunities to realize more than $500 million of value over time. One, accelerating Oak Street patient growth through CVS Health channels. Two, improving Oak Street's economics through integration with our broad portfolio of assets. Three, improving the retention of our Aetna MA members through the improved outcomes and experience provided at Oak Street clinics. Four, driving greater utilization of CVS Pharmacy and Caremark capabilities and five, capturing modest savings from external public company and lease costs.
We project that our investment in Oak Street will drive double-digit returns on invested capital over time, as clinics mature and synergies are realized. We are committed to exploring additional avenues to further accelerate growth, synergy realization and returns from this transaction, while balancing further near-term dilution to our EPS trajectory. As stated in our press release, this transaction will be funded with available resources in existing financing capacity. And we remain committed to maintaining our current investment-grade rating. The transaction is subject to approval by Oak Street shareholders, regulatory approvals and other customary closing conditions. We expect this transaction to close in 2023.
We are now targeting 2024 adjusted EPS of approximately $9.00, growing to approximately $10.00 in 2025 with the potential for upside in 2025 based on the successful resolution of our Medicare Star Ratings mitigation efforts. The 2024 and 2025 adjusted EPS trajectories reflect the impact of the previously disclosed 2024 Medicare Star Ratings headwind in Centene contract loss, closing of the Oak Street Health transaction in 2023, as well as projected contributions from the Signify Health transaction in 2024 and beyond.
Consistent with past practice, CVS Health expects to exclude integration and transaction costs from its adjusted EPS presentation. With the close of these transactions, we expect that our adjusted debt to EBITDA will peak in the mid-3 times level in 2024, well within leverage ranges aligned to our current investment-grade rating. Our current projections assume modest discretionary repurchase activity in 2024. This is consistent with our 2021 Investor Day projections, which contemplated 1% to 2% adjusted EPS growth from repurchases in addition to offsetting dilution. As leverage begins to subside in 2025, we will have potential for additional repurchases.
In summary, we are excited to announce the acquisition of Oak Street and to incorporate them into our expanding portfolio of capabilities. Oak Street's best-in-class clinics will serve as the focal point of high quality care for seniors across America. The strategic rationale for this combination is sound and the growth opportunity is vast. Together, CVS Health's foundational businesses, Signify's home assessment and provider enablement capabilities and Oak Street's clinics and care model, create the premier multi-payer Medicare value-based care platform. We could not be more pleased to join with Oak Street, as we take the next step in our journey to build a differentiated Health Services organization and transform how care is delivered.
To conclude, we delivered excellent performance in 2022, creating strong momentum as we continue to execute our strategy in 2023. We are building on our achievements, expanding our portfolio of capabilities and continuing on our path to become the leading health care solution company.
With that, we will now open the line for your questions. Operator?
