With Aetna Deal, CVS Looks To Turn Stores Into Health Care Hubs
CVS Health is looking to create a national network of community medical clinics that will serve as "America's front door to quality health care."
That's the goal, according to a statement by CEO Larry Merlo on his company's deal for Aetna. It's an ambitious one for CVS, a company better known as a quick stop for Tylenol and a Coke.
To get there, CVS agreed to pay $69 billion in cash and stock for Aetna, the companies said Sunday. The companies said that together they want to offer more health care services in CVS drugstores.
"CVS wants to be more than just a retail outlet," says Craig Garthwaite, a professor at Northwestern's Kellogg School of Management. "They're expanding the retail clinics so they won't be quite urgent care, but they'll resemble a direct primary care facility."
The company changed its name to CVS Health three years ago and is trying to reposition itself has a health care company rather than just a drugstore.
The vision is that customers, especially those covered by Aetna insurance policies, will seek more of their basic health care at an expanded CVS clinic.
CVS operates more than 1,100 MinuteClinics at locations in its drugstores and within Target stores. CVS says its pharmacists and nurse practitioners can provide ongoing health care for people with chronic conditions like diabetes, high blood pressure or asthma.
"Patients with diabetes will receive care in between doctor visits through face-to-face counseling at a store-based health hub, and remote monitoring of key indicators such as blood glucose levels," CVS said in the announcement of the acquisition.
The companies are counting on the notion that people will prefer going to a clinic around the corner over making repeated trips to their doctors that might require appointments and waits.
Garthwaite says the combination will also alter CVS's incentives when providing pharmacy benefits – which it does now for nearly 90 million people including most of those with Aetna health plans. "If you only have responsibility for the cost of the diabetes medication, you might impose a higher co-pay," Garthwaite says. "If you're responsible for all the medical costs that can ensue if people don't get their diabetes medications, then you may want a smaller co-pay."
The CVS-Aetna combination is enormous, but it's also the continuation of a trend toward insurance companies and health care providers getting together to offer integrated service, said Walid Gellad, a doctor and professor of health policy and management at the University of Pittsburgh.
For example, the insurance company Oscar Health signed a deal to work with the Cleveland Clinic to sell health coverage in Ohio.
The combination of CVS and Aetna aims for something else. "This is a different angle because the delivery part is focused on pharmacies, not hospitals or doctor's offices," Gellad says. "Many are pushing for more health care services to happen in pharmacies, and this is one mechanism to make that happen."
He says Aetna could help drive patients into the CVS clinics by making it cheaper to go there than to a primary care doctor. "The real potential here is for changing how healthcare is delivered in primary care settings," he says.
CVS doesn't need to buy Aetna to make that happen, says Lynn Quincy, a consumer health care analyst at Altarum, a health care analysis and consulting firm. She says she's skeptical that the combination of the two companies will lead to savings for consumers.
"We already see that pharmacy benefit managers don't really use their clout in service to consumers," she says. "Nothing about this deal says that's going to change."
It's unlikely that CVS will really transform itself from a pharmacy company to an integrated health care company, says Martin Gaynor, a professor of economics at Carnegie Mellon University. "That's an awfully big step," he says. "In fact, it's more than just a step to go from where they are to becoming a health care hub."
He says the obvious motivation behind the merger is that CVS and Aetna can save money on prescription drugs by simplifying the complicated way medications are paid for, and eliminating one middlemen looking to make a profit.
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