Healthcare IT Interoperability, EHR interoperability, Hospital Interoperability

Private Payers News

CVS Health to Buy Aetna for $69B, Altering Payer Landscape

CVS Health has announced its plans to acquire Aetna, integrating pharmacy and clinical benefits while sending shock waves through the health payer landscape.

CVS buys Aetna

Source: Thinkstock

By Jennifer Bresnick

- CVS Health is continuing its quest to become a major force in the growing world of consumer-centric healthcare by announcing that it will buy Aetna for $69 billion.

 "This combination brings together the expertise of two great companies to remake the consumer health care experience,” said CVS Health President and Chief Executive Officer Larry J. Merlo.

“We look forward to working with the talented people at Aetna to position the combined company as America's front door to quality health care, integrating more closely the work of doctors, pharmacists, other health care professionals and health benefits companies to create a platform that is easier to use and less expensive for consumers."

The move is part of a “natural evolution” for the two companies, the press release said, as the healthcare industry as a whole strives to deliver consumer-friendly care that contains costs while delivering quality outcomes.

"This is the next step in our journey, positioning the combined company to dramatically further empower consumers. Together with CVS Health, we will better understand our members' health goals, guide them through the health care system and help them achieve their best health," said Mark T. Bertolini, Aetna chairman and CEO.

READ MORE: Top 5 Largest Health Insurance Payers in the United States

"Aetna has a proud tradition of continually innovating to address unmet consumer needs and providing leading products and services to the marketplace."

The announcement, following earlier speculation of the deal that predicted an impending head-to-head battle with Amazon for dominance of the prescription drug market, has more immediate implications for Aetna’s remaining health payer competitors.

The combination of CVS’s plentiful retail pharmacy and retail clinic locations, combined with Aetna’s established national healthcare provider network, could make the new entity a very attractive choice for employers who are increasingly focusing on delivering convenience, preventive care, and lower costs to their employees.

Other large payers may not be able to compete as effectively for employer dollars without such a mature network of community-based locations for pharmacy interactions and low-level, urgent care. 

CVS Health owns more than 9700 pharmacy locations and 1100 MinuteClinic sites, sharing dominance of the market with Walgreens.  Together, the two companies operate around 75 percent of the nation’s retail clinic locations, said a 2016 RAND Corporation report. 

READ MORE: Payers with Larger Market Share Have More Negotiating Power

While some employers have started to open onsite clinics for their beneficiaries, it is less costly for these companies to send their employees to the local CVS when they have the flu or an ear infection than to build and pay for their own free-standing care sites – or to pay for full-fledged primary care visits.

The closer integration of payer functions and pharmacy benefits could also lower costs for employers and individuals while improving chronic disease management and population health. 

Earlier in 2017, an Aetna study touted the financial and clinical benefits of integrated pharmacy and clinical coverage, stating a combined plan could save between 2 and 17 percent of costs for patients with six of the highest-cost chronic diseases.

Integrated benefits members experienced fewer hospital admissions and ED visits, which contributed significantly to the savings.

A similar examination by Cigna added that patients with integrated benefits are more likely to participate in care management programs, more likely to consult with pharmacists about medication adherence and reconciliation, and more likely to achieve their personal health goals.

READ MORE: Top 10 Most Expensive Chronic Diseases for Healthcare Payers

Both studies highlight the importance of having visibility into both sides of the equation in order to target services, predict crisis events, and lower costs.

Data-driven insights applied to population health management goals will be a key focus for the new company, added Merlo. 

Access to data analytics that can help control costs was a driving force behind CVS’s decision to equip its care sites with electronic health record software from Epic Systems, the company has said

With improved access to care management and medication reconciliation services that span pharmacy and clinical concerns, beneficiaries may experience better chronic disease care and more proactive interventions around diabetes, heart disease, and other conditions.

"These types of interventions are things that the traditional health care system could be doing, but the traditional health care system lacks the key elements of convenience and coordination that help to engage consumers in their health,” Merlo said.

“With the analytics of Aetna and CVS Health's human touch, we will create a health care platform built around individuals.”

The ultimate impact of the acquisition in context of consumerism in general remains to be seen, especially since unexpected rivals like Amazon tend to move stealthily into new industries. 

But Aetna’s biggest payer rivals will certainly be scrambling to find a similarly attractive edge to their offerings as out-of-pocket costs rise for patients and regulatory uncertainty threatens their ability to remain profitable.

After the two failed mega-mergers between Aetna and Humana as well as Anthem and Cigna earlier in 2017, large payers will have to seek something other than scale to succeed in a rapidly changing environment – which is exactly what Aetna may have succeeded in doing.

The transaction is anticipated to close during the second half of 2018, CVS Health and Aetna said.  The deal must first be approved by shareholders and federal regulators.


Sign up for our free newsletter:

Our privacy policy

no, thanks

Continue to site...