The weekend announcement that CVS Health planned to purchase Aetna has recast healthcare industry observers as amateur fortune tellers, trying desperately to determine what the $69 billion deal will mean for doctors and patients.
Representatives for both the pharmacy chain and the insurance giant are of course touting expected efficiencies, which they say will lead to lower costs and greater customer convenience. Others are more skeptical.
“They’re not doing this to provide better care to people,” David Mitchell, founder of the advocacy group Patients for Affordable Drugs, told The New York Times. “They’re doing this to make more money.”
CVS and Aetna plan to share information and resources to shift the corner drugstore to a more all-encompassing provider of healthcare services. In additional to filling prescriptions, company executives envision a group of providers on site that can do basic lab work, consult on ongoing medical concerns, and address the sort of flaring ailments that now might send patients to their primary care doctor or even to the emergency room.
“We think of it as creating a new front door to healthcare in America,” Larry J. Merlo, president and CEO of CVS Health, enthused.
While the merging of these two massive entities in the healthcare field is broadly seen as a bulwark against the rumored entry of online retailer Amazon into the pharmacy business, another part of the sector could face a graver and more immediate threat from CVS and Aetna intertwining.
It could be hospitals that first feel the pinch.
As an analysis in Forbes points out, much of the treatment CVS and Aetna are aiming to provide currently routes through hospitals. If those patients go away, so does the revenue. Leaders within the merging companies believe the sheer reach of established CVS locations — including pharmacies embedded in Target stores, CVS has nearly 10,000 locations nationwide — gives them a tremendous advantage.
“When you think of healthcare interventions, they have always been there, but what they lack is the element of convenience and coordination,” said Merlo. “That’s really the unmet need that we’re filling.”
Hospitals are already facing a dizzying array of challenges in the current healthcare landscape, with continued uncertainty around various governmental supports and medical reimbursements only the most visible driver of anxiety. The emergence of an entirely new business model siphoning off patients compounds those troubles.
If nothing else, the pressure to consolidate that has already resulted in approximately two-thirds of U.S. hospitals operating as part of a chain — up from around one-half of hospitals at the start of the 2000s — is only going to increase. The day after the CVS-Aetna announcement, Chicago-area health system Advocate Health Care revealed plans to merge with Wisconsin’s Aurora Health Care. The combined company will be among the ten largest nonprofit hospital systems in the nation.
Although surely unrelated to the earlier healthcare business bombshell announcement, the hospital systems forging an alliance represents a possible new necessity for organizations that want to remain viable.
“What we have been seeing across the entire healthcare spectrum is consolidation amongst many players in an effort to get bigger, in an effort to get more leverage, in an effort to negotiate better,” healthcare equity analyst Jeffrey Loo told Fast Company.
The deal between CVS and Aetna needs to be cleared by shareholders and regulators, but all parties have expressed confidence there will be little trouble in those areas. Assuming all goes smoothly, the deal is expected to close in the second half of 2018.
(Image credit: AP Photo/Gene J. Puskar, File)
