As its $69 billion effort to purchase insurer Aetna looks to close by Thanksgiving, retail pharmacy giant CVS Health has made early moves tipping its hand on how it is looking to merge the company’s operations with the aim to reduce costs and improve patient health.
The early experimentation comes on the heels of a good quarter for the company, which posted $1.3 billion in profit in the third quarter. CVS Health CEO Larry Merlo said on a earnings call last week that the company has received approval from 23 out of 28 state regulators for its planned mega-merger after Aetna agreed to sell of its Medicare Part D business to WellCare.
Merlo touted that the combined company will exceed its initial projected two-year $750 million cost savings by reducing corporate expenses, integrating operations and reducing medical costs through methods like increasing investment in medication adherence programs and funneling patients to lower cost sites of care and away from unnecessary emergency room visits.
One specific example mentioned was infusion, which foreshadows growth in the company’s Coram division, which the retail pharmacy chain acquired back in 2014 for $2.1 billion and offers specialty infusion services in home-based and outpatient settings to more than 45,000 patients annually. Currently, Coram services are offered at more than 90 locations nationwide including retail infusion sties and five CVS Pharmacies.
When it comes to cost reduction over the long term, Merlo highlighted more closely managing chronic conditions like diabetes, cardiovascular disease, hypertension, asthma and behavioral health by integrating of CVS pharmacy and Aetna medical claims data to provide a stronger foundation of information to identify and close gaps in care.
For complex chronic disease like kidney disease, Merlo spoke about better aligning provider incentives, which presages some rethinking on reimbursement which will emphasize quality and outcomes, which include possible shifts to capitation or other value-based models for Aetna members.
A Deep-dive Into Specialty Pharma
A specialty drug is a class of prescription medications used to treat complex, chronic or rare medical conditions. Although this classification was originally intended to define the treatment of rare, also termed “orphan” diseases, affecting fewer than 200,000 people in the US, more recently, specialty drugs have emerged as the cornerstone of treatment for chronic and complex diseases such as cancer, autoimmune conditions, diabetes, hepatitis C, and HIV/AIDS.
One way to improve chronic disease management mentioned by Merlo would be using CVS’ network of walk-in MinuteClinics as a way to identify incidence of chronic disease early and improve management of conditions by moving care to more convenient retail settings.
By closely integrating Aetna’s clinical programs with CVS’ wide geographic footprint, the company is hoping to drive down hospital readmissions by being better able to handle the hand-off and drop off in care that occurs during the discharge process.
The new care models will be piloted at new “health hub” concept stores which will offer “new services to better address the cost-quality-access challenges of consumers and identify the most effective and scalable solutions, so they can be rolled out more broadly across our footprint,” Merlo said.
While many of the cost-saving measures and pilots programs will start out with Aetna members, Merlo emphasized that the long-term business strategy of the combined company is offer an open platform model that can be used by a range of different health plan partners.
“Remaking the consumer experience will be an increasingly important competitive differentiator and we are hard at work creating a plan to differentiate CVS Health in these patient journeys with the goal of making them simpler and more personalized, while making care more accessible,” Merlo said on the call.
The announcements by the company track with what observers predicted were the overall strategy behind the Aetna mega-merger which serves to insulate their existing customer base and open up opportunity for CVS clinics to act as a new “front door” for the healthcare system.
“With CVS’s large and growing clinical services footprint, Aetna can steer patients to CVS pharmacies and clinics—in many cases avoiding the costs of higher ER or other outpatient services. The merger can make expanded CVS services in-network and others out-of-network, putting additional pressure on conventional health systems to lower the costs of their outpatient services,” Healthcare consultant Rita Numerof told me when the Aetna deal was approved by federal regulators.
“By driving patients to CVS retail spaces through pharmacy and clinical outpatient services, CVS can reinforce and grow its front end over-the-counter business which is substantially private label.”
In order to head off the threat of Amazon from an e-commerce perspective, the company has also recently rolled out a pilot membership program in the Boston area.
Entitled CarePass, the program offers free one or two day delivery on most prescription medications and purchases, a discount on items under the CVS Health brand, access to a 24/7 pharmacist hotline and a $10 monthly store credit. The program costs consumers $5 a month or $48 for an annual membership.
Photo: Justin Sullivan, Getty Images
