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Analysis

CVS-Aetna Deal Tests Who Has The Right Data

By Bruce Japsen  
   October 15, 2018

This merger's strategy may up the ante for rival health insurers as they try to show employers and consumers they are controlling costs and managing populations with the best data.

When it comes to information needed to improve patient care and control costs, CVS Health CEO Larry Merlo vows to draw from the drugstore chain's "thousands of locations and touch points" and Aetna's millions of medical claims.

It's a strategy that may up the ante for rival health insurers as they try to show employers and consumers they are controlling costs and have the ability to manage populations of patients with the best data.

"There is no doubt that all of the players in the healthcare ecosystem are striving for a more data-driven and personalized experience for their members," says Scott Rabin, partner in the healthcare practice of Mercer, a health benefits consultancy.

"There are some systemic challenges today in that there is less standardization of healthcare data than in other mature industries, but to the extent providers and patients can be empowered with data they can use when they need it, we will begin to unlock the inefficiencies in the system," Rabin says. "The ability to integrate data on direct patient preferences and experience will differentiate these solutions going forward."

CVS executives think they have the right answer when it comes to the value-based approach of getting patients the right care in the right place at the right time. And gathering patient prescription data from its pharmacy benefit management subsidiary, customer and patient experience from its drugstores, and information from Aetna's medical claims will help improve care before patients get sick.

"Our focus will be at the local and community level, taking advantage of our thousands of locations and touchpoints throughout the country to intervene with consumers to help predict and prevent potential health problems before they occur," Merlo said last week following the U.S. Department of Justice's announcement that CVS' acquisition of Aetna has been granted preliminary approval.

"Together, we will help address the challenges our healthcare system is facing, and we'll be able to offer better care and convenience at a lower cost for patients and payers, "he said.

Related: CVS-Aetna Merger Secures DOJ Approval, With Strings Attached

CVS has more than 9,800 drugstores and 1,100 MinuteClinic retail health centers staffed by nurse practitioners at the drugstore chain. Meanwhile, Aetna has more than 20 million health plan members who, in the future, are expected to be guided to low-cost services that are part of the larger company.

As the U.S. healthcare system moves toward value-based models, insurers are more aggressively reaching out into the community, and CVS has stores and retail clinics in 49 states, Puerto Rico, and the District of Columbia.

Related: Why Health Systems Should Worry About Walgreens and CVS

"We know there is meaningful improvement in cost, outcomes, and patient experience when we can identify, predict, and prevent higher-acuity episodes," Mercer's Rabin says. "While data in-and-of-itself is just a piece of a higher-functioning healthcare ecosystem, it is an essential component to changing the way the system operates today."

To be sure, health insurers that are buying more medical providers are taking different paths into the community and using data they glean from these relationships to develop solutions to better quality at lower costs.

Ken Kaufman, managing director and chair of consulting firm Kaufman Hall, said CVS-Aetna is looking to make its platform more convenient and affordable.

"A focus on prevention and early intervention fits well into that objective and CVS's 10,000 stores and 70 million loyalty program members provide a good foundation. However, only time will tell whether they can make good on the level of transformation they promise," Kaufman said.

Some see CVS and Aetna trying to play catch-up to health insurer UnitedHealth Group, which already owns Optum, a medical care provider with a vast network of doctor practices and MedExpress urgent care centers. Optum also sells its population health management services to scores of employers and insurers, helping them to better manage care.

Other major insurers, such as Anthem and Humana, have been handling their PBM workload internally as well, so this type of PBM-insurer coordination is happening across the board, said Michael Levinson, JD, MD, a Miami-based partner with Berger Singerman and leader of the firm's healthcare practice.

"It's a chicken-and-egg issue here. Which one came first? I'm not sure," Levinson told HealthLeaders. "The whole idea is that, to better control your cost to be more competitive and not be reliant on another company for one of your major expenses, you have to bring that business in-house, which is what we're seeing."

By bringing the power of an insurer under the same umbrella as a pharmacy chain and PBM, the CVS-Aetna deal could capitalize on a powerful set of rich data about consumer behavior.

"And data is king in today's economy," Levinson said.

Health insurer Cigna plans to integrate more patients' pharmacy experiences to their medical membership with its acquisition of the larger PBM, Express Scripts.

"With Express Scripts, we'll be better equipped to understand, support, and inform physicians based on the breadth of data the combined company will be able to generate from the billions of customer touchpoints we'll have," Cigna CEO David Cordani told analysts in May on the company's first quarter earnings call.

"While we have existing tools in place today, this wider and deeper data set will meaningfully accelerate our progress and provide us with more actionable insights into both customer and physician behavior. And as a result, we'll be even better positioned to provide best-in-class cost performance, clinical quality, customer and physician service, and predictability," he says.

Analysts say it's too early to say which company has the answer given that healthcare costs continue to rise and these mega deals are just getting finalized, but payers are trying to find the patients where they are and keep them in a low-cost setting. And they are stepping up their mergers and acquisition to reach deeper into the community in a variety of locations.

Related: CVS-Aetna Forcing Hospitals to Rethink Their Business Models

Humana, for example, and private equity firms TPG Capital and Welsh, Carson, Anderson & Stowe this summer completed their $1.4 billion acquisition of CURO Health Services, which provides hospice to patients in 245 locations in 22 states. That deal came within a month after Humana bought the Kindred at Home division of Kindred Healthcare.

"Over the next year," Humana CEO Bruce Broussard said earlier this year, "we plan to leverage Humana predictive modeling to identify additional clinical interventions, integrate Humana Pharmacy resources to conduct comprehensive medication reviews, and extend our care management best practices from Humana at Home into the Kindred at Home homecare environment."

This CVS-Aetna combination and others like it seem to be "the first volleys" of a trend that's here to stay, said Rod Hochman, MD, president and CEO of Providence St. Joseph Health, based in Renton, Washington.

"I think we're going to see a tremendous amount of these mix-and-matches that are going on out there," Hochman said. "And I think for the first time, we're going to also see the provider health systems working together around specific goals and projects, whether it's around data, advocacy, potentially even with certain insurers."

"It's an exciting time," he added.

Editor's note: An earlier version of this article referred to Ken Kaufman, of the consulting firm Kaufman Hall, by the wrong name on second reference. It has been corrected.

Steven Porter contributed to this report.

Bruce Japsen is a contributing editor for HealthLeaders.


KEY TAKEAWAYS

Major players in the healthcare sector are all looking for ways to personalize consumer experiences with data.

The CVS-Aetna merger aims to make its combined platform more convenient and affordable. Time will tell whether they succeed.

All of this comes as major insurers across the board incorporate PBM business into their operations.


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