The $69 billion purchase of Aetna helped CVS Health boost third quarter net income by 10% compared to the prior year.
The difference was primarily due to higher operating income from the impact of the Aetna acquisition close to a year earlier, CEO and President Larry Merlo said.
It was an acquisition put in motion by former Aetna CEO Mark Bertolini, who stepped down after the consolidation.
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Aetna had been looking for a pharmacy partner, and if the $37 billion purchase of Humana had gone through, it would have been Aetna that bought CVS Health, and not the other way around, Bertolini said in a November 5 interview.
"We would have had the biggest balance sheet, we would have bought CVS," Bertolini said.
WHY THIS MATTERS: THE AMAZON EXPERIENCE
The insurer\pharmacy connection is happening industry-wide. Aetna went looking for a pharmacy partner to reach consumers in the way Amazon has created that Amazon experience.
Amazon, and its off-shoot healthcare company Haven, are seen as the disruptors of the industry. But that's the wrong way of looking at it, according to Bertolini.
"Here's how I would characterize Amazon," Bertolini said. "Amazon doesn't disrupt anything. It creates a customer experience for an unmet need that is convenient, reliably delivered and affordable. And when a customer experiences that, they stop going to other places. It's the customer that disrupts."
Bertolini believes that Haven, the healthcare company created by Amazon, Berkshire Hathaway and JPMorgan Chase in January 2018, has too small a population to have any near-term impact. Haven recently rolled out a health plan pilot for some of its one million-plus employees.
"I think the market will move beyond them before they do anything of significance," Bertolini said.
What healthcare needs -- and this comes as no surprise to the industry -- is to start behaving like Amazon.
"I think the issue, I think if we're really going to fix the system, it has to start with the end user," Bertolini said. "Step outside of the healthcare world."
There is no other system in which the consumer doesn't know the cost of what he or she is purchasing until after the service is delivered.
"Change the game or get out," Bertolini said. "It's why I did the deal with CVS."
Aetna went looking for a pharmacy partner to create a place in the community where patients could get the healthcare support they needed, after they visited the doctor.
"When Aetna looked at what does it take to get closer to the home, we realized we couldn't build our own storefronts," Bertolini said. "We looked for partners."
Aetna looked at several, including Walmart, CVS Health and Rite Aid, he said, to find locations to make meaningful investments.
"That's the model for the future," he said. "Insurers are making moves to do that."
In November 2018, CVS Health completed its acquisition of Aetna for $69 billion.
CVS has allowed the insurer to reach consumers where they are, in its estimated 9,900 pharmacies across the nation. Earlier this year, CVS piloted a test of HealthHubs in Houston. Based on that success, the company said it planned to open additional locations in Houston, Atlanta, Philadelphia, southern New Jersey and Tampa, and have a total of 1,500 HealthHUB locations operating by the end of 2021.
"Insurers can't do that on their own. This is why we did the CVS deal. We weren't able to do that, no matter how big we are," Bertolini said. "I think the system of the future needs to look like this: We as people spend 20 hours a year in the healthcare system. If you assume you sleep seven-and-a-half hours a night, 99.6% of your waking hours, you're somewhere other than the health system."
Also, when talking to their doctors, people have a tendency to downplay lifestyle factors that affect their health.
"'I don't drink more than one drink a day. I have no stress,'" Bertolini said as examples of the falsehoods patients tell their doctors. "If we're going to fix that, we need a view of one's life. We need a place for doctors to send people after the visit."
The social determinants of health also affect a patient's health. Life expectancy is 30% genetics and 60% where you live. That leaves a low percentage having to do with clinical care.
"What's needed is to start with the patient, and the patient as a consumer, and add in the relevance of issues outside of a medical condition that are affecting a patient's health," Bertolini said. Patients need to be asked, he said, "'What is it about your health that gets in the way of life you want to lead?' That's the model we're trying to create. It's about the store's ability to understand the needs at large."
More is needed to reach consumers than convenient care and price, he said.
THE LARGER TREND: THE RETAIL EXPERIENCE
CVS HealthHubs offer a broad range of services, digital and on-demand health tools, advice and personalized care. With the new format, more than 20% of the store is now dedicated to health services, including new durable medical equipment and supplies and new product and service combinations for sleep apnea and diabetes care, CVS said.
In September, Walmart opened a clinic in a stand-alone building next to its retail store in Dallas, Georgia. It offers primary care, dental, counseling, lab services, X-rays, audiology and more, advertising services for $59 to $99 for consumers without insurance and accepts an estimated 12 insurance plans.
Amazon launched Amazon Care, a new virtual medical clinic for the company's Seattle employees, and recently launched an Amazon Care app on Google Play and the Apple Store, according to CNBC.
However, Walgreens said owning their own clinics didn't make sense, in its decision to shut down 150 of their clinics and have 200 of them run by other healthcare providers.
It doesn't mean that the retail model is wrong. But it does have to sync with traditional health systems and be part of the way healthcare is delivered, said Dr. Peter Bonis, chief medical officer, Clinical Effectiveness for Wolters Kluwer.
INSURERS NEED TO BE 'MEANINGFULLY DIFFERENT'
The traditional insurance model has been changing and will continue to change.
A free-standing insurance company that takes on risk, unless they're involved and invested with the care of individual, will have a tough time being meaningfully different, Bertolini said.
An estimated 60% of employees now work for companies that are self-insured. New direct contracting models cut the insurer out of the process altogether.
Bertolini predicts the direct provider contracting will be a failed model as employers are in multiple locations and benefits are not in these vendors' skill sets.
"Provider-direct contracting is just about price, not about managing care," he said.
As with many retirees, Bertolini said since he left Aetna, he's been busier than he imagined, serving on several boards including for CVS\Aetna and others not necessarily related to healthcare, such as Verizon.
Two well-publicized life-altering events opened his eyes to elements of healthcare he wanted to change and influenced his tenure as Aetna CEO starting in 2010. One was a skiing accident in 2004 that broke his neck and left him in chronic pain.
Physicians sent him home after stabilizing his neck and put him on pain medication. Bertolini clawed back to health through yoga and meditation.
Even more traumatic, two years earlier, on July 15, 2002, his teenage son was transferred from the hospital to hospice care on a diagnosis of terminal cancer. To get him into hospice, the family had to admit that their son would die within six months, he said.
His son is now 34, married, and has two daughters.
The health system didn't look at the bigger picture of what these health events meant for either himself or his son, Bertolini said.
"It told me the healthcare system is only involved in solving an acute issue," he said. "That's why we have an opioid epidemic in this country. There needs to be a more holistic relationship."
Under his tenure, Aetna ran a compassionate care program that allowed patients to enter hospice without admitting they were going to die within six months. After two years, the percent of people using hospice went from 20% to 76%, he said. Costs dropped by 70% because patients were using hospice instead of the hospital for care.
"Now every Aetna member gets compassionate care," he said. "Our leadership model is built around that. We're engaged in a dialogue for better decisions. Aetna thrived under the model."
Earlier this year, Bertolini released his book, "Mission Driven Leadership," describing it as "My journey as a radical capitalist." It's also includes the mantra, "find the divine in me," which is readily recognizable by fellow yoga enthusiasts.
"It's that understanding we're all one, not that much different than each other," Bertolini said. "Look at the similarities and what we have in common."
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Focus on Patient Experience
This month, our coverage will continue a special focus on the patient experience. We'll talk to the thought leaders and first-movers reimagining the how and where of patient-friendly tech, and report on ways to activate, if not delight, the people they treat.