CVS-Aetna merger could shift patient flow and business models

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CVS Health’s pending acquisition of health insurer Aetna is part of a strategy to develop a fully integrated healthcare network similar to that of Kaiser Permanente, analysts say.

The acquisition, if approved by regulators, could make the nation’s healthcare industry less costly for patients while also changing the business models of physician practices and hospitals, says John Osberg, a mergers and acquisitions specialist at the consulting firm Informed Partners.

Pharmacy chain CVS has more than 9,700 drugstores and 1,100 MinuteClinic outlets—many collocated in its drugstores—offering convenient access to medical treatment, with all the data stored on Epic EHR systems. CVS also operates Caremark, a major pharmacy benefit management company, which offers real-time claims adjudication. What CVS lacks is access to patients who are receiving treatment outside of the pharmacy. That’s the strength of Aetna, which covers more than 23 million members for medical care and another 14.5 million for dental services.

An Aetna-CVS partnership could achieve care savings by incentivizing patients to get care at one of CVS’ MinuteClinic outlets rather than going to a physician office, emergency department or a hospital. Osberg believes Aetna will offer incentives, such as waived or reduced co-pays, for members who go to MinuteClinics for appropriate treatment.

These incentives to steer patients to MinuteClinics will reduce traditional physicians’ volume of routine medical visits, but Aetna can pay incentives to physicians and hospitals to steer their routine patients to MinuteClinics, and that would enable clinicians to focus on sicker patients who need more attention.

Further, providers could benefit from wider use of pharmacy benefit management technology to settle payments more quickly. “Aetna will use real-time technology for real-time adjudication of routine visits, and providers will get paid faster and more accurately,” Osberg adds.

If the vision is fully achieved, it could benefit electronic health record vendor Epic, which provides the EHR for CVS’ network of clinics and is working with the drug store chain on an approach for prescribing less expensive drugs. Analysts say the Aetna-CVS merger could possibly give Epic a huge advantage over other EHR companies.

But in order to make the merger work, the companies will need to successfully integrate their systems.

Also see: CVS-Aetna deal could upend future role of PBMs

Brad Haller, a merger and acquisitions practice director at the West Monroe Partners consultancy in Chicago, sees big challenges ahead for the combining companies. “To create the right vision of a combined CVS-Aetna, there will have to be a level of technology integration and data sharing that is unprecedented, and extremely uncommon in organizations of this size. Through our experience across health plans, pharmacy benefit managers and clinics, the core systems that store data are disorganized, on legacy architecture and pull from disparate systems. The cost to achieving the desired state of a one-stop shop for consumers would cost hundreds of millions of dollars and take 18 to 24 months (to integrate), if not longer.”

Neither CVS or Aetna responded to requests for comments on data integration challenges.

More major challenges face the two companies as they seek to combine, particularly on the integration side, both technically and culturally, says Dave Bennett, a systems integration specialist and executive vice president at Orion Health, vendor of the Rhapsody integration engine that connects disparate IT systems within complex environments.

"The businesses are so different that the semantics to align the companies will be difficult," he notes. "CVS, a retailer and supplier-distributor, looks at how to optimize the retail channel--it's all about optimizing the supply chain. On the other hand, healthcare emphasizes billing and reimbursement issues. CVS has pharmacy and consumer buying habits information. Aetna has information on consumers, wellness and preventive care. The companies have to take data from two different worlds, understand it and optimize it."

The new company, Bennett believes, will need a new model of engagement with the consumer and that will include the need for community IT integration with Blues plans, other payers and providers.

Information systems integration efforts will cover pharmacy, claims processing, plan management, employers, patients and clinical systems, among others. The companies will have to select, organize, verify and pull out data, then place it in a real-time analytics platform and doing so at considerable scale as they seek the best ways to combine and move forward.

Data and technology issues aside, Will Hinde, a managing director at West Monroe Partners, warns this is not a done deal. “Considering the unsuccessful Anthem-Cigna and Aetna-Humana mergers indicates a tough road ahead for an acquisition on the scale of CVS and Aetna; it’s still possible that the Department of Justice could move to block this deal.”

As new care models emerge, such as a combined CVS-Aetna company, big data and analytics will play important roles in success of the venture, says Jeremy Sherer, an attorney in health law firm Hooper, Lundy & Bookman's Boston office. With new models and the shift to value-based care, providers will look to harness the data they have on patients that could lead to efficiencies and savings. Big data is information to analyze and analytics is the process to conduct the actual analysis with the goal to produce more efficient and higher quality care at a lower cost of care.

CVS and Aetna will seek increased roles for digital tools to aid in transitioning care to community-based clinics, which could include inside CVS pharmacies, Sherer believes. "There is a potential for major quality of care improvements and savings if, for instance, patients can use telemedicine and digital tools to communicate with their medical team from home and allow their recovery to be monitored remotely. The potential for change is significant if the parties can adopt a locally-focused model."

Haller also sees an upside for healthcare consumers in the consolidation of CVS and Aetna.

“While consolidation in the healthcare space is supposed to benefit customers via lower costs and better outcomes, this generally has not come to fruition from most mergers,” he notes. “But this vertical merger provides a unique opportunity to improve care management, especially of patients with chronic conditions who fill a lot of prescription drugs.”

But Haller also expressed concerns about the potential impact on patient privacy. “For example, will patients want their insurer to know they’re buying junk food or alcohol at a CVS retail outlet?"

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