Medical Tuesday Blog

Health-Care Giant Not Built Around Doctors

Nov 9

Written by: Del Meyer
11/09/2017 12:41 PM 

Deal seeks to create an integrated system, but without the key cost gatekeepers

The companies said the merged CVS’s stores will offer wellness services,
as well as vision, hearing, nutrition and medical equipment.

By Anna Wilde Mathews and Sharon Terlep

The Wall Street Journal | December 4, 2017

CVS Health Corp. and Aetna Inc. are attempting to create something with little precedent: an integrated health-care enterprise that isn’t built around doctors.

The combination of the two companies, in a deal valued at $69 billion and announced Sunday, is supposed to bring together Aetna’s patient data and CVS’s sprawling network of nearly 10,000 brick-and-mortar sites to squeeze out costs while improving care and convenience.

But no major health-care company has tried to build a vertical system around the combination of drugstores, insurance and pharmacy-benefit management, the main businesses of CVS and Aetna, experts said. The merged company will lack a strong foundation of its own doctors, who make many of the decisions that influence both costs and quality of care. . .

Creating the new setup will be a heavy lift operationally, according to experts including managed-care veterans. A company doesn’t have to own every part of the health-care food chain to achieve gains from vertical integration, said George Halvorson, former CEO of Kaiser Permanente, the large insurer and health-care provider. But, he said, “the question is implementation.” For instance, he said, information such as prescription renewals and test results needs to flow easily to all of those who help care for a patient, including doctors.

Other vertical operators in health care have taken a different path. Major Aetna competitor UnitedHealth Group Inc. owns a growing roster of doctor practices, surgery centers and urgent-care clinics, as well as the nation’s biggest insurer and a major pharmacy-benefit manager, or PBM. Big integrated players such as Kaiser Permanente and Geisinger Health System bring together the full spectrum of health-care services, including health plans, hospitals, clinics and physicians. Large hospital systems have been buying up doctor practices, as well as merging with one another.

“It’s much harder to have a cost and quality advantage if you’re owning an ancillary part of the health-care delivery system, not the main part,” said Robert Kocher, a partner at venture-capital firm Venrock. . .

The merged CVS’s vertical reach may also bring a risk, as the combined CVS-Aetna seeks business from companies that may now become direct competitors. . .

Read the entire report at the WSJ

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