|THIS WEEK IN HEALTHCARE
What happened in healthcare this week—and what we think about it.
CVS announces aggressive expansion plans
In a presentation to investors this week, retail pharmacy giant CVS Health announced plans to expand its “HealthHUB” store concept, first launched at three store locations in Houston, to 1,500 stores in the next three years. The new store concept, built to take advantage of CVS’s 2018 acquisition of health insurer Aetna, is centered around providing more extensive care management and wellness services than traditionally available at the chain’s Minute Clinics. In addition to Houston, the company is targeting Atlanta, Philadelphia, and Tampa, all in states where Aetna’s existing insurance footprint and the new care offerings can be combined to create new benefit designs and consumer engagement approaches. In a wide-ranging discussion of the company’s future strategies, CVS executives also outlined plans for delivering home-based dialysis, expanded in-store primary care services, and further expansion of virtual care. In sum, CVS is banking on its ability to lower care costs for health plan enrollees and increase use of its clinic services to grow incremental revenue by $850M in the next three years, and $2.5B longer term. We continue to view CVS as an entirely new kind of healthcare delivery company, bringing together convenient, lower-acuity care services and a risk model that will allow it to prosper by reducing the cost of care and building consumer loyalty. The speed of CVS’s rollout of this new value proposition should be a wake-up call to traditional healthcare providers everywhere.
A familiar disruptor is spooking hospital execs
Meanwhile, according to Business Insider, insurance giant UnitedHealth Group has its own aggressive plans for expanding lower-acuity care delivery as part of its OptumCare division. Senior executives from the company reportedly told a gathering of investors that they expect to grow revenue from delivering care from $16B today to $100B by 2028. The OptumCare target is part of a broader UnitedHealth Group strategy to capture and manage Medicare Advantage “lives”, using referral management and care coordination approaches to reduce utilization of costly hospital and specialist services. $100B seems like an aggressive goal; by comparison, hospital company HCA Healthcare’s 2018 revenue was only $46.7B. To hit a target of $100B, OptumCare would need to expand its care delivery portfolio, now centered in primary care, urgent care and ambulatory surgery, to include other services. Executives rejected the notion that the Optum would ever directly own hospitals, however, instead describing their strategy as selectively partnering with health systems in markets where it lacks a critical mass of non-hospital assets. That’s little comfort to hospital leaders, who have grown increasingly concerned about the insurer’s encroachment on traditional provider territory. In a recent survey conducted by consulting firm Kaufman Hall, two-thirds of health system executives cited UnitedHealth Group/Optum as a “strong” or “extreme” threat, ahead of other potential disruptors including CVS, Amazon, Google and Apple. We believe incumbent provider organizations increasingly find themselves encircled by these new-style competitors, and must seize the initiative by developing new, more consumer-friendly approaches to care delivery that can ensure their relevance in a much more demanding and diverse healthcare marketplace.
Anthem acquires the nation’s largest behavioral health company
Anthem, Inc., the nation’s largest Blues plan with enrollees in 27 states, announced this week that they plan to acquire Beacon Health Options, the country’s largest behavioral health organization, which serves 36M patients across all 50 states. On the surface, this move appears to be in line with the provider acquisition strategies of other large national health insurers like UnitedHealth Group and Humana. While Beacon brings a broad array of behavioral health services, much of their portfolio is weighted toward intensive management of addiction and serious mental health conditions, and access for vulnerable populations. Combined with Anthem’s acquisition of CareMore Health, this move indicates that the insurer may be focused on building a care network to manage complex patients in its growing Medicare Advantage (MA) and Medicaid businesses, over solutions positioned for younger, healthier enrollees. (Government business accounts for nearly two-thirds of Anthem’s revenue.) CareMore has flourished under Anthem, in part by maintaining a degree of strategic and operational independence. It will be worth watching how tightly Anthem tries to integrate Beacon into its existing operations, and how Beacon’s client base, which includes 180 employers and 65 health plans, responds.