A year after its historic acquisition of Hartford-based Aetna, Inc., CVS Health Corp. remains bullish on Hartford, making good on its commitment to maintain a local workforce of about 6,000 and planning to roll out expanded health services at some pharmacies in Connecticut, beginning in Hartford this spring.
“I’ll underscore the point that we made a year ago that keeping Aetna’s headquarters in Hartford as a center of excellence for our insurance business,” Larry J. Merlo, CVS chief executive said, in an interview with The Courant. “Importantly, we are continuing that terrific work that the Aetna Foundation has done in terms of continuing to honor civic contributions.”
CVS agreed to keep Aetna’s headquarters in Hartford for at least 10 years and maintain the health insurer’s workforce for at least four years as part of its approval for the $69 billion acquisition. The deal closed in November, 2018.
Aetna -- as a designated “center of excellence” for CVS -- could emerge as critical to the company’s plans for the future as it uses data maintained by the Hartford insurer to identify potential health warning signs in patients earlier, avoid more expensive treatment and thus, push down the overall cost of health care.
Merlo said it is possible Hartford could benefit from the transfer of other CVS businesses to the city.
“I would not rule that out as we go forward,” Merlo said. “That’s something we’re continuing to look at as we evaluate our future needs.”
Merlo said CVS will keep its corporate headquarters in Woonsocket, R.I. In addition to Hartford, CVS also has centers of excellence in Chicago, Dallas, Phoenix and New York.
While Merlo this week celebrated the first anniversary of the corporate combination, health industry analysts say the integration is still in the early stages.
“The first year of a managed care business, in a lot of ways not much should have gone wrong,” Lance Wilkes, a senior analyst at Sanford C. Bernstein in New York, said, noting that health insurance contracts are already in place.
“How you are going to manage the business and how Aetna historically managed the business, you will start to see the impacts in 2020 and 2021," Wilkes said.
So far, at least, investors appear pleased at what they have seen. CVS shares have shot up nearly 50 percent since April, after initial fears about weakness in the pharmacy benefit business and the pharmacy retail business -- neither directly related to the merger -- receded in the minds of investors.
A new vision for CVS
The merged companies also have aggressively pressed forward laying the groundwork for a vision CVS says has the potential to transform the health care industry and help put the brakes on the soaring costs for care.
In June, CVS announced that it would retrofit 1,500 of its pharmacies across the country to incorporate “HealthHUBs” to provide more health care services in the next two years. The push comes after opening 50 in Houston, Tampa, FL, Atlanta and Philadelphia this year.
The first in Connecticut will open this spring in Hartford at a location that has yet to be determined, the company says.
HealthHUBs expand on the the strategy of CVS’s walk-in MinuteClinics to make CVS locations a true health care destination, going well beyond the traditional role of the pharmacy, the company says.
“The HealthHUB would include a MinuteClinic with expanded capabilities to not just diagnose acute illness but to provide for management of chronic disease,” Merlo said.
Merlo said the expanded locations could do blood tests, offer dietary and nutrition services, “wellness” rooms for groups on health topics and a “concierge” to help customers better understand their health benefits.
Merlo said CVS strategy is built on the vision that health care has to be local and where people are, “whether it’s in the community, the home, or even now, in the palm of your hand.”
CVS also sees the opportunity to use health data from Aetna to not only help customers stay on their health plans, but get to them earlier to head off more serious troubles and costly hospital stays.
Merlo said CVS is starting to develop a plan to use the health data. Traditionally, a telephone call from Aetna might have been placed to a plan member about coverage, but that has been found to have a marginal impact.
In the future, the local pharmacist filling a prescription might see that a customer is overdue for a diagnostic test and talk directly to the customer, Merlo said.
CVS has pharmacies in 10,000 communities nationwide and, according to the company, about 70 percent of the U.S. population lives within 3 or 4 miles of a CVS pharmacy.
But changing patient behavior might not be as easy as it might sound for a population -- especially an aging one -- that is more comfortable going to their primary care physician, said Spencer Perlman, a health care policy expert at Veda Partners in Bethesda, MD.
Perlman said he sees CVS providing care for routine illnesses, say a sore throat, but if there is something more serious, would a patient take the diagnosis of a nurse practitioner in a Minute Clinic or say, “Hey I should really go to my doctor.”
CVS could clearly make headway with its model but it will only be able to go so far without bringing primary care physicians into the equation, Perlman said.
Sanford Bernstein’s Wilkes said he expects physicians will be brought into the HealthHUBs. That would be similar to pilot programs already being tested by both department store giant Walmart and pharmacy competitor Walgreens outside of Connecticut.
“They can just take the step from going from 1,100 MinuteClinics to 1,500 HealthHUBs and once they are a little further along with that, then they can start to deploy the next step, which is what I would expect,” Wilkes said.
Changing health care
Merlo, 63, is a former pharmacist who joined CVS in 1990, the year the pharmacy chain where he worked was bought by CVS. He rose through the ranks to head retail operations and was named CEO in 2011. He won over skeptics of his ascension to CEO after turning around the troubled acquisition of Caremark, the pharmacy benefits manager.
The CVS pharmacy juggernaut has come under criticism for crowding out rapidly disappearing independent pharmacies. Merlo said there is a role for the independents to play, but Merlo sees CVS’ place in the health care landscape as far different.
“That speaks to going beyond just dispensing prescriptions to performing some of the [things] to help someone on a path to better health,” Merlo said.
Merlo said he also sees private companies like his as on the forefront of innovation and thus key to the future of health care -- despite talk during the presidential campaign about single-payer health care system.
Meanwhile, Merlo says CVS is making good on its announcement earlier this year to invest $100 million over the next five years in communities served by its pharmacies.
The goal is to promote health and wellness, including non-medical influences on health such as housing and education. The program continues the Aetna Foundation’s “Healthiest Communities” initiative.
As part of the $100 million program, CVS will announce a $1 million grant over five years, split between the Boys and Girls Club in Hartford and Providence.
Merlo also praised the community involvement and volunteerism ingrained in both the CVS and Aetna cultures.
“Aetna employees, much like CVS employees are very focused on giving back and regularly volunteering,” Merlo said. “Just in Connecticut, Aetna employees volunteered more than 100,000 hours over the course of the year.”
Kenneth R. Gosselin can be reached at [email protected].
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