The CVS-Aetna Deal: What it could mean for the health care industry
By Erin Reilly
CVS Health’s plan to buy Aetna for $69 billion may reshape the health care industry.
CVS announced the deal on Sunday, claiming the merger would provide people with an “integrated, community-based health care experience.”
“With the analytics of Aetna and CVS Health's human touch, we will create a health care platform built around individuals,” CVS CEO Larry Merlo said in a press release.
Aetna’s CEO and chairman, Mark Bertolini, added, “Together with CVS Health, we will better understand our members' health goals, guide them through the health care system and help them achieve their best health,” Aetna’s CEO and chairman, Mark Bertolini, added in the press release.
Most outsiders think the deal could come with both pros and cons.
“Effects from the merger may be positive or negative depending on the stakeholders’ perspective,” Jason Scozzafava, a clinical assistant professor of health sciences at Quinnipiac, said. “I believe what is highly likely is that a merger of this scope and scale will influence our health care delivery system.”
Specifically, Scozzafava said the merger could combine many health-related services in one company.
According to its press release, CVS has about 9,700 stores and 1,100 clinics, with 82 percent of Americans living within 10 miles of one of its locations. If CVS adds more locations, Scozzafava says it “would improve geographical access to health care services for many.”
“This strategy could also help to expedite the expansion of a new care delivery model, one which focuses on patient education, prevention, and management of chronic illness outside of the physician’s office,” Scozzafava said.
This will also affect the insurance side of the deal. Scozzafava said, potentially, it “could offer companies a ‘one-stop shopping’ experience for their employees.”
“People with Aetna insurance could have much of their preventative and disease management health care provided to them within the walls of the retail store,” Scozzafava said.
However, this may not be entirely positive. Scozzafava added that it “could also limit choices as to where one may go for care.”
He also noted that another possible negative effect of the deal could be the distancing between patients and their primary care providers. But Scozzafava feels there is still potential for various positive changes.
“Through the proper utilization of the CVS-Aetna health delivery model, the potential exists to help ease overcrowded emergency departments, improve patient ownership of their health, and decrease the cost of health care in the United States,” Scozzafava said. However, he noted that “a decrease in the cost of health care seems unlikely in our current climate, one that is dominated by private insurance companies.”
All of these possible scenarios rely on the deal actually going through. David Cadden, a Quinnipiac entrepreneurship and strategy professor emeritus, stressed that the merger still needs to be approved by the Department of Justice.
“Prior attempts to merge the largest insurance companies in the country were shot down by (the Department of Justice),” Cadden said.
However, Cadden said this case is different. He said the CVS-Aetna deal would be considered a vertical merger because the two companies are in the same supply chain. The deals that he says were denied were horizontal mergers because they consisted of companies from the same industry.
Cadden said CVS and Aetna “will argue that this merger will lead to significant cost savings, which then could be passed on to the consumer.”
“If they can demonstrate this, there is a significant probability that the Department of Justice would approve the merger,” Cadden said.
The question of whether or not the deal will be approved is part of a larger atmosphere of uncertainty within the health care industry, with its future remaining unclear.
“Our U.S. health care system is going through uncertain times,” Scozzafava said. “The political changes in Washington have led to uncertainty with Medicare funding and the (Affordable Care Act).”
Also, there is the threat of new competitors in the health care industry.
“Retail stores like CVS are responding to the threat of e-commerce, more specifically Amazon potentially entering the pharmaceutical distribution business,” Scozzafava said. “Amazon has proven its ability to disrupt longstanding shopping behaviors and CVS may be trying to get ahead of the change.”
The deal with CVS could be the second major Aetna-related change for Connecticut this year. In June, the insurance company announced that it would be moving its headquarters to New York City after being in Hartford for 164 years. Aetna plans to move sometime next year, but about 6,000 employees will remain in Connecticut.