This is what it looks like when a drug store chain and a health insurer merge.
In November, CVS completed its $69 billion acquisition of Aetna, the largest health care deal in history. Now, CVS is piloting three "HealthHub" stores in Houston with a suite of health care services that could be the drug store of the future.
The new HealthHubs fit into CVS CEO Larry Merlo's ambitious plan to turn his company's 9,800 stores into a "health care destination." CVS wants to arm its sprawling network of stores with a range of health services to protect against competition from Amazon and a wave of mergers in the industry.
"The service component will be an element that is hard to replicate online," Merlo said at a conference last year.
CVS already has 1,100 walk-in MinuteClinics that offer basic care for strep throat or an ear infection. But its HealthHub stores are much better equipped to deal with patients with chronic conditions, such as diabetes and respiratory illnesses. The revamped stores, with on-site dieticians, nurse practitioners, lab services, and medical supplies on the shelves, signal that CVS wants to move its stores beyond aisles of snack food and toothpaste.
"Do you need to have half a row for greeting cards? Probably not. And how many different types of shampoo do you need?" said Lisa Gill, health care analyst at JP Morgan.
Houston stores replace weaker-performing sections like greeting cards with 20% more floor space dedicated to health products, such as those for asthma and sleep apnea and iPads that explore health and wellness apps.
"This is a natural evolution since they recently bought Aetna," said Ross Muken, analyst at Evercore ISI. CVS wants to present a "holistic approach to health care," he added.
Spiraling health care costs
CVS starts off with a big advantage. It has been pushing into health care for years: it bought pharmacy benefits manager Caremark more than a decade ago. In 2014, it bought Omnicare to expand its business among patients with chronic conditions and stopped selling tobacco.
It's the largest pharmacy chain in the country, and nearly 70% of the US population lives within three miles of a CVS store.
The company's 30,000-plus health care professionals also make its HealthHub strategy credible with consumers: "In the health care system, one of the most trusted advisers is the pharmacist," Gill said.
CVS bought Aetna to create a gigantic customer base: It collects health care premiums from around 39 million Americans. The company believes the acquisition will help it lower costs and increase profit from those plans.
But these stores will face competition from urgent-care clinics that are popping up across the country, as well as retailers like Walmart that are also making a play in health care.
CVS has zeroed in on patients with chronic conditions as a key way it can drive down costs. Patients with chronic medical conditions are the most expensive to insure in the United States. Five conditions account for about 80% of the $3.5 trillion in annual health care spending: Heart disease, diabetes, hypertension, asthma and mental health.
"This is where we see a big opportunity. Individuals with diabetes, asthma, cardiovascular disease — we know their name," Merlo said last year. "They're not achieving their best health."
Hub stores like the new ones in Houston will target these patients with expanded MinuteClinic services that can screen, diagnose, treat and provide follow-up care. Stores in Houston will also have more patient-care rooms, as well as classes for health and nutrition seminars. There is a class with the American Heart Association in Houston, for example.
Although the Houston stores won't have doctors on site, CVS has partnered with TelaDoc, a virtual health care platform that connects doctors and patients.
Avoiding an ER trip
CVS wants patients to come to its stores for more minor conditions, rather than going to the emergency room, which is the costliest care option for insurers like Aetna. Trips to the ER can run up providers thousands of dollars every visit.
"Think of the number of visits that end up in an emergency room," Merlo has said. "They could be seen at a retail clinic at a fraction of the cost."
CVS believes it can become a "coordinator of care for patients," advising them on exercise, diet, and weight loss plans. Patients with chronic conditions may go to the doctor and leave with a treatment plan, but they're often left on their own after that. That's where CVS wants to carve out a role.
"We're not going to cure diabetes, but we can help that patient with diabetes achieve their best health and avoid unintended medical events that are occurring every day with thousands of people across the country," Merlo said.
'Hub and spoke'
The company plans a "hub-and-spoke approach" to remodeling stores across the country.
CVS is still figuring out what the hub stores will look like. Region by region, CVS says it will decide which conditions are most prevalent in communities and what health services to provide that can reduce costs.
"If there's a community where there's a high diabetes rate, they would have experts stationed in those stores that offer outreach, places for customers to get supplies, places to work on weight loss and check your insulin level," said Evercore's Muken.
Some stores will offer vision and hearing or blood pressure screenings, while others might have blood labs and offer vaccines. It's also running a pilot with SmileDirectClub to offer dental services at six stores.
Trips to clinics boost CVS' profit and allows it to pour money back into creating more competitive health insurance plans through Aetna.
CVS gets to collect a payment for a customer visit, instead of writing a check for an ER visit. 90% of the time patients visit a primary care clinic, a prescription will get written, Gill said.
So CVS gets to fill those prescriptions. And if customers hang around while the pharmacy fills out their prescription, CVS hopes they'll shop the store for an over-the-counter supplement or one of CVS' new healthy snacks.
- Fake Instagram accounts hijack Sudan solidarity campaign
- Encuentran el cuerpo de un mago después de su fallido truco al estilo Houdini en un río
- Hay más de 70 millones de desplazados en el mundo, alerta la ONU; Venezuela, uno de los países más
- Key things to know about Facebook's Libra cryptocurrency project
- Hershey's gives its best candy bar a makeover