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CVS' Q4 earnings call, it was announced that CVS-Aetna saw significant growth
in Medicare Advantage (MA) enrollment in 2019, adding about 563,000 new
members, which CEO Larry Merlo said represents a growth rate of over three
times the industry average for the year, according to FierceHealthcare.
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Additionally, CVS
noted that it opened more than 50 HealthHub concept stores — which dedicate
more space to healthcare services and medical equipment than traditional CVS
stores — across four markets in 2019 as part of its goal to launch 1,500
HealthHubs by the end of 2021.
CVS-Aetna is doubling
down on strengthening its hold in the MA market — and CVS' renewed interest in
offering health services could be part of an effort to control the costs for
caring for seniors. Following its $70 billion merger
with Aetna — the US' third-largest health
insurer by membership — in late 2018, CVS has focused on a strategy aimed at
offering convenient, comprehensive in-person health services to its customers
to limit costs associated with poor health outcomes that the newly formed payer
would be on the hook for.
For example, in
January, CVS CEO Larry Merlo announced that
select Aetna health plan members who use CVS Health services — such as those
offered in its HealthHub locations — could look forward to "zero
cost" and "low copay" treatment options. And with CVS-Aetna
seeking to grow its MA footprint — MA membership is expected to account
for 42% of all Medicare
beneficiaries by 2028 — it makes sense for CVS to double down on
health-centered initiatives to help shore up on high spending related to care
for seniors.
CVS Health is setting
itself up to be a multifaceted healthcare titan, which should help it ward off
competition from e-pharmacy newcomers. CVS Health now controls the
third-largest US health insurance company, the second largest pharmacy chain in
the US, and the nation's largest pharmacy benefits manager, according to data
from Open Markets Institute.
Essentially, one
company (CVS) is doing business with itself across three fronts: It's the
insurance company, the pharmacy dispensing medication to its members, and the
middleman responsible for negotiating between the two so that customers get the
best rates. This means competing against the multifaceted healthcare giant
could be a difficult proposition for less established firms such as Capsule, an
e-pharmacy startup which recently bagged $200 million in
funding to scale its no-cost, same-day medication delivery service across the
US.
And while startups
like Capsule could draw customers away from CVS Health given the convenience of
its medication delivery service, this could become a more difficult
proposition, considering HealthHub stores offer a comprehensive experience
where customers can see a provider and receive their prescription from the same
location — and CVS Health estimates that its HealthHub stores will cover 80% of what a
primary care doctor is capable of treating.
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