CVS Health Will Spend Up to $25 Billion on Provider M&A

by Peter Johnson

At the firm’s annual investor conference, CVS Health Corp. executives promoted closer vertical integration and promised to move even further into care provision. CVS, which acquired Aetna in 2018, emphasized virtual care and its retail HealthHUB clinics in recent months, and it has indicated it has a strong interest in acquiring providers, particularly in primary care. 

Firm Aims for ‘Omnichannel Health Delivery’ 

• According to CVS Health CEO Karen Lynch, the firm’s position astride three businesses — retail, care delivery and benefits management — is why it will perform better than its rivals, such as UnitedHealth Group and Walgreens Boots Alliance Inc.
• “Our reach is unrivaled. We are closer to the consumer than anyone else, both in terms of proximity, and in terms of reach and relationships,” Lynch said during her keynote at the Dec. 9 conference.
• Throughout her remarks, Lynch emphasized the importance of primary care and risk-based provider agreements. She also said that moving Aetna members into risk-based primary care relationships is a central element of CVS’s so-called “omnichannel health delivery” strategy.
• In managed care, Lynch said she is “focused on growing our government businesses: dual eligibles, Medicare Advantage, exchange plans.” In pharmacy, she said her focus will be “offering integrated products and services and growing our specialty pharmacy” while “expanding our reach and our engagement with target customer segments such as the aging population and those with chronic health conditions.” 

More Transactions Are Likely 

• Lynch said that “reaching scale with this model will require partnerships and M&A [mergers & acquisitions] activity.”
• The firm will have plenty of cash to spend, according to CVS Health Chief Financial Officer Shawn Guertin. In his remarks to the conference, Guertin projected CVS Health will generate “$40 to $50 billion in cumulative deployable cash between ’22 and ’24.” Of that money, he said that 25-35% will be spent on meeting Aetna’s medical loss ratio requirements and 20% will be spent on shareholder dividends. The remainder or “about half” of that cash — as much as $25 billion — will be available for transactions.
• “We will build the nation’s preeminent risk-enabled, vertically aligned, all-payer primary care delivery platform….The main focus of this will be on risk bearing in value-based models,” Guertin said.
• “There are some key capabilities that we need to deliver to achieve this vision. One is a network of physician-led advanced primary care centers….We will also enhance our health care services… [which] will help facilitate partnerships with [primary care providers] and allow us to…deploy the best model for each geographic market.” 

From Health Plan Weekly