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Is CVS' Acquisition of Aetna Good News?

Posted by Chip Block on December 4, 2017 9:20 AM EST
Chip Block photo

Within these Blogs from time to time, we find ourselves re-publishing news from others.  A good example of this is this weekend's interesting announcement of CVS' intended purchase of Aetna health insurance, one of our nations largest health insurance carriers.  So, is this a good thing...

...or is it simply business as usual and just a fancy way to prop up earnings or increase share price?  Short answer-who knows?

On the other hand, Blogs such as ours are not about taking the easy way out.  Offering an opinion, whether one that is credentialed or credible, is what every Blog ought to do.  Ours is no exception-as long as we do the right thing and disclaim our expertise on certain topics as less than expert level expertise.

Such is the case here.

As someone who fancies himself a management consultant around innovation and employee health benefits, with a dose or two of social collaboration and community action/collective impact on the side, I will admit that I am not an expert of the financial advantages and benefits of such propose vertical integration plays.  But I have an opinion there since I am an investor-good or bad.  My opinion is that this is a good combination, on paper if not in the practical sense.

Let's not spend much time discussing the financial aspect of such a merger, however.  Others much more qualified will weigh in on this one for some time to come, including folks in the judicial system determining if this acquisition meets stringent FCC and SEC requirements.

I DO think that this type of move is a good one in terms of how it meets the classic criteria for business moves that respond to disruptive innovation.  And how it may enable improvements in the out of control disbalance between quality, accessibility and low-cost healthcare services and products.

Here's why that this move makes sense on the grounds that it can potentially help lower the hurdles that make healthcare services and products such a high-potential target for disruptive solutions that lower the costs of the incumbent methods, improve access and convenience, reduce the complexity of offering and drive better quality and value through lower prices.  In my mind, this one is a no-brainer on all four of those counts.  Presuming the acquisition is approved and if approved the integration and execution of combining these companies is well-managed, the potential to score meaningful, sustainable impact on these classic four dimensions for the disruption that benefits consumers are almost too obvious to mention.

Here's just a few:

1. Lots of convenient locations and easy build out of facilities that are "good enough" to provide basic healthcare services at the same time that power priced pharmacy products may be made available.

2.  Opportunities to provide myriad pricing and cost incentives tied to purchases of healthcare services in combination with pharmacy products.

3.  Strong opportunities for improved consumer education due to database marketing and communications tools that can cross-promote both sides.

4.  Hiring nurse practitioners and physicians assistants to staff these "good enough" physical clinics will reduce the cost of healthcare services for many basic services.

5. Opportunities to help consumers better understand the financial impact of their choices across both healthcare services and products, including meds.

Here's my caveat though.  We know from much research that the large drivers of healthcare costs is not borne by basic services, though many are key to reducing what are the key drivers of healthcare costs which are chronic illnesses and large medical interventions.  So, while this is a BIG HAIRY AUDACIOUS GOAL that can do much good at reducing costs, improving access, strengthening the quality of healthcare services and decreasing complexity, it still falls short of the key aspects of population health management that targets the areas of most dramatic improvement and where the majority of costs increases reside-prevention and recovery.

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