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Our Take: CVS to expand HealthHub stores as part of its growth strategy

Jun 10, 2019
CVS will increase the number of HealthHub stores to 1,500 by the end of 2021, the company announced at its 2019 Investor Day.

HealthHub stores have expanded space for health-related products and larger health clinics with a lab for blood testing and screening. They also have a general wellness room used for yoga classes and educational events.

After piloting the concept in Houston, the company now intends to introduce more HealthHub stores in the Houston area, as well as Atlanta, Philadelphia, Tampa, Fla., and southern New Jersey.

Our Take: In addition to the massive expansion of HealthHub locations, CVS said the management team is focused on a laundry list of activities, including:
• Driving engagement through personalization
• Delivering new and innovative benefit designs
• Optimizing government programs
• Creating new analytics products
• Developing programs for complex conditions

CVS President and CEO Larry Merlo said, “Our goal is to fundamentally transform the consumer health experience for the millions of Americans we interact with every day, while creating value for our patients, members, partners and shareholders.”

Although the HealthHub is one way to accomplish this, will people want to go to CVS for their yoga classes and health seminars?

Today, there are about 1,100 MinuteClinics in CVS’ 9,800 locations. MinuteClinics tend to serve patients who have lower-acuity needs, such as colds and vaccinations. HealthHubs will focus more on the everyday needs of patients who have chronic illnesses, offering a more personalized approach to patient care.

Michael Abrams, managing partner at Numerof & Associates, isn’t buying it. Htold Modern Healthcare that offering personalized care “requires adding a human face to health care that, quite frankly, CVS has no particular experience in.”

CVS stores tend to operate with a lean staff and are mostly self-service, Abrams said. “The way they run their operations now, in general, their culture is not one of deep individual personal engagement.”

The real story here has to do with CVS’ acquisition of Aetna and the company’s subsequent efforts to integrate insurer data with pharmacy data, to tell a richer story about the health status of Aetna’s 21 million members. According to Dr. Alan Lotvin, CVS’ chief transformation officer, CVS is targeting locations where Aetna members have the highest rates of chronic disease.

It’s ironic that CVS made the announcement on the same day that U.S. District Judge Richard Leon held the first hearings about the $69 billion merger between CVS and Aetna. Despite the U.S. Justice Department’s approval of the merger — and the fact that CVS and Aetna have already combined their operations — Judge Leon is still reviewing the case.

The Tunney Act requires a court review of all Justice Department decisions regarding mergers and acquisitions.

No one seriously thinks that Judge Leon can stop the deal, but he might create problems for CVS by requiring more divestitures than the company has already agreed to.

What else you need to know
In a 7-1 decision, the U.S. Supreme Court ruled last Monday that the Department of Health and Human Services failed to properly seek public comment before changing the way CMS calculates Medicare payments to disproportionate-share hospitals (DSHs), commonly referred to as safety-net hospitals. Mandated by the Affordable Care Act, the change in payment policy was scheduled to take effect in 2014 and was to be retroactive to fiscal year 2005. After numerous delays, the change was set to take effect in fiscal year 2020, which starts in October; DSH payments would have been reduced initially by $4 billion and the cuts would have increased to $8 billion by 2025. The day after the court’s ruling, members of a House subcommittee discussed both a proposed full repeal of the DSH cuts and the possibility of overhauling the DSH funding formula.

Partners HealthCare announced Tuesday that it was withdrawing its application to acquire Care New England (CNE). The two health systems began to explore a possible affiliation more than two years ago and signed a definitive agreement in May 2018. Based in Boston, Partners would have increased its regional market share by purchasing Providence, R.I.-based CNE. Other stakeholders have been involved in the negotiations over the last couple of years, and Rhode Island Gov. Gina Raimondo said Tuesday that she has asked CNE, Lifespan and Brown University to resume talks, with the goal of establishing a strong, locally run academic medical center. Meanwhile, existing clinical affiliations between CNE and Partners will continue, and Partners indicated its willingness to re-engage with CNE or the resulting entity in the future.

Cincinnati-based Bon Secours Mercy Health is selling a majority stake of Ensemble Health Partners, the health system’s revenue cycle management subsidiary, to Golden Gate Capital, a private equity firm based in San Francisco, according topress statement by Ensemble Health. The transaction, in which Golden Gate Capital will attain 51% ownership of Ensemble Health, is valued at approximately $1.2 billion, The Wall Street Journal reported, citing people familiar with the matter. Bon Secours Mercy Health will retain minority ownership, will continue to serve as a commercial partner to Ensemble and will be represented on Ensemble’s board. The deal is subject to regulatory approval.

Connecticut’s proposed public health insurance option is off the table for now, after Cigna’s CEO allegedly threatened to move his company elsewhere if the bill moved forward, the Hartford Courant reported. According to the state’s comptroller, Cigna CEO David Cordani made the threat during recent negotiations between state legislators and insurers. A company spokesman said Cigna had lobbied strongly against the bill but denied that any such threat had been made. Gov. Ned Lamont told the Hartford Courant that although he remains committed to the Connecticut Option, the proposed legislation “must leverage the best thinking from all stakeholders, including the carriers.” The bill’s sponsors and the governor’s office intend to reintroduce the proposal again during next year’s legislative session.

Subscriber feedback
In last week’s editorial on Novartis’ new gene therapy, we wrote: “By our math, about 385 newborns each year in the U.S. will be diagnosed with SMA. That means Novartis will add about $500 million in annual sales to its top line, assuming that it can take 60% of the market away from Biogen.”

Thomas Abbott, Global Head, Real World Informatics Capabilities and Alliances at Astellas Pharma US, pointed out the errors of our back-of-the-envelope approach:

“The above calculations may make sense (economically) in a static world where the only options are this gene therapy or current treatments (which I think are about $500k per year); but in a dynamic context where additional entrants might appear in the planning horizon, the future benefits should be discounted at a fairly high rate to represent the opportunity cost of forgoing those future treatments (which could be better, more effective, fewer side effects, cheaper).”

What we’re reading
‘Eyes In The Home’: ACOs Use Home Visits To Improve Care Management, Identify Needs, And Reduce Hospital Use. Health Affairs, June 2019 (subscription required)

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