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Transcript

HCLP 5003: CASE STUDY

AL DAILAMI

BREEN

CASTERTON

COHEN

FRIEDMAN

KARRA

CASE

OVERVIEW

"What they lack is the element of convenience and coordination. When we talk about this unmet need, that's really the unmet need that we're filling"

-Larry Merlo, CVS CEO

  • December: CVS Announces purchase of Aetna for $69B

2017

2018

2019

TIMELINE

2020

CVS Aetna Integration

2017

  • December: CVS Announces purchase of Aetna for $70B

2018

  • February: CVS Earnings Double
  • March: Cigna announces purchase of Express Scripts
  • June: CVS and Aetna choose combined executive team
  • August: Merger opposed by DOJ and AMA weighs in
  • October: DOJ approves the deal
  • December: US District court orders management to be kept separate

2019

  • June: CVS and Aetna plead their case
  • July: Additional hearings
  • September: Deal is signed

2020

  • February: Former Aetna Chief executive steps down from board; roll out of HealthHubs targeted at Aetna customers escalates

PRIMARY CARE/RETAIL MODEL

Will this merger truly create a shift in the way healthcare is delivered?

Two Perspectives

Patients

The Business

Will this merger create a shift in the way healthcare is delivered?

Patient Perspective

Streamline care with payor, clinic/pharmacy, and PBM under one umbrella

Benefit from reduced prices for MinuteClinic visits and CVS purchases ( both prescription drug and sundries)

Manage basic care/wellness through Minute Clinics, reducing need for lengthy wait times at hospital or ER

Work within limited choices when it comes to scheduling time with a provider or filling a prescription

Cope with the perception of lower quality of care (i.e., "cheapening of healthcare")

Will this merger create a shift in the way healthcare is delivered?

Business Perspective

Expand MinuteClinic and CVS retail pharmacy customer base by tapping into Aetna network

Add greater services to create more of a primary care model; transform most MinuteClinics into HealthHub

Incentivize Aetna members by rewarding healthy behaviors in order to decrease overall healthcare spending and insurance-related costs

Integrate consumer, patient, and insurance member data over longer term, allowing for more effective sales and marketing tactics

Navigate legal and ethical challenges that come with access to data

Avoid driving non-Aetna consumers to competing pharmacies or clinics (e.g., if non-member prices rise significantly)

PRESCRIPTION DRUG

COSTS

Are prescription drug costs more contained because of this integration?

$328 Billion on Prescription Drugs*

*2016 CMS Healthcare data

The Prescription Drug Value Chain

Augmenting the value chain through vertical integration?

Two Perspectives

Patients

The Business

Are prescription drug costs more contained because of the

CVS Aetna integration?

Patient Perspective

Streamline inefficiencies

Reduce price of prescription drugs

Decrease doctor and ER visits

May increase cost by decreasing transparency

Unlikely that cost savings will be passed on to patients

Centralization of power and reduced competition decreases incentive to keep prices low

Are prescription drug costs more contained because of the

CVS Aetna integration?

Business Perspective

Decreasing hand-offs in the PBM value-chain translates to increasing margins

Aetna-covered population establishes a consistent customer base

Increased foot traffic for primary care = increased foot traffic for Rx and sundries

Similar vertical integration across the industry could mean more fierce competition for their customer base

Push to become more transparent with pricing

COMPETITIVE RESPONSE

"What they lack is the element of convenience and coordination. When we talk about this unmet need, that's really the unmet need that we're filling"

-Larry Merlo, CVS CEO

Hospitals May Choose to Invest In

Reducing ED Wait Times

Expanded Rx Services

Insurance Services

High Revenue Specialties

Satellite Offices/

Urgent Care

SUMMARY

In

Summary:

Cons

Pros

Limit Providers

Streamline Care

Less Choice

Reduce Cost of Care

More Transparency

Unlikely That Cost Savings Will be Passed to Patients

Data Access (Ethical Use)

Drive Customers to their Business by Offering More Services

Reward Healthy Behaviors

Retention of Customers Who Sit Outside Value Chain

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