CVS Health's Merlo outlines Aetna integration plans
CVS Health's acquisition of Aetna is nearly complete. With Department of Justice clearance secured for the deal — conditional on Aetna divesting its standalone Medicare Part D prescription drug plan business to WellCare at the transaction's close — it now only lacks five state approvals (out of 28) and is expected to close by Thanksgiving.
As a result, CVS Health president and CEO Larry Merlo told investors on a call accompanying the company's third-quarter operating results that his focus is on the impending integration with the health insurer, with a long-term focus on substantial medical cost reductions, increased revenues through membership growth, increased customer satisfaction and retention, customer value expansion through CVS Health assets, and growth enabled by an open platform model.
Merlo said that CVS Health and Aetna’s integration and innovation teams’ immediate priorities in preparing for the close fall into two broad categories — successfully delivering on a stated goal of achieving $750 million in year-two synergies and executing on the foundational pieces of its new healthcare model to achieve longer-term growth.
“Our year-two synergy plan is largely complete, and we're ready to begin implementation upon closing," he said. "At the same time, we've developed a foundational plan that will benefit post-close from a deeper dive into Aetna's strategies and operations, leading to longer-term value creation.”
He said that central to realizing these synergies will be reducing the company's corporate expenses, integrating operations and focusing on reducing medical costs.
"We plan to accomplish [the medical cost reduction] through actions that increase adherence to prescription regimens and close gaps in care, along with programs that optimize the site of care either to reduce unnecessary emergency room visits or move expensive therapies, such as infusion to lower-cost sites of care."
Merlo said the longer-term medical cost savings will come from new programs that are possible through the combination and close integration of the two companies.
Substantial savings also are expected to be achieved through a specific portfolio of such products and services as the better management of diabetes, cardiovascular disease, hypertension, asthma and behavioral health, he said.
“We'll accomplish this by building upon our near-term medical cost savings through the tighter integration of pharmacy and medical claims, the rich clinical data set we will have, along with our community assets," he said. "Another example is the optimization and extension of primary care, by expanding the scope of services available at MinuteClinic to help with the early identification and ongoing management of chronic disease.
Merlo said he envisions that substantial savings also will be derived from programs and services that reduce avoidable hospital readmissions by joining Aetna's clinical programs with the CVS Health's community presence to better support patients during and after hospital discharge.
The development of comprehensive programs to better manage such chronic diseases as kidney disease, where the goal is to reduce hospitalizations and delay the progression of the disease, and oncology — where the objective is to align provider incentives to focus on quality and outcomes, while enhancing patient support — are also expected to result in cost savings, he said.
Pointing out that solutions will be accessible through a broad range of channels from local community-based assets to virtual and digital solutions that are all coordinated across the member's journey, Merlo said these solutions will be available to Aetna clients and their members, as well as to healthcare partners the company works with.
Concept stores that will play a key role in offering accessible, personalized care will be operational early next year, and programs and services will be piloted at these stores so they can be rolled out nationally, he said.
“Remaking the consumer experience will be an increasingly important competitive differentiator, and we are hard at work creating a plan to differentiate CVS Health in these patient journeys with the goal of making them simpler and more personalized, while making care more accessible,” Merlo said.
As a result, CVS Health president and CEO Larry Merlo told investors on a call accompanying the company's third-quarter operating results that his focus is on the impending integration with the health insurer, with a long-term focus on substantial medical cost reductions, increased revenues through membership growth, increased customer satisfaction and retention, customer value expansion through CVS Health assets, and growth enabled by an open platform model.
Merlo said that CVS Health and Aetna’s integration and innovation teams’ immediate priorities in preparing for the close fall into two broad categories — successfully delivering on a stated goal of achieving $750 million in year-two synergies and executing on the foundational pieces of its new healthcare model to achieve longer-term growth.
“Our year-two synergy plan is largely complete, and we're ready to begin implementation upon closing," he said. "At the same time, we've developed a foundational plan that will benefit post-close from a deeper dive into Aetna's strategies and operations, leading to longer-term value creation.”
He said that central to realizing these synergies will be reducing the company's corporate expenses, integrating operations and focusing on reducing medical costs.
"We plan to accomplish [the medical cost reduction] through actions that increase adherence to prescription regimens and close gaps in care, along with programs that optimize the site of care either to reduce unnecessary emergency room visits or move expensive therapies, such as infusion to lower-cost sites of care."
Merlo said the longer-term medical cost savings will come from new programs that are possible through the combination and close integration of the two companies.
Substantial savings also are expected to be achieved through a specific portfolio of such products and services as the better management of diabetes, cardiovascular disease, hypertension, asthma and behavioral health, he said.
“We'll accomplish this by building upon our near-term medical cost savings through the tighter integration of pharmacy and medical claims, the rich clinical data set we will have, along with our community assets," he said. "Another example is the optimization and extension of primary care, by expanding the scope of services available at MinuteClinic to help with the early identification and ongoing management of chronic disease.
Merlo said he envisions that substantial savings also will be derived from programs and services that reduce avoidable hospital readmissions by joining Aetna's clinical programs with the CVS Health's community presence to better support patients during and after hospital discharge.
The development of comprehensive programs to better manage such chronic diseases as kidney disease, where the goal is to reduce hospitalizations and delay the progression of the disease, and oncology — where the objective is to align provider incentives to focus on quality and outcomes, while enhancing patient support — are also expected to result in cost savings, he said.
Pointing out that solutions will be accessible through a broad range of channels from local community-based assets to virtual and digital solutions that are all coordinated across the member's journey, Merlo said these solutions will be available to Aetna clients and their members, as well as to healthcare partners the company works with.
Concept stores that will play a key role in offering accessible, personalized care will be operational early next year, and programs and services will be piloted at these stores so they can be rolled out nationally, he said.
“Remaking the consumer experience will be an increasingly important competitive differentiator, and we are hard at work creating a plan to differentiate CVS Health in these patient journeys with the goal of making them simpler and more personalized, while making care more accessible,” Merlo said.