CVS Health and Aetna bet $69 billion merger on analytics, data, digital transformation
Can two companies merge their way to digital transformation, become a health care and analytics juggernaut and improve outcomes with one $69 billion deal? CVS Health and Aetna sure hope so.
CVS and Aetna merged in a deal valued at $69 billion. CVS valued Aetna at $207 a share and combines a large pharmacy and retail footprint with pharmacy benefits and insurance. The deal also creates a massive data pool that could lead to more personalized medicine and follow-up and efficiencies.
The rough plan is to use CVS' physical and digital footprint to provide more last mile services in healthcare. Aetna is a direct pipeline to insurance payments and the network of health care pros.
One of the core benefits pitched by CVS CEO Larry Merlo was better use of data and analytics. Aetna has had a solid analytics architecture for years and has focused on reducing fraud. CVS is using its Minute Clinics and pharmacy benefits data and combining it with its retail touch points. By offering more services and personalization, CVS and Aetna are hoping they can better manage chronic conditions, coordinate care and reduce hospital readmissions.
Merlo outlined the promise:
We continue to see the shift of health care decision-making into the hands of the consumer, and this trend was intended to empower health care consumers, but has frequently left them without the tools necessary to make informed decisions. So we will use our high touch connectivity to become the front door to health care for consumers. We will also improve consumer engagement by marrying physical and digital touch points with a broader use of data and analytics capabilities to inform health care decision-making and help patients navigate the complex health care system. Additionally, we see the health care marketplace evolving into a more value-based system, where premium is placed on the efficiency with which care is delivered. And will become a leader in driving further adoption of value-based care models through our combined assets, promoting lower cost site of care, eliminating unnecessary spending and enhancing our clinical programs. By integrating data across our enterprise assets and through the use of predictive analytics, we will create targeted interactions with patients to promote healthy behaviors and drive adherence, and this will further improve the quality of care for patients while also resulting in healthier outcomes.
Aetna CEO Mark Bertolini said the CVS deal gives the company a front door to its services and analytics approach that's already in place. "Clients, through the combined entity, will be able to help address the growing cost of treating chronic conditions through the broader use of data and analytics, leading to improved patient health at a substantially lower cost," he said.
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CVS via its acquisition of pharmacy benefits player Caremark has been to this data integration rodeo before. CVS has also become adept at creating data sandboxes when it has to play with other providers. That data silo ability will matter when CVS' retail has to work with an Aetna rival such as UnitedHealthcare.
There's no question that the combination of CVS and Aetna will create a data juggernaut. The combined company will have analytics and data along every piece of the healthcare food chain. Here's a look at the combined touch points of CVS and Aetna.
And those touch points spit out a ton of data. Here's CVS' data well:
Aetna's network looks like this:
The bottom line is that the CVS and Aetna combination will thrive or dive based on how well it uses data, personalizes care, drives cost savings and produces efficiency. Data will enabled the combined company to fend off a bevy of rivals including the likes of Amazon vs. CVS.
Here are a few moving parts to consider as CVS and Aetna aim for analytics nirvana.
What analytics architecture will work best? The analytics team and approach to technologies such as artificial intelligence, data science and machine learning can be federated, centralized or made by division. Whether CVS and Aetna can find an approach that works well for the combined entity remains to be seen.
How clean is the data? Obviously there are a few pockets of data where the CVS and Aetna have been able to shine individually. Aetna has used its analytics, machine learning and AI to drive real returns by reducing fraud. CVS has been able to engage more with customers via digital efforts such as texts and apps. Nevertheless, there may be a lot of grunt work ahead integrating data.
Will the quantified self and AI minimize the impact of all of these CVS and Aetna touch points? Health consumers have more data on themselves than ever. AI enables a lot of those first-wave health touch points. The broader question is whether AI becomes more like that primary care physician and render some of the CVS-Aetna strategies moot. CVS and Aetna will have to figure out how to use more technology to improve care.
Transformation turf wars. CVS Health has digital strategies for its pharmacy business as well as retail efforts. Aetna has partnerships with Apple to create iOS apps to improve care. Aetna also has digital units aimed at fraud, medical compliance and managing long-term conditions. Each company has its own approach to AI as well as ways to use data for personalization. These digital transformation silos will have to be managed and brought together where it makes sense. Like most mergers, CVS and Aetna can big synergy, cost savings and returns on deck, but ultimately these massive combinations need humans to play well together.
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