Last month, two major retail and pharmacy companies made big strides in delivering healthcare: Amazon finalized his purchase of One Medical and CVS Health announced their intention to buy Oak Street Health.
The deals aren’t unexpected, said Christopher Lis, managing director of global healthcare intelligence at JD Power. More … than 31 million people are now enrolled in Medicare Advantage plans, key demographics for primary care providers. In the meantime, bringing care closer to or within the home could create cost savings and improve care.
Lis sat down with MobiHealthNews to discuss recent mergers and acquisitions and any plans retailers and pharmacies may have for healthcare delivery.
MobiHealthNews: There are other retailers that are taking similar steps in providing care, like walmart And Walgreens. What opportunities do these companies see in the space?
Christopher Lis: I think there’s a lot of interest from some of these key players to expand their healthcare portfolios. In the case of CVS, we have strong core businesses that have synergistic and strategic alignment. We have the CVS Pharmacy, and if we look across the country, 85% of Americans live within 10 miles of a CVS store. So great access possibilities there. We have Caremark which is the PBM [pharmacy benefit manager]. And then we have Aetna, which is the insurer.
And Oak Street is a growing organization. I believe there are about 169 clinics right now, and there is a vision for establish 300 or more clinics by 2026. So I think CVS is looking for synergies both on the back-end, as well as synergies related to CVS channels to grow and expand their presence in value-based healthcare.
And then Amazon is a little bit different, because Amazon had some challenges in health care. Their strength certainly lies in operational excellence with logistics and supply chain. They are also renowned for their price transparency and improved access to goods and services for consumers.
They have some strength in pharmacy with Pill And RxPass. But they see some competition. Marc Cuban has this cost-plus model, which offers a lot of transparency around pharmacy pricing with transparency around manufacturer pricing, and then increments of transparency around additional costs and markups. Digital pharmacies are therefore going to present challenges for retail healthcare as we know it.
If we look at Amazon’s image, what are the big risks? I think one of them is that we have consumers and watchdogs who are concerned about how sensitive consumer health information will be used. This problem must therefore be solved. Amazon will need to be very transparent going forward about how information will be used with these organizations.
Amazon is going to have to build trust with its business partners and with its consumers for this to succeed, because they don’t have a legacy healthcare brand. Not yet. I think they have a great opportunity. It is definitely an organization to watch closely due to its excellence in supply chain logistics, transparency, and consumer access.
MNH: What do you think are the pros and cons of these types of care delivery systems for patients?
Read : I think the biggest opportunity will be to build trust with the consumer, to build trust with the patient. Because health care is very personal. The stakes are high. Especially in the case of Oak Street and One Medical, these organizations serve high-risk patient populations, in some cases from underserved areas. So there will be a great opportunity for these organizations to build trust as they scale. For example, CVS Health with Oak Street, they’re talking about going from 169 to 300 clinics over the next few years.
They are going to have challenges on several fronts. The first is that there is talent shortage in the provision of health care with which they will have to struggle and overcome. We are seeing staffing issues, not only in the vendor space, but also in the pharmacy area with pharmacy technicians and so on. Physician burnout is real.
And on the consumer side, there’s this big opportunity to build trust as new brands come onto the scene. CVS has fundamental advantages with Pharmacy and their PBM and Aetna. Outside of the pharmacy space, Americans are turning to Amazon for consumer goods and products.
Health is very intimate. These are very important relationships to build with the healthcare teams, very important decisions to make. It’s very relational. And I would say what we’re trying to do in the value-based healthcare industry is increase relationships and increase communications and what we call frequent contact. So the more interaction we have with the patient, the more evidence suggests better outcomes will be. Then, physicians and staff at each of these centers will get to know patients about the social determinants of health.
MNH: Do you think that poses a threat to more traditional health care providers, the health system?
Read : The main theme is that healthcare innovation is here. It’s not a concept, and there are very substantial changes going on in the market. While value-based healthcare has been discussed for the past 20 years, its momentum has accelerated very rapidly in recent years. Traditionally, we were mainly paid on a fee-for-service basis. We are still mostly there. there is no doubt. But the incentives are in line with these value-based health care arrangements.
I think there are downward pressures in these traditional environments that will cause these organizations to rethink innovation, to think about how they’re going to gain market share as the country moves towards more of these value-based health care arrangements. They’re going to have to think very creatively about what they’re going to do to move these efforts forward, what strategic partnerships are going to form with respect to each organization’s core capabilities, strengths and assets.