While working in one of the largest safety-net hospitals in the country, I saw how difficult it can be for people to access medical care. For many providers, the story of the patient with diabetes or a suspicious lump who couldn’t get an appointment on time or who couldn’t miss work will resonate too well. Many hospitals have adopted initiatives to improve access, but innovation has been slow, confined to individual facilities and hampered by regulation.
In the absence of a productive government, some find it necessary to turn to industry. CVS Health is an industrial giant that promotes itself as the newest solution in healthcare. Its power unknown to many, CVS Health is a national conglomerate made up of 9,900 retail stores, which serves more than one million customers a year through its senior pharmacy, operates 1,100 MinuteClinics, has 105 million enrollees through its pharmacy benefits manager (PBM) Caremark, and manages health insurance for more than 34 million people through traditional, voluntary programs, and consumer health insurance products and related services, including Aetna. And now, CVS Health has unveiled its new venture: primary care.
CVS Health wants to grow by turning MinuteClinics into HealthHUB Clinics, a one-stop-shop for primary care needs. Customers will be able to schedule primary care visits, browse CVS’s 6,000 branded medical products and receive training on chronic disease management. On November 5, 2021, CEO Karen Lynch announced CVS Health would hire primary care physicians for their new HealthHUBs, a move that will make CVS Health the first company to offer pharmacy-linked patient medical care, covered by its own insurance plan and managed by its own PBM.
Can such a vertically integrated, for-profit company deliver on its promise to increase access to high-quality care while reducing healthcare costs? The majority (71%) of Americans living in a 5 mile radius of a CVS, the company is ready to provide local and convenient primary care. However, the complexity of the incentives in the built-in CVS Health model prompts one to approach this new model with caution.
First, the relationship between an embedded health care provider and an insurance company has implications for how high quality care can be incentivized. While providing high-quality care that keeps patients out of hospital will reduce costs for the insurance provider, incentives could also be skewed to prevent patients from accessing expensive services. Current insurance companies do this with usage controls, such as access control, pre-authorization requirements, and step therapy. In theory, tighter usage controls at CVS Health could lead to telehealth first and limited in-person visits to HealthHUBs, leaving Aetna members with little choice in primary care services and reliance on a quality unknown to new HealthHUB practitioners. Additionally, having providers employed by both an insurer and PBM could create incentives to reduce out-of-network referrals, preventing patients from getting the care they need. Meanwhile, the company’s profits would likely outweigh the losses incurred as a result of deteriorating patient health.
Second, complexities arise from the potential for induced demand. A pharmacy-owned provider service could theoretically incentivize doctors to increase prescriptions, especially those covered by the formulary negotiated by the PBM Caremark. Although some may think that doctors would not engage in such actions, numerous studies have shown that doctors, like all human beings, can be influenced by financial motivations.
Finally, with an insurer providing care to its own patient population, it will be important to monitor any potential skimming in which less healthy people are not incentivized to join the CVS Health plan. Skimming was widely reported in Medicare Advantage (MA) plans, and with much of 2020 CVS revenue stemming from MA advantages, it will be important to keep an eye out for any additional skimming tactics.
Some would argue that such profiteering tactics are worth tolerating if they reduce health care costs in the United States. One argument is that, with its strong network of 105 million members, Caremark PBM could negotiate with manufacturers and suppliers to lower drug and hospital prices. However, research has not shown that for-profit vertical integration will pass cost savings on to patients. On the contrary, the current structure of the PBM encourages formulary coverage of all drugs that the PBM can negotiate the highest discount percentage on, with discount expired to the insurer or PBM rather than to the patients. In fact, a the lawsuit alleges that CVS Health denied consumers low-cost generic drugs, choosing only to cover higher-priced branded drugs, which increased profits for their pharmacy and PBM, and cost patients higher co-payments. Therefore, it is very possible that patients will not see savings through increased vertical integration, and that promises of integration-driven efficiency are just another example of “health washing” to profit.
Is for-profit vertical integration the innovation the United States needs to increase access to quality care, improve health outcomes, and reduce overall health care costs? Despite incentives that could theoretically steer the company toward tight usage controls, induced pharmaceutical demand, or skimming, CVS Health has the potential to deliver on its promise by adopting tight internal controls.
The question then becomes: how will CVS Health be held accountable? Without transparency into CVS Health’s payment structures, quality metrics, and health outcomes, the public will wonder if this new disruption will truly drive the changes in primary care we’ve all been waiting for.
While the path ahead remains uncertain, one thing is clear: CVS Health is forcing traditional healthcare to adapt. One promising avenue could be statewide global payment models, such as accountable care organizations, that reimburse by value rather than volume. If the monopolization of privatized health care forces hospitals to accelerate their shift to such global payment models, then perhaps the public will benefit from the for-profit sector after all.
Lucia Ryll is a fourth-year medical student at Boston University School of Medicine and an MBA candidate from Boston University’s Questrom School of Business in 2023.