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CVS and Aetna – A New (and Improved) Healthcare Giant?

Just announced this past Sunday, pharmacy chain giant CVS Health agreed to purchase Aetna, a large, national health insurance company, for about 70 percent of Jeff Bezos (Amazon) net worth – or $69 billion.

CVS is one of the largest providers of pharmacy services in the country, with almost 10,000 retail pharmacy locations and about 1,100 MinuteClinic walk-in clinics, while Aetna is the third-largest U.S. health insurer. By combining, their total annual revenue would be $240 billion. In a joint statement, CVS and Aetna claim this deal will “redefine access to high-quality care in lower cost, local settings – whether in the community, at home, or through digital tools.” Further, according to the CVS Health President and CEO, Larry Merlo, “…With the analytics of Aetna and CVS Health’s human touch, we will create a healthcare platform around individuals.”

Both organizations jointly claim the combined company will “dramatically further empower consumers,” and “better understand our members’ health goals, guide them through the healthcare system and help them achieve their best health.” By having a broader use of data and analytics, the new organization hopes to benefit the entire healthcare system and be able to address the cost of treating patients with chronic diseases. The combined synergy of both organizations lay out a vision to reshape healthcare into a new approach.

This large ‘deal’ has the makings of being a great thing – for both organizations (CVS and Aetna), their shareholders and those covered through their products.

But will it?

Quite often, the American culture is fixated on the belief that “bigger is better,” or that “new and improved” will always serve us best. Perhaps it will. But as I mentioned in my blog, “The Illusion of Getting ‘Bigger‘” – when Aetna was attempting to purchase Humana (a deal that was subsequently blocked by a judge in early 2017 for antitrust purposes) – such deals are not a slam-dunk to fix an ailing and complex $3+ trillion healthcare system. In fact, in some cases, larger integrated delivery networks may make the coordination efforts to serve patients more cumbersome and inefficient.

The twists and turns of organizations finding new approaches and seizing opportunities to make healthcare more affordable, safer and much more efficient is clearly a laudable goal. But, to be so, the patient must always be at the center of these initiatives. The profit and incentive motives are important, but getting it right for the patient should be the primary driver of any meaningful change.

Let’s hope the hype is matched by results.

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The Value of Employee Benefits…
It’s a Passing Parade

Portland Grand Floral Parade 2016

Portland Grand Floral Parade 2016

On the eve of receiving our new 2016 Iowa Employer Benefits Study survey results, I once again have a great deal of anticipation about what this data may reveal. At this point, I only know that 1,014 randomly-selected employers responded to this survey which continues to exceed our annual goal of 1,000. A big ‘thank you’ to all organizations that took the time to participate in this annual work!

Offering workplace employee benefits has been happening for decades. From the employee perspective, receiving various workplace perks is a staple expectation when being interviewed and ultimately hired by most employers. In fact, recent research conducted by staffing and HR service company, Randstad US, shows that jobseekers most value salary, employee benefits, long-term job stability and a pleasant work environment.

Employers, for their part, offer employees and jobseekers a cadre of benefits they believe to be highly-valued by their mainstream targeted ‘audience.’ But it is extremely important for employers to dissect their intended audience by gender, age groups (e.g. generation), location, race and other factors that will help clarify the benefit ‘value’ employees desire. By not doing so, a disconnect will eventually occur, resulting in a large chasm of a wasted investment that is costly, both in terms of money and desired human capital.

Conducting biannual employee engagement surveys may eliminate much of the guesswork that employers have when trying to predict which future strategies to embrace. I suspect that a healthy chunk of employers put their human investment strategies on cruise control assuming that the desires of employees five or ten years ago will still apply in today’s world. Most often, they do not.

Much like a New Year’s Day or Fourth of July parade, a perpetual flow of people (and floats) coming and going will not be replicated again. In a similar fashion, so does the employment pool that organizations continue to encounter.

One example on how employers respond to the ‘new parade’ of employees can be found through three employers: Aetna, Fidelity and PricewaterhouseCoopers. All three have launched their own student loan matching programs for employees who are pursuing undergraduate and/or graduate-level degrees.

Beginning in 2017, Aetna’s full-time employees will qualify for matching loan payments of up to $2,000 per year, totaling $10,000 per student. Part-timers will receive half of this amount by pursuing undergraduate or graduate degrees from accredited institutions.

According to the Society of Human Resource Management (SHRM), about 3% to 4% of all U.S. companies contribute to employees’ student debt payments to help soften the financial burden they increasingly face. About 71% of college graduates carry student loan debt, totaling $1.3 trillion of student debt in this country. A need clearly exists to help alleviate financial hardships and new approaches must be pursued.

Our annual study’s purpose is to survey employers about the key benefits they offer at this particular point in time. It allows employers to compare their benefits with the mainstream. However, the juxtaposition of organization culture and employee attributes can allow any organization to stake a claim on having a competitive advantage when attracting and retaining their most prized asset – the employee. To do this, the organization will need to account for what is most important and valued by their employee population.

So enjoy this year’s parade, but be ready for upcoming attractions that may appear in the next one.

To stay abreast of employee benefits and other tangential issues, we invite you to subscribe to this blog.

The Illusion of Getting ‘Bigger’

Sometimes Size MattersAmerican culture is all about the belief that “bigger is better.” Heck, just stop by the local convenience store and you will find patrons walking away from the cash register with a ‘Big Gulp’ beverage. (No wonder obese Americans now outnumber overweight Americans.)

We seem obsessed with having the biggest ‘something’ – whether it is a city, town square, tallest building, largest (and most expensive) house or maybe a huge bicycle fortress crossing the state during late July. No doubt, it can be enticing to claim something enormous.

In both the hospital and health insurance industries, the fixation on growth is being taken to a whole new level. Nowadays, growth does not necessarily occur organically, such as through offering newly-innovative products and services that provide added value to customers. As customarily assumed, growth is intended to drive down costs, increase negotiating leverage and ultimately boost profits.

Controlled, organic growth seems to be much too slow for investors and today’s conventional wisdom of doing business. Enter acquisitions and mergers of competitors.

Insurance companies are making headlines with eye-popping takeover bids. For example, UnitedHealth Group, the nation’s largest health carrier, with expected revenue this year of $143 billion, has made a move to acquire Aetna, the nation’s third largest health carrier. The second largest carrier, Anthem, Inc., is pursuing Cigna Corp. They just made a takeover offer of $47.5 billion – which was subsequently rejected as being too cheap. If this isn’t enough, Aetna is reportedly interested in buying Humana, the fourth-largest carrier in the country. Big is better, right? After all, lobbying does matter a great deal in healthcare.

The impact on various markets across the country will most certainly affect local competition, and because of this, such takeovers will face rigorous antitrust scrutiny by the U.S. Justice Department for anti-competitive reasons. The reality is that healthcare markets are local, so unless a larger carrier gains a larger percentage of insureds in a given market, certain markets will not be impacted.

Hospitals have also made a myriad of moves in the recent past through mergers and acquisitions. Physician practices are gobbled up in Pac-Man fashion. Hospitals are concerned that larger insurance oligopolies will gain more clout by keeping provider payments lower – yet increase prices of insurance products to purchasers – employers and individuals. It appears the new arms race is not so much about nuclear bombs, but rather, healthcare purchasing clout. The hunger to grow escalates when the other side expands – a never-ending treadmill of activity.

So what does this mean for healthcare customers like you and me? Through sleight-of-hand, carriers and providers provide the illusion that patients are the focus in this post-ACA environment. But unfortunately, due primarily to the complexities inherent in healthcare, the public continues to buy into this perpetual illusion that care will somehow get better and become less expensive because our best interests are the center of this activity. The illusion continues.

Let’s be honest, it’s about the bottom line – healthcare is in the money business.

Third parties develop websites on price information coming from aged-claims data that usually are at least two years removed from the unknown prices now being used. Patient engagement is critical within healthcare, yet, according to research conducted by Nielsen/Harris Interactive Strategic Health Perspectives, patients with chronic conditions who have significant out-of-pocket exposure are increasingly feeling disillusioned by our healthcare ‘system.’

As mentioned in previous blogs, gaining the ‘public trust’ is the fundamental business in which the health provider community should be operating. But customers who feel hopeless about their healthcare most likely will not have the trust to use transparency tools to make optimal healthcare decisions – even when more relevant tools eventually become available.

Growth by acquisition and mergers will not gain public trust. If consumerism has a chance to work in healthcare, we must allow it to work by agreeing that, when seeking non-emergency care, consumers are entitled to receive accurate cost information about their out-of-pocket exposure. This information can be provided through the collaboration of providers and carriers. If they are unwilling or unable, other third parties can fill this role. Without a doubt, the healthcare and health insurance worlds are in a full state of disruption – complacency is NOT an option for those who wish to survive.

Further, consumers must have access to quality metrics about the provider care they seek. Gaining a consensus on quality metrics will be no easy task, but it is the right course to take when rewarding those providers who perform the care we assumed we were receiving in the past.

Mergers and acquisitions may be great for owners, stockholders, corporate executives and the M&A consultants who promote such activities. But it only prolongs the REAL work that is needed for healthcare to become safe and affordable to all.

Bigger is not better. Smarter is better.

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