While working at one of the nation’s largest safety-net hospitals, I experienced first-hand 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 in time or wasn’t able to take time off work will resonate all too well. Many hospitals have adopted initiatives to improve access, but innovation has been slow, confined to individual institutions, and hampered by regulation.
In the absence of a productive government, some believe it necessary to turn to industry. One industrial giant touting itself as the newest solution to healthcare is CVS Health. Its power unknown to many, CVS Health is a nation-wide conglomerate composed of 9,900 retail stores, which serves over 1 million customers a year through its senior pharmacy, runs 1,100 MinuteClinics, has 105 million plan members through its pharmacy benefit manager (PBM) Caremark, and manages health insurance for over 34 million people through traditional, voluntary, and consumer-directed health insurance products and related services, including Aetna. And now, CVS Health has unveiled its newest venture: primary care.
CVS Health wants to expand by transforming 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 education on chronic disease management. On November 5, 2021, CEO Karen Lynch announced CVS Health would be hiring primary care physicians for their new HealthHUBs, a move which will make CVS Health the first company to offer physician patient care coupled with a pharmacy, covered through 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 lowering healthcare costs? With the majority (71%) of Americans living within a 5-mile radius of a CVS, the company is poised to deliver local, convenient primary care. However, the complexity of incentives in the integrated CVS Health model pose reasons to approach this new model with caution.
First, the relationship between a healthcare provider integrated with an insurance company has implications for how high-quality care can be incentivized. While providing high-quality care that keeps patients out of the hospital will lower costs on the insurance provider, incentives could also be skewed to keep patients from accessing costly services. Current insurance companies do this with utilization controls, such as gatekeeping, prior authorization requirements, and step therapy. In theory, stricter utilization controls at CVS Health could result in telehealth first and in-person visits restricted to HealthHUBs, leaving Aetna members with little choice in primary care services, and reliance on an unknown quality of new HealthHUB practitioners. Additionally, having providers employed by both an insurer and PBM could incentivize reduced referrals out-of-network, preventing patients from getting the care they need. Meanwhile, the company’s profits would likely offset any losses incurred from worsened patient health.
Second, complexities arise from the potential for induced demand. A provider service owned by a pharmacy could theoretically incentivize physicians to increase prescriptions, particularly those covered under the formulary negotiated by the PBM Caremark. While some may think physicians would not engage in such actions, multiple studies have shown that physicians, like all human beings, can be influenced by financial incentives.
Lastly, with an insurer providing care to its own patient population, it will be important to watch for any potential cream-skimming in which less healthy persons are de-incentivized to join the CVS Health plan. Cream-skimming has been widely reported in Medicare Advantage (MA) plans, and with a large portion of CVS’s 2020 revenue stemming from MA benefits, it will be important to keep an eye out for any additional cream-skimming tactics.
Some may argue that such profit tactics are worth tolerating if they reduce U.S. healthcare costs. One argument is that, with its 105-million-member strong network, the Caremark PBM could negotiate with manufacturers and providers to drive down drug and hospital prices. However, research has not shown that for-profit vertical integration will pass on cost savings to patients. Rather, the current PBM structure incentivizes formulary coverage of whichever drugs the PBM can negotiate the highest percent rebate on, with rebates passed off to the insurer or PBM rather than patients. In fact, a lawsuit is alleging that CVS Health denied consumers low-cost generic medications, choosing only to cover higher-priced brand-name drugs, which increased profits for their pharmacy and PBM, and cost patients higher co-pays. Therefore, it is very possible that patients will not see savings through increased vertical integration, and that the promises of integration-driven efficiency may just be another example of for-profit “health-washing.”
Is for-profit vertical integration the innovation the U.S. needs to increase access to quality care, deliver improved health outcomes, and lower overall healthcare costs? Despite incentives that could theoretically skew the company towards strict utilization controls, induced pharmaceutical demand, or cream-skimming, CVS Health has the potential to deliver on their promises by enacting tight internal controls.
The question then becomes: how will CVS Health be held accountable? Without transparency into CVS Health payment structures, quality measures, and health outcomes, the public will be left to question whether this new disruption will truly bring about the changes in primary care we have all been waiting for.
While the road ahead remains uncertain, one thing is clear: CVS Health is forcing traditional healthcare to adapt. One promising avenue may be state-wide global payment models, such as Accountable Care Organizations, that reimburse on value rather than volume. If the monopolization of privatized healthcare forces hospitals to accelerate their switch to such global payment models, then perhaps the public will glean benefits from the for-profit sector after all.
Lucia Ryll is a fourth-year medical student at Boston University School of Medicine, and a 2023 Boston University Questrom School of Business MBA Candidate.