CVS opening 1,500 new retail clinics in its stores
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June 04, 2019 04:16 PM

CVS to aggressively expand healthcare services in stores

Tara Bannow
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    If CVS Health officials felt uneasy about the federal hearing into the company's Aetna acquisition that started Tuesday, they certainly didn't let on as they boasted to analysts and investors in New York about their plans to dramatically expand the scope of healthcare services their stores will offer.

    CVS will launch a fleet of 1,500 so-called HealthHUBs in its stores by the end of 2021, company leaders announced Tuesday. CVS piloted the concept at three locations in Houston this year and, encouraged by their early success, plan to expand it to 50 locations in additional markets by year-end. By the end of 2021, CVS plans to have 1,500 HealthHUBs up and running nationwide.

    "This is an aggressive expansion plan, but one we are confident we can deliver within our capital plan," Kevin Hourican, president of CVS Pharmacy, said during the presentation. "Our HealthHUBs are engaging with customers in new and compelling ways."

    CVS' roughly 1,100 MinuteClinic sites currently focus on low-acuity services like colds and immunizations, and the company realized half of the patients who visit them don't have primary-care providers. The HealthHUB model will cater more to everyday needs, with a special focus on chronic disease management, offering services like blood draws and sleep apnea assessments. Some of CVS' MinuteClinic sites will be converted into HealthHUBs, although the company isn't saying exactly how many, CVS spokesman Joe Goode wrote in an email. A MinuteClinic typically has one to two exam rooms, while HealthHUBs will have three to four. The company plans to convert about 15% of its existing clinics into HealthHUBs, Goode said.

    HealthHUBs will be more staff-intensive to offer customers a more personalized experience and medical advice specific to their needs, Hourican said.

    Perhaps most importantly, the concept will rely on CVS' newfound access to Aetna's wealth of data on its members' health conditions, which CVS executives said will help inform where it decides to locate its next clinics.

    "By covering health and pharmacy data, we are better able to target the products and services that will help that specific member on their path to better health," Hourican said.

    CVS has the geographic footprint and big data to succeed in this area, but Michael Abrams, managing partner with Numerof & Associates, questioned whether the company can truly create connections with customers.

    "That requires adding a human face to healthcare that, quite frankly, CVS has no particular experience in," he said.

    CVS stores tend to be thinly staffed and largely self-service, Abrams said. "The way they run their operations now, in general, their culture is not one of deep individual personal engagement," he said.

    CVS plans to expand the concept to Atlanta, southern New Jersey, Philadelphia and Tampa, Fla., next. In addition to chronic care, they'll also have digital displays on health and wellness trends to try to draw in millennials.

    Dr. Alan Lotvin, CVS' chief transformation officer, said CVS will initially target areas with the highest rates of chronic disease among Aetna members. It will also consider the competition in specific markets and whether it currently has MinuteClinics there.

    CVS CEO Larry Merlo hinted at the HealthHUB concept at the J.P. Morgan Healthcare Conference in San Francisco in January. Lisa Gill, an analyst with J.P. Morgan, had remarked to Merlo that the MinuteClinic concept seemed underutilized. He said his company planned to expand its scope of practice and add new services to treat chronic diseases.

    It's especially important for CVS to embark on the new strategy as it faces competition from Amazon and struggles with declining revenue from generic-drug launches and other headwinds.

    Hourican said CVS is working to cut costs in its pharmacy business, including closing hundreds of stores in unprofitable locations over the past few years. He said the company's existing stores are profitable, but that CVS will re-evaluate its approximately 500 leases that come up for renewal each year.

    Lotvin also shared more detail on the company's home hemodialysis technology that it hopes the U.S. Food and Drug Administration will approve. He said the device is cloud connected so that patients' nephrologists, nurses and entire care team can learn how complete the dialysis was, whether any alarms went off and whether any additional services are needed. He said the amount of money spent on kidney care in the U.S. approximates that spent on drugs. CVS' announcement last year that it planned to disrupt kidney care may have prompted traditional providers like DaVita and Fresenius to ramp up their messaging in the area.

    There was no mention at Tuesday's event of the legal challenge to CVS' $69 billion merger with Aetna, despite the fact that testimony began the same day. U.S. District Judge Richard Leon continues to consider the case despite the U.S. Justice Department's approval of the deal.

    Instead, Eva Boratto, CVS' chief financial officer, said the company has increased its projected savings from the deal, from an initial estimate of $750 million in synergies in 2022 to $800 million by 2020 and $900 million on a run-rate basis thereafter. That will happen by moving Aetna's formulary to CVS Caremark to increase scale and negotiating power. Synergies will also come from streamlining corporate functions and lowering medical costs, she said. Overall, the company expects to see $3.5 billion in incremental operating profit in 2022, Boratto said.

    Boratto said CVS expects to pay $7.5 billion in debt by the end of 2019 from closing the Aetna deal in November 2018.

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