Courtesy CVS Health
A CVS Pharmacy store in Houston that's been turned into a Health Hub
- CVS Health on Tuesday held an investor day to detail the company's strategy now that the retail pharmacy giant has combined with health insurer Aetna.
- CVS laid out how it plans to make its pharmacies your go-to place to get healthcare through its HealthHubs, or pharmacies that have been fitted with additional medical services.
- Here are some of the key slides the company presented, which outline why CVS is making a big bet that it can be the place you go when you get sick.
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When CVS finalized its deal for Aetna in 2018, it combined a chain of nearly 10,000 pharmacies with one of the biggest US health insurers.
The result is an entirely new healthcare company that can wield a tremendous amount of power over how healthcare gets paid for and provided to patients.
The combination is still in its early days, but we're starting to get a better picture of how CVS will use that power.
CVS on Tuesday hosted its annual investor day, in which it laid out what's ahead. Notably, the company detailed plans to make its pharmacies your go-to place to get healthcare through its HealthHubs, or pharmacies that have been outfitted with additional medical services.
By the end of 2021, the company plans to turn 1,500 of its pharmacies into HealthHubs. By the end of 2019, it expects to have 50 up and running in Houston, Tampa, Florida, Atlanta, and the Philadelphia and southern New Jersey area. The company began testing the hubs in Houston earlier this year.
Read more: CVS Health just revealed plans to dramatically expand its strategy to upend how Americans get healthcare as it takes on Amazon
Investors welcomed the updates. CVS shares were up 3.6% on Tuesday afternoon.
The expansion builds on the footprint CVS already has with its 1,100 MinuteClinics, which are small clinics inside CVS stores, typically staffed by nurse practitioners or physician assistants.
As part of the investor day, CVS gave a four-hour presentation, complete with 174 slides, which you can see here.
We boiled down the presentations into eight key slides, which show why CVS is making a big bet that it can be the place you go when you get sick. They show what's ahead for the newly combined CVS and Aetna, as well as why the transition is so critical for the business.
For starters, CVS laid out how it expects the combination with Aetna to lead to an $850 million increase in operating income in 2022. In 2018, CVS generated $4 billion in operating income.
Courtesy CVS Health
Chief Transformation Officer Alan Lotvin said on Tuesday that the MinuteClinics are adding more services, including sleep apnea treatment and blood work, expanding from some of the simpler conditions retail clinics are known for treating, like cold or flu symptoms.
Courtesy CVS Health
Through CVS's HealthHubs, the plan is to help patients manage more chronic diseases like diabetes, keeping them healthier and out of the hospital. Lotvin said that piece, as well as the company's analytics, are already in the works. More products and services, like at-home treatments for people with kidney disease who need a treatment known as dialysis, are a little farther out.
Courtesy CVS Health
Lotvin broke down where the $850 million in operating income in 2022 is expected to come from. More than half - or $450 million - will come from reduced medical costs for people who get their health insurance from Aetna, while the MinuteClinic and HealthHub expansion will contribute to the $300 million via payments from other health plans. New lines of businesses will, in 2022, only contribute about $100 million, but that's expected to balloon to $1 billion in the long term, Lotvin noted.
Courtesy CVS Health
CVS Pharmacy President Kevin Hourican laid out how the company's sales are changing at CVS's 9,900 stores.. He talked about all the merchandise the stores sell except for prescription drugs, which are tracked separately.
The growth in health merchandise and in beauty and personal care, compared to the decline in consumables and general merchandise, shows plainly why CVS is making such a big push into healthcare.
Courtesy CVS Health
Retailers like CVS are losing out on revenue, as customers increasingly shop for everyday goods on websites like Amazon. It's a headwind Hourican detailed in the next slide.
Courtesy CVS Health
Hourican said that on the whole, CVS has been able to offset the impact of people increasingly shopping online, but that it's been hit hard because its pharmacies are getting paid less for filling prescriptions.
Hourican also pointed out some of the programs CVS has in the works to improve the experience for prescription drug customers. That includes combining all of a patient's daily prescriptions into a single packet, something that Amazon's PillPack is known for.
Courtesy CVS Health
At the end of the presentation, CVS CEO Larry Merlo presented a slide that shows just how many businesses the combined CVS-Aetna is now in, from health plans, to telemedicine, to infusion services, to the MinuteClinic and pharmacy.
"We can touch every facet of the healthcare market in a direct or in a complementary way with the consumer at the center of care," Merlo said.
So far, the healthcare giant hasn't gotten into the business of owning doctors or medical centers (those are shown in gray).
The slide appears to be a challenge to CVS's biggest rival, UnitedHealth Group. UnitedHealth owns the biggest health insurer, with about 50 million members. It also has a huge hand in the prescription-drug business through its OptumRx unit, but it doesn't own a big chain of retail pharmacies.
Increasingly, UnitedHealth is playing a bigger role in the business of getting medical care, too. Already, the company's OptumCare business employs or works with 38,000 doctors, from surgeons to primary-care providers. UnitedHealth wants OptumCare to reach $100 billion a year in revenue by 2028, up from roughly $16 billion last year.
Courtesy CVS Health
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