CVS Health (NYSE: CVS) has become one of the most interesting home-adjacent health care players since its investor day last December.
It’s possible that the “adjacent” tag will soon be dropped, and the company will be squarely in the home-based care space.
“We are diversifying our growth portfolio with new health services,” CVS Health President and CEO Karen Lynch said on the company’s first quarter earnings call Wednesday. “We are expanding our capabilities in home health as we prepare for the 2023 launch of a post-acute transitions pilot for our Aetna membership in select geographies.”
Aetna – one of the largest health insurance payers in the U.S. – is a part of CVS Health.
During that investor day in December, Lynch presented CVS Health’s new strategy to investors. That included the launching of “all-payer health products and services” to diversify the company’s growth portfolio and, more importantly, an “expansion of home health services.”
On its fourth quarter earnings call a month later, the company even flirted with the idea of getting into fee-for-service Medicare home health through acquisition.
“It’s hard to predict the exact order with which things will potentially show up, if this is something you decide that you’d rather acquire than build,” CVS Health CFO and EVP Shawn Guertin said at the time. “But yes, absolutely, [we’re interested in] things that make sense to sort of extend the care continuum – particularly to a Medicare population. [That] would make a lot of sense and they’d be high on the list.”
On Wednesday, the company dropped more clues as to where its home-based care strategy may take it.
Lynch specifically said that partnering with technology and home-based care players will allow the company to reduce readmissions and better care for customers. The company also continues to evaluate its portfolio for “non-strategic assets,” she said.
In regards to M&A, the company is not looking for “jumbo-sized” assets, but is looking at adding capabilities.
“Our priority areas remain primary care, an MSO capability and a home health capability,” Guertin said Wednesday. “These assets will serve as the foundation of the platform upon which we’ll pursue our strategic vision.”
First and foremost, CVS Health is honed in on primary care, not unlike Walgreens Boots Alliance (Nasdaq: WBA), which has invested over $5 billion in the home-focused primary care company VillageMD. Walgreens is also an investor in CareCentrix, a health-at-home solutions company that manages care for over 19 million patients.
There’s “a number” of opportunities out there for CVS when it comes to extending primary care into the home, Lynch said.
And the post-acute transitions program that Aetna is rolling out next year is one of the key reasons it’s also focused on home health care.
“We’re starting very early with our post-acute care transitions, and we’ll look at opportunities to support – first and foremost – the Aetna membership, particularly to support improvement in Medicare costs, and then expanding into a payer agnostic [system],” Lynch said. “So there’s a lot in the home.”
CVS already does some kidney care in the home, as well as infusions. Coram – the company’s home infusion platform – cares for 50,000 patients monthly.
“There’s a number of options out there, and we are looking at that too as part of our acquisition strategy,” Lynch said.
Interest from a big name could help jump start home health M&A activity, which was down in early 2022, according to recent data from M&A advisory firm Mertz Taggart. There were just eight home health transactions in the year’s first three months, a sharp drop from the 17 and 21 deals that took place in the previous two quarters, respectively.
Where exactly the next step is for CVS Health is not yet knowable, but for now, it seems as if home-based partnerships and home-based acquisitions are both on the table. It’s also important to point out that Aetna’s leadership team has been equally bullish on in-home care services.
“We’re kind of assuming a new landscape for the delivery of health care and moving away from acute,” Dr. Jamie Sharp, chief medical officer for Aetna Medicare, previously told Home Health Care News. “I think it’s important to focus on aging in place.”
In the first quarter, CVS Health revenues totaled $76.8 billion, up 11.2% year over year.
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