Large retailers – like CVS Health (NYSE: CVS) and Walgreens Boots Alliance (Nasdaq: WBA) – that have invested heavily in home-based care aren’t just hoping for a boon from those capabilities.
They’re banking on it.
CVS Health has reworked its business model to capitalize off of the shift from fee for service to value-based payment in health care.
“The tactical challenge is [around] how to create better earnings growth sort of from that profile of businesses and that led us to think a lot about a lot of different alternatives,” CVS Health CFO Shawn Guertin said during the Bernstein 39th Annual Strategic Decisions Conference Wednesday. “But what we began to realize is that there was an opportunity here that was somewhat unique to us – to play on a really powerful trend in health care, which is value-based care and the move to value-based care from fee for service.”
That strategy was reflected by its $8 billion acquisition of Signify Health, an at-home and value-based care enabler.
Earlier this month, CVS Health CEO Karen Lynch said the company would be open to acquiring more home-based care companies in the future, too.
While capitalizing off of the shift to value-based care is the overarching strategy, at-home care capabilities is one of the major avenues CVS Health is taking to get there.
“The trend of the role of the consumer in health care,” Guertin continued. “[That] only got accelerated by the pandemic. And [so did] some other very powerful trends, like moving care away from acute inpatient into home settings as an example.”
CVS Health also recently closed on its $10.6 billion acquisition of the Chicago-based primary care provider Oak Street Health. Many of the largest health care companies in the country have followed this formula to value-based care: pairing home-based care capabilities with primary care capabilities. It’s also worth noting that CVS Health owns Aetna, one of the largest insurers in the country.
In the first quarter, CVS Health’s total revenues increased to $85.3 billion, an 11% year-over-year increase. It did lower its profit outlook, however.
Company leaders also in April cited “improving home-based care” as a vital part of its ongoing senior care strategy.
“This angle around home care, value-based primary care, physician enablement to move to value based care, we think that’s one of these things that actually makes our payer business better and that our other assets can really add to and differentiate the experience,” Guertin said.
Guertin sees the future of CVS Health’s health care footprint being virtual, in the home, and in brick-and-mortar facilities, such as at Oak Street Health’s primary care clinics.
The key there would to be ensure that all three parts of that footprint work together, and not in silos, Guertin said.
He also reiterated the idea that more home-based care acquisitions could be in CVS Health’s pipeline.
“On M&A, going forward, I think undoubtedly there are complementary assets out there that we could pursue,” Guertin said. “We’ve talked a lot about doing more in the home, right, for example. And so I think over time, we’ve talked about provider enablement, of which we have some capability now.”
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