by Jordan Roberts
Director of Government Affairs, John Locke Foundation
Whether you are ready for it or not, retail health care is an emerging sector of the health care market. The looming Aetna and CVS merger shines a light on what this could mean for the future of how Americans access health care. The Justice Department approved the merger between insurance giant Aetna and drug store CVS; however, the merger is under review by a federal judge to further evaluate the effect on market place competition. A Wall Street Journal Opinion column details some of the implications of this potential merger:
But the American Medical Association still opposes the merger because it could undermine hospital-provider oligopolies.
Bringing retail clinics, drug stores, pharmacy benefits and insurance under one roof could increase CVS’s leverage with providers and drug makers. But CVS CEO Larry Merlo says his ultimate goal is to reduce health-care spending by steering patients to lower-cost settings such as its 9,900 retail stores and 1,100 walk-in clinics operated by nurse practitioners.
CVS is also experimenting with “concept” stores to offer lab, eye and hearing tests, diabetic and sleep apnea screenings as well as services to treat chronic conditions. This retail makeover will help CVS adapt as more consumers shop online for cosmetics, toiletries, household products and over-the-counter drugs that now drive foot traffic to drug stores.
These low-cost treatment centers could also counteract the higher health-care spending that has resulted from hospitals acquiring physician practices. Only about 45% of physicians nowadays run their own practice, down from about three quarters in 1983.
One reason is because physicians employed by hospitals can refer patients to in-house lab and diagnostic tests that are billed at higher rates to insurers. A recent study by Merritt Hawkins found that physicians generate an average of $2.4 million a year in revenue for hospitals, up 52% since 2016 and nearly 10 times the starting salary of a family practitioner.
Earlier this week I wrote in the Daily Journal about the effects of hospital mergers on prices and quality of care for patients. Here is a small excerpt that echos some of what CVS is trying to unravel:
Another aspect of hospital consolidation that patients may not be as keenly aware of is the extent to which non-hospital providers, such as primary care practices or specialists, may become part of the equation. When large hospital systems expand, there is potential for more profits when they acquire smaller practices and incorporate them into their systems. Often the same procedure will be much more expensive in a hospital compared to a smaller practice. Outpatient procedures and imagining services are a prime example. So the natural result is that when hospitals acquire smaller practices — you guessed it — prices rise.
As the high and rising cost of healthcare continues to pose problems for employers and patients, market forces will produce new alternative methods for Americans to receive critical care at a fraction of the cost. Retail clinics offer the next wave of these reforms as businesses like CVS, with an infrastructure in place to provide care, partner with other companies to expand their ability to care for patients in a manner that competes with traditional facilities, offers more price transparency, and provides high-quality care.