Molly Gallaher Boddy, Strategy Analyst, Market and Competitive Research
With consolidation and the promise of further disruption sweeping through the healthcare market, vendors are targeting a diverse array of opportunities such as health retail, employer health, and vertical integration to “remake” the industry. While it may seem reductive to identify a single driving force that runs across every recent healthcare announcement, I believe we can safely call America’s aging population of Baby Boomers a common denominator underlying many of the current trends.
Payers, with experience in Medicare and Medicaid enrollment, various Medicare Advantage plans, close relationships with hospital systems, and, increasingly, fleets of physicians that help manage members across the care continuum, are scrambling to capitalize on available opportunities to serve aging members. The fast-growing 65+ population has led vendors to undertake consolidation and merger activity. Recent weeks have also seen payers post strong results around their Medicare Advantage plan growth, solidifying the fact that there is a massive financial opportunity in the senior care market.
A look at what payers Aetna, Humana and UnitedHealth are working to achieve in the Medicare Advantage space proves just how comprehensive vendor visions now are.
- Perhaps the clearest example of a payer-led attempt to provide expansive Medicare-related services comes from Walmart and Humana, who plan to merge. Analysts such as Forbes’ Bruce Japsen have suggested that a merged Humana-Walmart would allow the retail giant to build out its pharmacy and retail clinic business while challenging peers CVS Health and UnitedHealth. This is particularly true following Humana’s decision to gain a 40 percent stake in home health and hospice provider Kindred and its purchase of hospice provider Curo with private equity firms. Such purchases will give Walmart elder care resources that extend far beyond its in-store clinics.
- The pending merger of CVS Health and Aetna, meanwhile, will likely expand the use of CVS MinuteClinics and in-store services by Aetna members, while also wrapping in a pharmacy benefits management component for better patient data and drug cost control. Peer Cigna would gain some of these same capabilities from the purchase of Express Scripts, minus the in-store retail experience.
- UnitedHealth and its Optum arm, meanwhile, is a formidable Medicare Advantage competitor with its broad portfolio of offerings. Control over provider organizations and in-home medical services are major boons in the Medicare Advantage space.
- All three of these examples are also Medicare Part D powerhouses, with UnitedHealth, Humana and CVS Health covering more than half of enrollees for 2018, according to the Kaiser Family Foundation. Pharmacy benefit management is also a common theme running across all three, with the ability to better control drug costs another major consideration for vendors playing in the Medicare Advantage and 65+ healthcare space.
Of course, news from large payers Aetna, Humana and UnitedHealth only scrapes the surface of the larger race for dominance in Medicare Advantage. Just this week, Blue Cross Blue Shield payer Anthem announced it would purchase Aspire Health, giving Anthem access to a non-hospital care setting through what the news release calls “the nation’s largest non-hospice, community-based palliative care provider.” Medicaid and Medicare plan provider WellCare, meanwhile, announced recent investments to help make it the largest Medicaid provider in Michigan and Illinois while adding its own pharmacy benefit manager, allowing it to compete with the larger payers mentioned above.
#Babyboomers and #silvertsunami driving healthcare consolidation, mergers and diverse partnerships Tweet
Though payers are clearly positioning themselves to profit from Medicare Advantage growth, a comprehensive approach to serving this population also necessitates attention to an immersive, consumer-first digital experience. This is an area where payers might find themselves at a disadvantage compared to their retail store or digital/technology-centric vendor peers. More agile healthcare players focused closely on the in-store or digital shopping and pharmacy experience—think Rite Aid and Walgreens—may provide large payers or bulkier merged entities competition as Medicare Advantage enrollees, and seniors in general, look outside of traditional care settings for low-cost treatment.
In fact, after purchasing almost 2,000 Rite Aid stores, Walgreens may move to offer more in-store health services—particularly in senior-heavy markets like Florida—though its exact plans are still murky. Albertsons, the grocery store chain buying the rest of Rite Aid’s stores, has expressed explicit plans to enhance integrated food, pharmacy and wellness offerings. Although larger competitors like CVS-Aetna could end up dominating the in-store health experience market, a narrower focus and the increased agility that comes with it could be a boon in a quickly-growing market full of horizontally-integrated peers. It’s worth noting that digital disruptors also understand this value in agility and customer service, with Amazon looking for various entry points into the senior care technology market alongside other retailers such as Best Buy.
With payers and non-traditional disruptors rushing to carve out their piece of the senior care space, the question of “what’s next?” looms large. There are a few areas that will likely provide much opportunity over the coming months:
- With recent CMS changes to what counts as “primary-health-related” Medicare Advantage services, expect vendors to make further investments in social, community, and whole-person health initiatives, prioritizing decidedly non-medical undertakings such as access to fresh food.
- Additionally, CMS announced coverage of genetic testing for cancer (FDA-approved tests) by Medicare, suggesting that precision medicine and associated technologies—likely analytics-- will be key growth areas.
- While video-based forms of communication are sometimes thought of as a tool of the young, more often leveraged by millennials facetiming with faraway family and friends than by the 65+ population looking to treat a sore throat, telehealth vendors stand to benefit from changes to virtual care coverage for Medicare Advantage plans passed by the federal government earlier this year.
Finally, for healthcare vendors, the opportunity around America’s aging population means yet more mergers in the endless stream of healthcare M+A activity. Home health, remote patient monitoring and senior-specific nursing providers are particularly ripe for acquisition, with Medicare Advantage insurers already announcing partnerships that support home health settings. Medicare Advantage specific-insurers may be snapped up by larger payers, retailers or hospital systems as they attempt to up their enrollment numbers while gaining more targeted expertise in the senior care market.