Hockey’s all-time leading goal-scorer, Wayne Gretzky, advised aspiring goal scorers to “skate to where the puck is going, not to where it is.” By acquiring leading insurer Aetna, CVS is leaving little doubt that it intends to do just that.
CVS is positioning itself to skate to where future profits lie in healthcare’s not so distant future: chronic disease and population health management. Other healthcare companies would be wise to follow that lead.
The demand for new payment models that prioritize value over volume isn’t just a prediction, but an approaching reality, in response to unsustainable healthcare spending growth. Medicare and other major insurers are already implementing payment structures that intend to shift attractive profits towards organizations that are controlling cost growth and keeping patients healthy.
Ignoring the imperative to reinvent how care is purchased and delivered in order to cost-effectively manage the health of populations could prove fatal. Unfortunately, this imperative has left many healthcare organizations in a state of paralysis while staring in the face of the innovator’s dilemma: their businesses models are profitable within our current system, so why fix what doesn’t seem broken? Thus, they are left content to just skate to where attractive profits currently are.
This does not bode well for them, as based on what we know from the Theory of Disruptive Innovation, failing to adapt could leave them in the dust.
Making the switch to value-based care will almost certainly demand a rethink of the traditional, healthcare business model. To that end, CVS’ recent move provides a compelling example to other providers of how it could be done. Its acquisition of Aetna is just the latest step in its approach to business model innovation, having already nurtured partnerships with health systems nationwide, including Cleveland Clinic. These partnerships coordinate CVS’ penchant for providing convenient, cost-effective preventative care with the everyday processes of healthcare providers to profitably manage risk and the health of populations over the long-term. Such an integrated approach creates fertile grounds for developing innovative care models, re-centered around proactively managing patient health and care costs.
With the goal of innovation in mind, the vertical acquisition of a major insurer, like Aetna, ensures alignment between insurer payment and any innovative delivery models that emerge from CVS and its provider partnerships. In this way, CVS can stand to profit from, rather than suffer losses for the sake of, the kind of innovation critical to reigning in America’s unsustainable healthcare expenditure growth.
Following CVS’ example, when facing the innovator’s dilemma, providers should not let the future pass them by. Instead, they should look to other areas of the supply chain for cooperation and innovation. Only by finding ways to coordinate innovation efforts with the other moving pieces of the healthcare value network (as CVS has deftly done by way of partnership and acquisition) can the healthcare players of today score the profits of tomorrow.