The Trump administration has made important strides toward promoting the so-called “value agenda” in health care — efforts to bring down costs by promoting systems of payment and reimbursement that reward not the volume of care, but instead the value and quality of care delivered to the patient.
Health and Human Services Secretary Alex Azar has noted that advancing the value agenda, with new policies that promote innovation and provide the consumer with greater transparency into the cost and quality of their care, is one of the top priorities of the agency.
One of the best ways to promote the value agenda, expand options for consumers, and decrease costs would be for regulators to look favorably on some of the mergers and consolidations that we are seeing in the health care sector today — in particular, the proposed union of CVS and Aetna.
Such a conclusion is counterintuitive. There’s a perception among many that bigger in the health care industry doesn’t mean better. The viscerally negative reaction to consolidation among companies is understandable when one examines combinations between direct competitors, such as two insurance companies. These mergers are more likely to reduce competition, decrease choices for consumers and increase costs. But the situation is more complex — and arguably better for consumers — when one considers so-called vertical combinations, where companies from different parts of an industry’s ecosystem decide to combine.
The proposed merger between CVS, a household name in many communities across the country, and Aetna, one of the country’s largest insurers and health benefits administrators, is an example of a vertical combination in health care that could yield positive gains for consumers. It actually promotes the value agenda because the combined entity can create synergies that will help lower health costs in America.
In particular, mergers like the one between CVS and Aetna allow for greater coordination of care between different providers within the health care system. A significant challenge today is the lack of effective data-sharing and coordination between physicians, hospitals, and other care providers.
By creating a single entity that can administer health benefits programs, communicate with providers regarding the care delivered to a patient, dispense prescription medications, and provide a venue for follow-up visits with patients, a newly-combined CVS and Aetna will be well-positioned to ensure that patients are better cared for from start to finish.
A specific issue in our health system that the merger might help to address is medication non-adherence. The World Health Organization concluded in 2003 that almost half of those with chronic conditions fail to take their medications as prescribed. This results in costly hospital re-admissions or the need for more intensive follow-up care.
More engagement generally helps to increase the rate of adherence, and that’s why the combination of an insurer and administrator with a retail company creates a unique opportunity to address this problem. It will be able to leverage additional data to monitor and identify medication non-adherence, and have the ability to directly engage patients to timely take the medicines they’ve been prescribed.
A second important way that the merger of CVS and Aetna will benefit consumers and advance the value agenda is by creating many more places where they can get access to health care in cost-effective settings. Even after passage of the Affordable Care Act, far too many Americans still seek care in the hospital emergency room — the costliest place to be treated. In many cases, a more efficient or lower-cost venue is proper.
During the last several years, many more retail pharmacies have created walk-in clinics that deliver basic services, such as immunizations or diagnoses of common conditions. These are community-based facilities that have the potential to provide quality care at a lower price point, as well as to make referrals to physicians when additional attention is needed. While these clinics certainly aren’t suitable in every situation, they do promote earlier interventions that can speed patient recovery and also lower health care spending.
The goal of the CVS-Aetna merger isn’t to replace doctors or hospitals, but to supplement the important work they do, while making the health care system more cost-efficient and responsive to patient needs.
Much can be done to improve our health care system without having to break the impasse that exists in Washington over the future of the Affordable Care Act. The efforts to promote a “value agenda” in health care, with the ultimate goal of delivering better care to patients at a lower cost, is an example of this sort of improvement.
While many see the consolidations happening in the health care industry as bad news, the reality is much more nuanced than that. There are situations where bigger can be better — and consumers and patients are the ones who stand to gain.
• Lanhee J. Chen is a research fellow at the Hoover Institution and director of domestic policy studies at Stanford University. He was a senior official at the U.S. Department of Health and Human Services during the George W. Bush administration.
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