NEW YORK (Reuters) – CVS Health Corp (CVS.N) is planning to significantly expand health services at its retail pharmacies if it completes a more than $66 billion deal for insurer Aetna Inc (AET.N), a move that could save more than $1 billion annually, people familiar with the matter said.
A key rationale is to use many of the U.S. pharmacy chain’s 9,700 brick-and-mortar outlets to improve access to preventative care and cut back on some emergency room visits for Aetna’s roughly 23 million members with medical coverage, these people said.
The full benefits of the strategy will take several years to realize, requiring billions of dollars in investment to increase the number of CVS clinics and provide the staff and equipment for a wider variety of treatments, the people said.
Those funds would be diverted from planned investments in CVS retail facilities, and not amount to additional expenses, they said.
Deal talks between the companies are still underway, and an agreement could be announced as early as Sunday or Monday, sources familiar with the matter told Reuters. It is also possible that a deal is delayed or does not materialize, they said.
Health insurers have redoubled their efforts to cut costs in a time of steep prescription drug price rises and requirements to care for even the sickest patients under the Affordable Care Act.
Aetna last year tried to buy rival Humana Inc (HUM.N) to gain more leverage over costs, but that transaction, as well as a proposed merger between Anthem Inc (ANTM.N) and Cigna Corp (CI.N), was shot down by antitrust regulators.
Many insurers have already been encouraging patients to use urgent care centers, which can provide some of the same services as emergency rooms for as little as a tenth of the cost, said Laurel Stoimenoff, chief executive of the Urgent Care Association of America.
The industry has grown to about 8,000 urgent care centers nationwide, as more hospitals, insurers and private operators open such walk-in facilities, Stoimenoff said, with 400 to 500 centers added each year. They may be staffed by doctors and provide relatively advanced care including X-rays.
CVS operates more than 1,000 MinuteClinics, which offer more basic services ranging from flu shots to physicals and are mainly staffed by nurse practitioners.
Combined with Aetna, the company would be able to seamlessly access medical records, offer certain preventive services to covered members for free and make drugs promptly available in adjacent CVS pharmacies, said Dan Mendelson, president of consultancy Avalere Health.
The in-store clinics could provide immunizations, check if a patient needs antibiotics, help manage chronic illnesses like diabetes or even administer medications by infusion, but are unlikely to offer acute treatment of serious injuries, healthcare experts said.
“It would probably be unsettling to people coming in to buy socks to have someone with a bleeding head come in for stitches,” said Greg Burke of the United Hospital Fund, a non-profit focused on improving healthcare in New York.
Expanding the clinics could eventually save the combined company more than $1 billion annually by substituting low-cost treatments in CVS stores for more expensive hospital visits, two people familiar with the matter said. The combined net income of Aetna and CVS is forecast to be about $9.25 billion in 2017, according to Thomson Reuters data.
Aetna competitor UnitedHealth Group Inc (UNH.N) operates 230 MedExpress urgent care centers in 17 states in one of its fastest-growing divisions, with nearly 20 percent compounded revenue growth per year.
For CVS, which has seen non-pharmacy sales decline at its stores, the clinics could have the added benefit of bringing in new customers and providing alternatives for less productive retail space.
“It’s a tough retail environment. I think they’re going to devote less space to it and more to different healthcare services and clinics,” said Jeff Jonas, a portfolio manager at Gabelli Funds which owns shares in Aetna and CVS.
Reporting by Carl O’Donnell, Bill Berkrot and Caroline Humer; Editing by Michele Gershberg and Meredith Mazzilli