Aetna, CVS and data thoughts

CVS has agreed to buy Aetna for a lot of money. This raises a lot of questions including, what is the value proposition?

There is the obvious value proposition that CVS has 10,000 physical locations on the same information platform. I am spitballing and harkening back to my days as an insurance data geek and there are three inter-related items that could generate an incredible amount of revenue for the Aetna/insurance side of the deal. This is a risk adjustment data gold mine.

Every risk adjustment system which drives money that I know needs a claim based event to trigger an action. Previous history of chronic conditions is the easiest to access predictor of current chronic conditions. When I worked at UPMC, I spent three years figuring out how to optimize the risk adjustment revenue for the Medicaid line of business. UPMC Health Plan is a multi-line insurer with products in Medicaid, CHIP, Exchange, Medicare and Employer Groups. It is not at all unusual for people to bounce between Medicaid, CHIP, Exchange and Employer coverage over time. One of my major projects that I was very happy to have completed was building an integrated data model that mined the entire UPMC claims universe instead of just the Medicaid claims universe. That increased the total revenue haul and decreased the number of false positives.

I had it easy. Data geeks working for insurers with either low market share or shallow data had a much harder time optimizing their risk adjustment revenue.

Aetna has a kick-ass data team. They have huge and deep data sets that they control. It is quite likely that a significant chunk of their risk adjusted covered lives in 2018 have shown up in some point in their data bases in the past decade. An individual who is now insured by Aetna Medicare Advantage in Texas may have had an amputation claim from Aetna Medicaid in Pennsylvania that is dated in 2009. That is valuable information to build and curate a risk adjustment optimization list.

However there are always serious holes in the Aetna list. Either someone has never been on Aetna before or there was a major change in health status when that person was covered by someone else. This is where CVS comes in. There is a good chance that CVS has filled some prescriptions for people who do not show up in Aetna’s data banks. Newly covered lives by Aetna can have a risk profile built off of CVS prescription data to minimize the number of surprises and optimize risk adjustment strategies.

This is the most obvious play from my days as a risk adjustment data geek. The other side of the far more complete pre-enrollment data universe for Aetna via the CVS pharmacy data is that Aetna will have far more granular level information on their markets. This will influence plan design, it will influence marketing materials, it will influence whether or not Aetna enters or leaves a market or bids for certain contracts.

Finally, the biggest data bonanza from my point of view is the CVS non-prescription data that is tied to the loyalty card that almost everyone carries on their keychain. This should give a massive predictive edge to the Aetna data geeks. Let me share way too much personal information to illustrate.

Our two children were extremely planned children. My wife used oral contraception until we started trying for our first child. After our daughter’s birth, we switched to condoms as our birth control method as she felt better off the pill and for the most part, we could handle a happy accident or a baby one year premature. I felt that I was tempting fate if I bought condoms from Costco. I walked past a CVS at least twice a day to and from the bus-stop I used for work. If we were running low, I would pick up condoms and a gallon of milk.

If an insurer could see the non-prescription purchases tied to the customer loyalty card, they had an excellent idea of when my wife and I started trying for Kid #2. If this was an insurer that sought to be socially productive and useful, we could expect to get mailings and outreach calls on pre-natal and perhaps pre-conception health enhancers. If the insurer was run by cynical bastards and the time of the year was right, they might try to be enough of a pain in the ass to get us to switch insurers so that someone else could pay for labor and delivery.

That is the most obvious data play that I can think of based on personal experience. I can think of using the CVS retail data as population health monitoring service, I can think of using the over the counter sales data tied to individuals to fuel predictive models for future opioid issues, or arthritis flares, or pulmonary hospital admissions or one hundred other things.

So from my former point of view as an insurance data geek, this merger offers an incredibly rich vein of data that can be mined and minted. This makes a lot of sense to me without even thinking about how the entire pharmacy benefit management function is a messed up situation.

30 replies
  1. 1
    JPL says:

    Wow, what a great post.

  2. 2
    SP says:

    If I tried to think of a company with worse customer service than a typical health insurer, CVS would be one of the first on my list.

  3. 3
    CarolDuhart2 says:

    What I find intriguing-and a little frightening at times-is the interface between prescription purchases, non-prescription purchases, and insurance. Will they track diet for compliance with a drug regimen, and if a person doesn’t eat the right things for that do they risk coverage?

  4. 4
    ThresherK says:

    Tangent: CVS was said to be worried that Amazon would get into healthcare. Given what is known on healthcare companies, like Humana, is there room for Bezos to make them worse? Or am I not cynical enough here?

  5. 5
    CarolDuhart2 says:

    @ThresherK: They are right to fear Amazon. Amazon could provide the complete package for home delivery: Prescription medicfine combined with durable medical goods and home delivery all in one package. Refill your medications using Amazon Prime eliminates the trip to the phamarcy where you may also pick up that 2 liter soda, which is an increasingly larger part of pharmacy profits. They can all go on the same order and delivered at the same time. Think of getting all my medications at once in an Amazon box along with diet soda, a heating pad and some other item just for fun.

  6. 6
    eclare says:

    Very interesting. CVS does not have a big footprint in Memphis, there is one that I go to occasionally for very specific brands of things, but that is it.

  7. 7
    Xentik says:

    CVS/Caremark is already one of the largest pharmacy benefit management (PBM) companies in the US, and the largest pharmacy chain. In states like West Virginia they have used shady tactics to try and dominate the marketplace, including gaining control of the State Employee Health Plan and forcing those employees to go to CVS locations for prescriptions. They also regularly try to prevent other pharmacies from filling for caremark customers by requiring manual reauthorizations.

    How does this not fall under the same category as the Humana/Aetna merger that was blocked last year? My SO works as a Pharmacist and is incredibly concerned with this coming merger from a monopoly standpoint, as am I.

    Re: Amazon – From what my SO says, it’s unlikely Amazon will be able to innovate much. Rx-by-mail is already a major component of all PBMs strategy and yet pharmacies still exist. Disregarding the customer service aspect, there are many prescriptions which cannot be handled by mail at all because of their time-sensitive nature (e.g. antibiotics), or due to the short lifespan of the drug (various injectables) which require. The biggest concern is that Amazon is going to become a pharmacy chain/PBM like CVS via Wholefoods and its shipping system and use that weight to try and secure a large part of the marketplace.

  8. 8
    Feathers says:

    This is why I generally don’t use the CVS card I have, unless there is a specific sale. And even then, I usually use my ex-husband’s phone number, because that was what we signed up for all the loyalty programs with. Always thought a Massachusetts referendum banning differential pricing based on giving up personal information. Or at least that this fact must be disclosed in all advertising of the sale.

  9. 9
    CarolDuhart2 says:

    @Xentik: Amazon Prime Now. 2 hour delivery window for most medications would be sufficient. But the real money could be in mail-order durables and repeat prescriptions that don’t require fast delivery, and in a larger universe of available medications. One medicine I take was from out of town and took a couple of weeks for delivery. Amazon could do much better than than delivering from a local fulfilllment center.

  10. 10
    MazeDancer says:

    CVS Silver Scripts is one of the cheapest Medicare Part D for drugs with zero deductible. Saved my mother a bundle. Don’t know if Aetna merger will change that program. Hope not.

    CVS has some kind of purposefully insane check-out-line policy. Truly bizarre for such a big company. Where most stores refuse to have the single line feeds to all the registers policy, which customers try to pursue on their own, but some one always cuts in if you’re not vigilant. The check-out keeps me out of there unless forced.

    CVS swallows up retiring mom-and-pop, community-enhancing pharmacies and turns them into the soulless cookie cutter tacky places. CVS also has an enormously important policy of giving jobs to people with Downs Syndrome and other challenges. My friend’s son has worked at one in Manhattan for years. He walks to work, loves his job, they love him.

  11. 11
    evap says:

    I have Aetna insurance through my employer (a private university with a world-class hospital/healthcare system), although I think Aetna just manages and the Elite University self-funds. I wonder how this will affect my insurance. Probably will require us to use CVS for prescriptions. There is an independent old-fashioned drugstore down the road from us and I try to use them if I can. I hope I can continue to use them.

  12. 12
    Starfish says:

    CVS is now the pharmacy for Target stores.

  13. 13
    kindness says:

    CVS is going after guaranteeing drug money. You wait, if this happens the only pharmacy that Aetna will be good at will be CVS.

  14. 14
    dr. bloor says:

    10,000 locations, most of which in my area already have drop-in clinics and have been offering flu shots for several years now. They get to set their own price for routine care.

  15. 15
    ThresherK says:

    @CarolDuhart2: I already understand the whole bit about selling stuff; Amazon is good at that. I’m probably not phrasing this right. What I meant was about relations between Amazon and medical care professionals.

    The human body is different than buying a hot water heater at Home Depot and using them to find an installing contractor, or Amazon-suggested warranties for an HDTV.

  16. 16
    Ohio Mom says:

    For the Ohio family, a very timely article. Ohio Dad’s insurance through UHC has required us to use CVS; in January, his employer is switching to Aetna. So I guess we will not be switching pharmacies.

    We were covered by Aetna many, many years ago, and our memories, though fuzzy, include a lot of calls trying to convince them that they needed to pay one claim or another.

    I do remember clearly in one instance spending six months getting them to cover my first asthma test. They kept telling me they didn’t cover durable equipment and I kept telling them it was an asthma test.

    We also remember finding out years later about Aetna’s huge data breach. We thought it wouldn’t effect us because we hadn’t been part of an Aetna plan in years.

    Then we discovered someone was using our info to try to get a tax refund. Luckily, the bank was on to it. At least one other person in Ohio Dad’s office had the same thing happen to him.

  17. 17
    Anonymous At Work says:

    From an antitrust perspective, this should sail through as an example of vertical integration. However, I am heartened by Democrats making a bigger focus on antitrust/monopoly control part of their platform.

  18. 18
    gvg says:

    Aetna just managed to get most of the state of Florida employee healthcare high end. I have had AvMed HMO state of Florida for 24 years. the first 19 I was healthy and had no way to judge except reputation. then I got cancer and AvMed gave me no problems and my costs weren’t enough to make me use itemized deductions instead of standard. UF offers 6 plans and I always had picked the better end of coverage because I am cautious and don’t have lots of extra income. this year my good coverage choice was Aetna and as of January I will switch. I am nervous about ti tho reputation was Aetna HMO is only slightly less positive. I hate being forced to change. Also Aetna was not previously availible here and some docs are saying they don’t take it/ My feeling is there are such a large percent of state employees around here that in a little while all the docs will have gotten on board. From what I can see, Avmed lost most of the state counties that they used to have. No idea why. Someone in a Docs office heard the state didn’t want such a concentration on one plan but from what I can see, they just switched which one with the same concentration.

    they tried to make us do mail order prescriptions starting a few years ago. I ignored their confusing instructions and still get mine from the grocery pharmacy.

    I use CVS sometimes-the one that is 24 hours if I make a mistake and run out. I don’t use loyalty cards except book stores. really don’t trust corporations. its not just the targeted adds, its that they don’t keep the data secure. Look at target with the data breech and others. Last time i had an unauthorized use with cancel and replace, I think it was a Sears order that exposed my card. We also need more significant penalties for lax data security from companies.

  19. 19
    Dog Mom says:

    I am not much of a pharmaceutical customer for myself (three dogs are another story). However, I did have a bad reaction when wasps came after a few years ago. When my EPIpen expired most places wanted to charge me at least $400 for a replacement with a ‘Coupon’ to make me think I was getting a deal. CVS had the Adrenaclick (epinephrine injection, USP auto-injector) available for $109.99 – when I went to pick it up – they told me I had another discount and only charged $9.99. For this, I will sing there praises.

  20. 20
    Woodrowfan says:

    We have Aetna and some years back they forced us* to switch to CVS from Rite Aid. We liked Rite Aid. it was closer to us and the pharmacists were nicer. The CVS stores around us always seem to be over-worked and understaffed. I once heard a CVS pharmacist complain to her manager that she had worked a 12 hour shift without a lunch break.

    The Rite Aid we used lost business and closed.

    * we could get our prescriptions filled anywhere, but if we wanted Aetna to pay for them, well, then we went where they told us!

  21. 21
    Shinobi says:

    I work in the data science industry and this kind of merger is what creeps me out about the future of what we can do with data.

    Right now we are still really bad at working with Data. I mean we’ve come a long way but we’re still stumbling around with very old techniques and figuring things out.

    There are NO protections for consumers when it comes to what a company can do with your data. They need to protect your identity from exposure, but in terms of trying to manipulate you to get your money or save themselves money, they can do whatever the want. Which, isn’t so bad if you just have a list of stuff people bought.

    But now CVS has a list of what you bought, and also your medical history. PLUS if you install the CVS app on your phone they might have a map of everywhere you’ve been in the last year. They might have information about how you sleep, so on and so forth.

    Amazon knows when you like to listen to music, watch TV, how much and what you read, when you last bought new shampoo and what you want for Christmas. It’s also listening for your voice all the time. Yup.

    And sure, all that data might be harmless, and right now much of it is.

    Because we haven’t figured out what to do with it yet.

    But we will, and it will be creepy and invasive and you probably wont even know you’re being manipulated into behaviors that may or may not be in your best interest.

    And now I hope you are all as creeped out by my job as I am.

  22. 22
    MoxieM says:

    @Dog Mom: brief funny anecdote prior to my single point of data-light.

    One of my older dogs needed meds to control her pain from arthritis and the woes that older Newfies are prone to. They were pharmacy-filled meds (Tramadol, and ? something for her neuropathic pain.) Vet called it in to my local Walgreens, and I went down and picked it up along with something for me. It took a couple of fills before somebody’s lightbulb lit, and they realized it was a veterinary prescription, and Maisie was a canine, not my human daughter. (I wasn’t trying to rip them off, I actually didn’t realize they were running it through my insurance.)

    Anyway my single point of data light: I choose not to use my CVS card, with all those “read your purchases and offer you discounts based on priors” that result. They are intrusive and a waste of paper. An insurer could check my meds of course, but they’d have to go through my bank to connect to my casual purchases.

    Also, given the choice between a CVS and a Walgreens, I’ll go CVS (the major chains in my area). I’ve had nothing but chaff from the pharmacies at Walgreens, and will go out of my way to use a CVS. An anecdote.

  23. 23
    Barbara says:

    CVS can’t use Aetna’s health information to market its services without violating federal law. Using your purchase/non-purchase of oral contraceptives at a CVS store as a marker for deciding to start sending advertisements and messages about prenatal vitamins or diapers would be problematic.

  24. 24

    Look at the optics of this. Look who is buying whom. If Aetna bought CVS, no one would raise an eyelid. But this is like QuikLube buying Ford. It is the beginning of the end of the health “insurance” industry as we have known it. (The scare quotes signify the fact that it isn’t, and never has been, insurance in the meaning of the word that applies to every other kind of insurance.)

  25. 25
    Ohio Mom says:

    @Woodrowfan: You are describing our local CVS pharmacy, especially in years past. The entire staff turned over a couple of years ago and that helped a lot. Before that, they shortchanged us more than once because they didn’t have enough stock.

    When Ohio Dad announced his employer was changing health insurers, my very first reaction was, “This will be good if we can drop CVS.” But no dice. I’d much rather go to the Walgreens across the street from the CVS.

  26. 26

    […] Duke University, a former data manager for the University of Pittsburgh Medical Center Health Plan, outlines some of these benefits: Aetna, he observes, has served the Medicare, Medicaid, and private insurance markets, which […]

  27. 27
    AnonPhenom says:

    I realize data is more your thing than delivering care, but would you agree that among the potential savings would be conversion of retail space in select CVS outlets to Urgent Care/Triage Centers (for Aetna lives yes, but not limited to just those). Such Centers staffed with floating physicians, Nurse Practitioners, P.A. are common already today.
    The converted CVS spaces would already have health professional on staff ready to facilitate the visit.

  28. 28

    […] Duke University, a former data manager for the University of Pittsburgh Medical Center Health Plan, outlines some of these benefits: Aetna, he observes, has served the Medicare, Medicaid, and private insurance markets, which […]

  29. 29

    @Barbara: CVS can’t use that data, but Aetna can use data from external sources to pump up their data model. The trigger would be the purchase or non-purhase of non-prescription barrier birth control combined with the lack of prescription birth control claims that Aetna in this scenario already had full legal access to.

  30. 30
    Barbara says:

    @David Anderson: Don’t see why purchase of barrier contraception would not be individually identifiable health information.

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