Across industries, consolidation is becoming the new normal. This can take the form of horizontal integration—like Walt Disney and 21st Century Fox—where two players operating in the same space band together to control a larger share of the market. Or it can come in more unexpected ways—like Amazon acquiring Whole Foods, or Walmart buying Bonobos—that allow market behemoths to expand out of their comfort zone and capture a new type of clientele.
We’re seeing this same type of vertical integration take off in healthcare. UHC/Optum, Aetna/CVS and, most recently, the announcement of Cigna and Express Scripts coming together are all examples of vertical integration, as plans and PBMs seek to control greater swaths of the supply chain. And the health plans aren’t limiting this expansion into pharmacy alone. Through DaVita, UHC is staking out an on-the-ground provider network. Through CVS Minute Clinics, a combined Aetna/CVS will touch nearly the entire continuum of care.
At the same time, you have beloved tech giants like Google, Amazon and Apple making forays into healthcare. Apple is entering the provider space with AC Wellness, an onsite clinic solution for their employees. And even with so much unknown about the Amazon/Berkshire Hathaway/JP Morgan Chase collaboration on healthcare coverage for their employees, the announcement alone sent shockwaves through the market.
So, what does all of this mean for employers?
Greater coordination of pharmacy and medical coverage can lead to greater efficiencies of care and better aligned incentives. This can lead to better outcomes for patients and, we hope, savings for employers. At the same time, the combined medical/pharmacy entities will have greater leverage, as the field of competitors narrows and their reach as organizations expands.
Having already built successful businesses around engaging the end user, tech companies like Google, Amazon and Apple are uniquely positioned to drive to a personalized, engaging experience for consumers. What remains to be seen is how effective they’ll be at bridging the gap between the move-quick, fail-fast ethos of tech, and the slow-moving, highly regulated, and perpetually fragmented world of healthcare.
What can employers do to prepare? As the players in healthcare delivery get bigger, employers should think big, too. Know your leverage as the holder of the purse strings, and use it to drive the market to your advantage. Work together with other employers, seek out areas of common interest and use your collective clout to advance your priorities.
In a system as broken as healthcare, change can be a good thing. And with employers offering health insurance to more than 178 million Americans – more than half the country – we have the ability to ensure changes lead in a direction that benefits our employees. Now that’s something to be optimistic about.
More posts from the Innovation Symposium Series:
- Mercer’s Innovation Symposium 2018 -- in 15 Minutes or Less!
- Symposium Synopsis #1: The New Face of High Cost
- Symposium Synopsis #3: In Digital Health, the Small Are Getting Smarter
- Symposium Synopsis #4: Healthcare Leaders Envision the Future
- Symposium Synopsis #5: Employers Can Integrate, Too
- Symposium Synopsis #6: Meet Zoey, The Consumer of the Future