Yes, the CVS/Aetna Merger Will Transform Healthcare Technology—Eventually

The short-term impact will be felt behind the scenes

In many ways these companies are like oil and water, operating and profiting in entirely different ways.
Getty Images, Aetna, CVS

CVS and Aetna have a new vision for healthcare, one in which technology plays a critical role. It’s coming, but it will take some time.

In comments regarding the two companies’ upcoming merger, Aetna CEO Mark Bertolini said it will cause “a dramatic change” to services and stores and create a healthcare platform that’s “easy to use and less expensive for users.” Part of this, he has emphasized, will involve new technologies. Telemedicine, remote monitors, personal health aids and many more advances will allow consumers to streamline their relationship with their own care. This isn’t necessarily an unrealistic vision; indeed, it’s one shared by many experts in both medicine and tech.

It is not, however, one which patients should expect to be realized any time soon. It will happen inevitably, yes. Consumer-facing technology is becoming a dominant narrative in the healthcare sector, especially among millennials. For the 36-and-under generation, an increasing majority say they expect providers to connect with them with digital care options that range from help finding a doctor to direct telemedicine solutions. The new CVS/Aetna corporation will be under enormous pressure to deliver eventually, but the short-term impact of the merger will be felt behind the scenes.

An immediate impact on the back-end

In the near future it will show up in back office functions like HR, finance and procurement. And that’s not unusual. Mergers of this size almost always lead to functional synthesis, generally before any product development takes place. The companies involved, even when they work in very different industries, share many needs which can benefit from economies of scale. Indeed, often companies merge specifically to take advantage of consolidated corporate infrastructure. As Aetna and CVS define their new relationship, systems such as management, CMR, EMR, IT and finance will likely see increasingly sophisticated solutions as the two companies share their best ideas.

On the consumer-facing side that process will lag. New technology-based products will take a long time to filter out to insurance delivery or pharmacy shelves. In part, this is simply because the deal between CVS and Aetna is unprecedented. Retail and insurance have never come together like this before, and the digital transformation journey for each company will look very different even after they begin operating under one umbrella. These are complicated companies, with processes and systems to match, and, as a result, any technological revolution will have to happen slowly.

This is also because Aetna and CVS operate such distinct business models. In many ways these companies are like oil and water, operating and profiting in entirely different ways. Their digital transformation initiatives will reflect this. Aetna, for example, will look at technology and analytics from a risk and actuarial standpoint. The company wants to get into the heads of its insureds, because that’s its bread and butter, and any digital transformation will reflect that. CVS, on the other hand, looks at its consumer relationships through the lens of a retailer. It sells products and healthcare services directly and will build its own digital transformation around that very different model.

Aetna’s risk analysis and behavioral incentives certainly will find some synergies with CVS’ retail model; it would certainly be worth knowing whether one customer buys frozen pizzas and another whole grain bread, for example. But adapting these models to each other will take time and effort and will not lend itself to turnkey product development.

This is the upshot of vertical integration. CVS and Aetna will merge service lines, creating customer relationships that travel from purchasing habits to the physician, the prescription and final payment, but at the same time it also involves two companies reconciling very distinct business models.

Privacy laws will be an issue

Technology development will also have to work around the strict privacy laws governing healthcare, a particular challenge given that Aetna’s industry depends on successfully analyzing broad tranches of data. HIPAA tightly controls how a patient’s information moves without his or her consent, creating very real problems for system-level sharing in any future suite of integrated CVS/Aetna products. Companies can’t simply start sharing data and profiling customers. Even before the engineers get to work, the lawyers will have to have their say.

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