CVS Health Corp. is betting its future in the increasingly competitive healthcare ecommerce market on becoming a virtual shopping mall.
In the run-up to its $78 billion acquisition of health insurer Aetna, a deal CVS completed in December, CVS had been laying out to the healthcare market and Wall Street big chunks of its plan to turn a network of 9,700 drugstores and another 1,100 walk-in clinics into medical shopping centers that are a mix of virtual and physical healthcare services.
The key to that strategy is access to more patient medical and payment data—a prime reason CVS bought Aetna for its base of nearly 40 million health plan members—and retooling more stores into what CVS calls HealthHubs, a concept store that will feature one-stop shopping for purchasing healthcare services, insurance and products.
CVS is currently piloting HealthHubs at five locations in Houston, with plans to open additional HealthHubs in Houston, Atlanta, Philadelphia and Tampa, Florida, this year. CVS also plans to have 1,500 total HealthHubs operating by the end of 2021. The goal of opening a wide array of HealthHubs is giving consumers more online and omnichannel options to shop for healthcare services, insurance, and medical equipment and supplies at locations that aren’t doctor’s offices and hospitals, CVS says.
“These stores bring to market a new retail engagement model that offers healthcare services in a more convenient, more accessible and more customer-focused manner,” CVS Health CEO Larry Merlo told analysts and shareholders in June at the retailer’s annual investor’s day conference. “What we’ve seen is an incredible willingness of people to engage in this setting, in the retail health setting, as a principal and primary part of where they get care.”
A typical HealthHub takes up about 20% of an existing store’s space and provides shoppers with access to a wide range of regular and telehealth services; new durable medical equipment (DME) and supplies; new product and service combinations for sleep apnea; diabetes care; diet and wellness counseling; and a concierge.
We are confident that the HealthHubs will enable our transition from a traditional retailer to a consumer health company.
A primary aim of a HealthHub store is matching—and then exceeding—the same primary care services consumers can find in a traditional doctor’s office or clinic, says CVS Health executive vice president of transformation Alan Lotvin. “The clinics that we’ve expanded services in the HealthHubs in Houston can manage about 80% of the scope of a typical primary care practice and, in fact, bring some services that most doctors don’t have,” Lotvin told attendees. “Sleep apnea screening is an example, or cameras to take pictures of the back of the eye or retina, which is a critical evaluation for people with diabetes.”
CVS isn’t saying how much it’s spending on expanding its HealthHubs across all stores, although CVS Health will spend between $2.2 billion and $2.3 billion now through 2020 on various initiatives, including digital healthcare technology. “These investments will be directed toward reformatting our stores, advancing our digital programs and driving our transformational efforts,” CVS says.
Another goal of expanding HealthHubs into more CVS stores is targeting more segments of the healthcare population, primarily patients with a chronic condition and enrolled in Medicaid and Medicare.
At a typical HealthHub, CVS wants newly hired concierges to help consumers shop for medical equipment on their way home from the hospital or get nutritional advice from an on-site dietician, says CVS Health executive vice president and president of CVS Pharmacy Kevin Hourican. “The health concierge is a real game changer–they are readily accessible to customers and help educate them on new products and services that are available in our stores and help connect customers to those services,” Hourican says. Additionally, over time, the concierge will be enabled to answer insurance-related questions, and we have on-site dietitians that can help customers better understand the impact of nutrition on their overall health and wellness.”
Ecommerce and digital technology will be a mainstay of HealthHubs. For example, at select HealthHubs, CVS is working with Nashville, Tennessee-based SmileDirectClub to offer telehealth visits and the sizing and ordering online for invisible braces, or clear aligner therapy, through SmileDirectClub. “SmileDirectClub SmileShops will be included in select CVS HealthHubs by the end of 2019,” CVS says.
Currently, SmileShops are located in 13 CVS stores in eight states and will expand to several hundred locations this year and “more than 1,000 over the next several years,” CVS says.
To grow HealthHub traffic, CVS will promote its expanded healthcare services to the 72 million shoppers currently signed up for its text-messaging program, the retailer says. “In 2019, talking about texts may not seem like the most technologically advanced experience, but remember, healthcare is one of those few industries that still runs largely on telephone, snail-mail and fax,” Lotvin told attendees. “So by being able to communicate with people in a much more modern fashion, we are changing that experience.”
CVS Health also will leverage its acquisition of Aetna and the combined nearly 94 million healthcare consumers of CVS and Aetna services, and use more advanced analytics and artificial intelligence to analyze consumer and patient data.
“Our engagement platform will translate insights we derive from our data into recommended behavioral change on the part of consumers—in other words, turning insights into actions,” CVS Health chief operating officer Jonathan Roberts told attendees. “It will enhance our understanding of each consumer and create a customized engagement strategy for them. For example, the strategy for an individual with diabetes who is living a healthy lifestyle is very different for someone with a more advanced form of the disease.”
CVS has yet to release many metrics on the performance of its HealthHub pilot stores, such as customers’ average spend or the increases in telehealth visits or ecommerce transactions on CVS.com, or increases in the number of new or refill online drug prescriptions. But CVS does say shoppers in a CVS pharmacy are somewhat more satisfied with a HealthHub experience than a visit to a conventional CVS store.
For example, consumer satisfaction scores for pharmacy services in HealthHub locations are 84.9%, compared with 79.5% for a regular CVS drugstore. For overall store satisfaction, shoppers rate a HealthHub at 81.3% vs. 76.9% for a conventional CVS pharmacy, CVS says.
CVS is staking a lot of its future business expansion plans on HealthHubs. “We will transform healthcare delivery via our stores and local communities via our trusted health care professionals and via our digital capabilities,” CVS Health executive vice president and president of CVS Caremark Derica Rice told attendees. “We are confident that the HealthHubs will enable our transition from a traditional retailer to a consumer health company.”
But CVS also faces stiff competition from other online and chain retailers, such as Amazon.com and Walgreens Boots Alliance Inc.
Although it has yet to release full details on its own expansion plan, Walgreens in one of its stores in suburban Chicago has been piloting more healthcare services, including digital doctor visits, laboratory and testing services such as blood draws, an optometrist shop and an audiologist to perform hearing tests.
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