Feb 15 2014, 2:20pm CST | by Forbes
The move by CVS/Caremark (CVS) to stop selling cigarettes and other tobacco products is expected to boost the drugstore giant’s relationships with doctors and hospitals forming under the Affordable Care Act.
CVS has estimated that its decision to cease tobacco sales by October will reduce annual sales by about $2 billion, but analysts see the future for the drugstore giant, as well as its rivals including Walgreen (WAG) to be capturing health care dollars from newly insured Americans under the health law.
Increasingly, both drugstore chains, Wal-Mart (WMT) and even some grocers with pharmacies like Kroger (KR) are trying to become part of accountable care organizations, or ACOs, which link medical care providers together to improve quality of medical-care. The idea is to improve health outcomes and ACOs need pharmacists to do that.
“If you look at ACOs and physician practice groups today, they are increasingly focused on outcomes, because more and more of it is being linked to their reimbursement rates and a key area that ACOs are focused on, is the role that tobacco place in exacerbating a lot of chronic conditions that are driving cost up in the healthcare systems, so many of these ACOs have developed a number of metrics to track this,” CVS chief executive officer Larry Merlo told Wall Street analysts and investors on the company’s fourth-quarter 2013 and full-year earnings call earlier this week.
If the providers in the ACO achieve better outcomes, they divvy up money saved with employers, insurance companies or, in the case of the health law, the Medicare health insurance program for the elderly and disabled.
The ACOs rely heavily on outreach to patients via primary care doctors, nurse practitioners and pharmacists like those at CVS and Walgreen that help patients adhere to their prescriptions, stay healthy and out of the more expensive hospital.
In the Medicare program alone, there are now more than 360 ACOs that have signed on to participate in the so-called “Medicare Shared Savings Program,” an initiative under the Affordable Care Act.More than 5.3 million Medicare beneficiaries will be receiving care from these ACOs in this year alone, according to the Centers for Medicare & Medicaid Services, which runs the Medicare program.
Tens of millions more Americans are expected to be receiving medical care from doctors and hospitals that are part of ACOs thanks to deals these providers are negotiating with private insurance companies like Aetna (AET), Cigna (CI), Humana (HUM), UnitedHealth Group (UNH) and most Blue Cross and Blue Shield plans. Insurers see ACOs as a move away from fee-for-service medicine that results in doctors and hospitals doing unnecessary or unneeded procedures and tests.
Insiders at CVS and Walgreen say both pharmacy chains are in a fierce battle to be the pharmacy of choice for large health care systems forming ACOs. The fact that the chains have sold tobacco products often comes up and isn’t looked on positively by doctors and hospitals, these insiders say.
“If you think about all the different ways that we serve, millions of customers each and every day through our retail pharmacies, our MinuteClinics, our patients and pharmacy counseling through Caremark channels and we see our decision more fully aligning with your outcomes-based reimbursement models [taking] and you and we think that we will become the pharmacy of choice for these entities and physicians,” Merlo said told analysts earlier this week.
Source: Forbes Business
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