Last week, CVS took cigarettes off of its shelf and announced its plans to change its name from CVS/Caremark Corp. to CVS Health. This is just one more step in the company's metamorphosis from drugstore to pharmacy to healthcare provider. Through these changes, CVS is positioning itself to be an integral player in the new healthcare market.
At midnight, CVS rebranded itself as "CVS Health." By 2 pm, the Web ads had already started: pic.twitter.com/wNjr8ZUgiP
— Dan Diamond (@ddiamond) September 3, 2014
The strategy motivating CVS to change its name is to gain a leg up on its competitors, according to Jeff Hoffman, senior partner at the management consulting firm Kurt Salmon.
"People don't trust big corporations or Congress," Hoffman said. "When you ask people in this country what they trust, their hospitals and doctors are on the top of that list. Their strategy in changing their name is that they will be viewed as a more trusted healthcare partner and people will choose them over Walgreens or Rite Aid."
CVS doesn't make a lot of money on its MinuteClinics, Hoffman said. The goal of the company is not to replace major healthcare providers, but to be chosen over their current competitors and increase traffic and in-store sales, which is where they increase their margins. The branding change is concurrent with an ongoing push to partner with health systems to further that goal.
How providers benefit
The pharmacy chain announced in July that it was entering an affiliation with Washington DC's MedStar Health. This is the 41st affiliation CVS has created nationwide. As Healthcare Dive reported, MedStar will be tracking its patients who visit CVS through their electronic medical records.
The partnership between CVS and MedStar is meant to keep non-emergent patients out of the emergency rooms and to allow MedStar to receive data on CVS' interventions with their patients. MedStar providers will also work with nurse practitioners at CVS' MinuteClinics on care coordination.
Hoffman said hospitals are looking to increase two things: access and capacity. In areas where there is a shortage of primary care or an overuse of emergency rooms, the affiliation will link health systems to support to address those two things.
At this point, it is the major health systems that are creating these kinds of partnerships, according to Hoffman. CVS and Walgreens help larger organizations by treating minor illnesses and reducing emergency room wait times, Hoffman said. But the pharmacies may also be used as a referral source or entry portal into a hospital system for patients who come in and need further testing or care—they drive consumers to the affiliated system.
Hoffman said concepts have also been tested where stores like CVS make space available and the local hospital system staffs and runs the space. In the reverse, an academic medical center that doesn't make money on outpatient pharmaceuticals may have a Walgreens in its medical center to fill prescriptions as patients leave the building.
Model limitations
This kind of partnership may not be suitable to every market, Hoffman said. In some areas where there is a lot of competition or where there is good access to urgent care, the relationship would be more adversarial.
"Healthcare is still local and it is going to be community by community," he said. "On a regional basis, [hospital systems] will be looking at what the value-add is of adding them to the network. Some health systems are working with these organizations and others are competing with them."