U.S. market access landscape: A push for control is erasing the boundary between payers and providers in U.S. healthcare

Major U.S. healthcare payers and providers are consolidating at a dizzying clip as they seek to gain market share, increase access to care and secure clinical control to improve health outcomes. These mergers feature both vertical integration – as was the case with CVS’ watershed acquisition of Aetna five years ago – and horizontal integration, as with Elevance’s recent acquisition of Blue Cross Blue Shield of Louisiana.

Vertical integration is common in the health systems sector. Health systems will buy or establish an insurance plan to serve as an extension of their continuum of care, a means of directing referral streams to increase revenue and securing control over clinical and formulary decisions for patients. Horizonal integration is seen more in the payer sector and typically involves a more broad-based collaboration or strategic alliance to improve health care and can often improve finances. It can mean a first step into a new line of business to fill a gap in care or serve as an expansion of current services and programs.

Here’s a look at some of the recent mergers that are reshaping the business of healthcare delivery and payment in the United States – who the players are and how their moves will impact drug development and launch strategies going forward.

Pharmacy giants battle to bulk up with provider group buys

CVS Health rattled the healthcare industry when it acquired one of the nation’s top insurers, Aetna, in 2018, and the giant retailer continues to make waves. Five months after outbidding Amazon to purchase the Signify Health home health platform—and just a month after CVS’ investment arm funneled $100 million to Carbon Health, a hybrid primary/virtual company with more than 125 brick and mortar locations—CVS Health announced it was closing in on a $10.6 billion deal to acquire Oak Street Health, a value-based primary-care company focused on treating Medicare patients. Oak Street has 169 locations across 21 states and expects to nearly double its size to 300 centers by 2026.

CVS’ bid for Oak Street is in keeping with nearly two decades of evolution toward becoming an integrated payer and provider. The drug store entered the retail clinic business in summer 2006 by acquiring Minneapolis-based MinuteClinic, an already-established chain of retail-based healthcare clinics with many locations inside CVS pharmacies. CVS then began affiliating with health systems across the country (like Cleveland Clinic) for physician oversight of MinuteClinic’s staffed midlevel providers, just as Walgreens was rising as a formidable competitor in the convenient care space through its own walk-in clinics that it launched in fall 2006.

In 2019, while Walgreens was selling off the last of its healthcare clinics to partnering health systems, CVS announced a transition of its nearly 1,200 MinuteClinics to larger format HealthHUBs focused on chronic disease management and preventive medicine. After Walgreens upped its ownership stake in the primary-care company VillageMD from 30 to 63 percent and then announced plans to operate 1,000 clinics by 2027, the writing was on the wall: to stay competitive and manage costs in CVS’ newly integrated Aetna plan, CVS could benefit by making a larger bid for primary care of its own.

In January 2023, VillageMD acquired Summit Health for $8.9 billion (with investments from Cigna’s Evernorth subsidiary). Summit Health, a value-based medical practice that offers primary and specialty care as well as urgent care through CityMD, has more than 370 locations in New York, New Jersey, Connecticut, Pennsylvania and central Oregon. VillageMD’s rollup continued with a March 3 announcement that it was acquiring Starling Physicians, a Connecticut-based physician group, expanding its footprint to 680 practice locations in 26 markets.

These developments, together with Walgreens’ recent rollout of Health Corners that help patients manage chronic conditions and its October 2022 announcement that it would fully acquire CareCentrix (a platform that coordinates post-acute and home care), underscore Walgreens’ plans to become a leading healthcare provider.

CVS’ and Walgreens’ recent moves follow Amazon’s July 2022 agreement to acquire One Medical—a primary-care organization that partners with local health systems in nearly 190 locations nationwide—and highlight numerous industry trends.

Lines are blurring between payers and providers

More and more, large integrated delivery networks and national payers are battling each other for greater control over patient costs and outcomes. Ongoing consolidation and growth in clinically integrated networks, paired with the expansion of some IDN-owned health plans like Baylor Scott & White Health in Texas are creating self-contained healthcare ecosystems that serve as both readymade narrow networks in direct employer agreements as well as bargaining chips in payer negotiations. Payers are responding by creating, acquiring or fortifying provider networks and healthcare clinics of their own.

The biggest example is UnitedHealth’s Optum, which is steadily building a network of more than 60,000 physicians nationwide and recently acquired Kelsey-Seybold Clinic, a key driver of value-based care in the Houston market and one of the nation’s highest-rated Medicare Advantage carriers. Kelsey-Seybold’s vertically integrated structure (with nearly 500 physicians plus cancer centers, Texas’ largest freestanding ambulatory surgery center and a five-star Medicare Advantage plan) made it an ideal acquisition target for UnitedHealthcare, which has been actively looking to deepen risk and value-based care strategies across Texas as a whole. Other notable acquisitions by Optum include Crystal Run Healthcare, a medical practice in the Hudson Valley and lower Catskill region of New York with more than 400 physicians and nearly 50 specialties, Atrius Health, Massachusetts’ largest independent physician network, as well as Healthcare Associates of Texas, a Dallas-based physician practice management company. In February 2023, UnitedHealth added to its Optum offerings by purchasing national in-home healthcare services provider LHC Group, allowing it to deliver value-based care in the patient’s home at a time when demand for in-home care has increased.

The second largest managed Medicare player in the nation, Humana, launched senior-focused Partners in Primary Care clinics in select markets in the 2010s—including some inside Walgreens stores—and now operates 222 such clinics under the rebrands CenterWell and Conviva Care Solutions. Less than a year after acquiring Kindred at Home in and rebranding it CenterWell Home Health, Humana announced in May 2022 a $1.2 billion venture with private equity firm Welsh, Carson, Anderson & Stowe to develop 100 new senior-focused clinics between 2023 and 2025. On the heels of CVS’ announcement to acquire Oak Street, Humana inked a five-year contract with long-time partner ChenMed for Humana’s MA members to be in-network with ChenMed’s senior primary-care centers. Humana and ChenMed have collaborated for more than a decade on JenCare Senior Medical Centersin Georgia, Kentucky, Virginia, Illinois and Louisiana. Humana’s aggressive growth plans for senior healthcare underscore its February 2023 announcement to exit the commercial business entirely.

Even the struggling Bright Health insurtech—which dropped out of exchanges nationwide for 2023 and refocused its Medicare Advantage business to California only—operates risk-bearing primary-care centers under the name Neue Health.

Primary care makes the leap to value-based care

Private investments in primary care have soared in the past decade owing to new value-based care models, the use of technology to manage data and more recently the availability of telemedicine heightened by the COVID-19 pandemic. Primary care has typically been underfunded, making it ripe for the transition from fee for service to other models of reimbursement that pay a set amount for providers to keep a defined population healthy, manage chronic conditions and reduce readmissions—and there have been big savings for doing so. Signify Health’s subsidiary Caravan Health, which partners with 170 providers in Medicare ACOs, for example, generated more than $138 million in gross savings in 2021.

That may be at the crux of why Amazon decided to purchase One Medical, closing on the $3.9 billion deal in February 2023 and immediately offering its customers a one-year membership for the discounted price of $144. In addition to the direct-to-consumer model, One Medical works with 8,500 employers that offer care to their employees. Not only that, One Medical accepts insurance and partners with local health systems in most markets where it operates.

While much of the focus of value-based care has been on seniors, we may see risk-based VBC increasingly scale to other populations. For example, Morgan Health, the healthcare venture arm of JPMorgan Chase that seeks to improve quality, cost and equity of employee healthcare, invested $50 million in advanced primary-care operator Vera Whole Health in 2021. Vera seeks to move away from Fee for Service in favor of a globally capitated model.

Players are targeting at-risk communities and populations

At a time when social determinants of health are becoming a bigger part of the conversation about American healthcare, national payers are seeing the value of delivering care to underserved communities through primary-care subsidiaries. CVS’ pending acquisitions of Oak Street Health and Signify Health foreshadow a deeper investment in SDOH alongside competing insurers like Humana (which operates a Bold Goal population health program in select markets across the country that focuses on housing, food, healthcare education and care access) and UnitedHealth Group (which staffs its own president of SDOH, Alex Billioux, M.D.).

Oak Street Health offers transportation assistance, home nursing visits, community events, behavioral health support and food assistance to a population composed of more than 50% of patients who identify as African American, Hispanic/Latino or Indigenous. Signify Health’s subsidiary Caravan Health, meanwhile, partners with ACOs through tech support and helps serve more than 500,000 patients at more than 200 health systems and 100 federally qualified health centers.

Value-based primary care companies like Summit Health (acquired by Cigna and Walgreens’ VillageMD), One Medical (acquired by Amazon) and VillageMD (majority stake held by Walgreens) have all been ideal acquisition targets due to these companies’ ’pre-made’ infrastructure and technology platforms that help providers succeed in risk-bearing contracts. Value-based operational models should help non-traditional healthcare providers, like drugstore giants and insurers, close care gaps in medically underserved communities and populations.

Even huge health plans get the Blues

A number of the Blue Cross Blue Shield plans, a network of historically independent and nonprofit regional entities known collectively within the industry as The Blues, have been at the forefront of value-based care. In January, Elevance Health, formerly known as Anthem, announced it is adding Blue Cross Blue Shield of Louisiana into its for-profit behemoth.

For Elevance, the purchase is a good-sized expansion: the Louisiana carrier has more than a million members and is the state’s dominant health insurer by far. For the Blue plan, the combination means access to Elevance’s services and systems and deep pockets. Elevance operates each of its Blue plans from their existing local offices, keeping local management in place to preserve deep local ties and continuity of service.

Elevance has been casting about for additional Blue Plan partners for years, but has had no takers until now. The independent Blues generally are comfortable local fiefdoms that enjoy the benefit of the Blue brand and Blue Cross Blue Shield Federation’s national reciprocal network arrangements. In recent years, it’s been more common for the smaller independent Blues to band together as regional entities and maintain their nonprofit status (Highmark, Regence). But at a time when all levels of the healthcare industry are ‘going big’ with mergers and vertical strategies, BCBSLA obviously saw value in Elevance’s scale.

BCBSLA and Elevance Health have worked together since 2017 on its Healthy Blue joint venture, which operates a Medicaid MCO in the state, with 340,000 members.

BCBSLA has a surplus of $1.8 billion and when a nonprofit converts to a for-profit entity, the public is due part of that money because the company benefitted from its tax status so the deal includes creation of a $3 billion foundation, Accelerate Louisiana, to benefit health programs in the state. For customers, the most noticeable change will be a shift to Elevance’s in-house PBM from Express Scripts.

The deal is expected to close in the fourth quarter, pending state regulatory approval.

Key acquisitions by U.S. healthcare organizations

Company Founded Type No. of locations Status
Caravan Health 2013 Provides tech support to ACOs N/A Acquired by Signify Health for $250M, February 2022
Carbon Health 2015 Combines primary, urgent, mental health, and virtual care 125 $100M investment by CVS, January 2023
CareCentrix 1996 Post-acute and home care N/A Full acquisition by Walgreens Boots Alliance expected by March 2023
Change Healthcare 2007 Healthcare data analytics 964 Acquired by UnitedHealth’s Optum for $13 billion in October, 2022
ChenMed 2013 Primary care for seniors 120 Five-year agreement with Humana, February 2023
Crystal Run Healthcare 1996 Multispecialty group practice 15 Acquired by UnitedHealth Group’s Optum, February 2023
LHC Group 1994 Home health, hospice, home- and community-based services, and facility-based care 964 Acquired by UnitedHealth Group, February 2023
Oak Street Health 2012 Primary care for seniors 169 Pending $10.6B purchase by CVS Health
One Medical 2007 Membership-based primary-care linked to local IDNs 189 Purchased by Amazon for $3.9B, February 2023
Signify Health 2017 Value-based payment healthcare platform, risk assessment N/A $8B acquisition by CVS Health, March 2023
Starling Physicians 1947 Primary care and multispecialty physician group 30 Acquired by Walgreens-backed VillageMD in March 2023 for an undisclosed sum, expanding VillageMD’s footprint to more than 700 sites
Summit Health 2019 Multispecialty group practice 370 $8.9B acquisition by VillageMD, January 2023
Vera Whole Health 2008 Advanced primary care combining social, psychological, and physical well-being 20 $50M investment by Morgan Health, August 2021

As of: April 11, 2023
Source: Clarivate Life Sciences and Healthcare analysts, aggregated from press releases and news reports

Implications for pharma and medtech

These developments point to an ongoing effort to move away from inpatient hospitalization – the most expensive modality of care – with primary care leading the way. Inpatient care will increasingly be reserved for only the most complex cases, while the balance of chronic care management, palliative and preventive care shift to other settings, including the home.

Whether it’s payers building out their own provider networks or new entrants to the business of care delivery such as CVS, Walgreens and Amazon, all players appear to be seeking to capitalize on an unsustainably expensive and inconvenient status quo.

For pharmas and medtechs, this fast-evolving payer/provider landscape means companies will need to stay on top of emerging access points in order to bring new drugs, devices, diagnostics and procedures to market and ensure that patients can access them. It will also bring significant changes to the patient experience as the patient journey stratifies based on condition complexity. Understanding this evolving patient journey will be critical in designing products that can improve patient health outcomes and quality of life, and in identifying barriers to and drivers of adoption and adherence.

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This article was written by Clarivate Lead Healthcare Research and Data Analysts Renée Burnham, Michelle La Vone and Paula Wade.