“Backward integration.” This is a business strategy concept – “when a company expands its role to fulfill tasks completed by organizations in its supply chain.”
In health care, we’re seeing backward integration by health plans, particularly into primary care. Most recently, Blue Cross and Blue Shield of Texas announced a partnership with Sanitas USA to open 10 advanced primary care medical centers in Dallas and Houston. These locations will offer weekday and weekend hours, some will be open 365 days per year, and all will provide primary care, urgent care, lab and diagnostic imaging services, care coordination, and wellness and disease management programs (see BCBS Texas Partners With Sanitas To Open 10 Medical Centers In Texas).
In this same vein, the Aetna/CVS merger has the attention of health care analysts. After acquiring Aetna, CVS has “vowed to change the way U.S. health care is delivered,” including plans to decrease consumer’s need for hospital services by focusing on wellness and preventative care (see Threats To Hospitals Emerging Already From CVS-Aetna Combination and The Merger Of Retail With Health Plans-Strategy, Please). In February, CVS Health introduced three redesigned health-focused HealthHub® stores in the Houston market. The new stores offer a broader range of health care services, new product categories, digital tools and on-demand health kiosks, and personalized care (see CVS Unveils HealthHub® Store Design In Texas). And in January, CVS Health Foundation and the Aetna Foundation announced a $100 million commitment to support community health initiatives over the next five years through the company’s “Building Healthier Communities” initiative (see CVS Health Invests $100 Million Over 5 Years In Community Health Initiatives).
Humana, Inc. and Walgreens announced a partnership in the Kansas City, Missouri area to open in-store primary care health clinics at two Walgreens pharmacy locations. Humana representatives will be available in these stores to assist Humana Medicare members, and other customers, with information and assistance in accessing a range of health-related services. Humana and Walgreens indicated that they are considering expanding this collaboration into other markets (see Humana Partners With Walgreens To Provide ‘Senior-Focused’ Primary Care In Missouri). Humana also entered into a partnership with telehealth provider organization Doctor on Demand to create a new health plan centered on virtual primary care and charging between $150 and $200 a month, with no copayments for video visits (see Humana And Doctor On Demand Launch New Virtual Primary Care Health Plan). And earlier, Humana has purchased Kindred, the long-term care provider organization, operating home health, hospice and community care businesses, long-term acute care hospitals, and inpatient rehabilitation facilities (see Kindred HealthCare Sold To Humana & Equity Firms For $4.1 Billion).
And, as we’ve written about before, United Healthcare and Kaiser Permanente are now among the largest employers of primary care physicians in the U.S. (see UnitedHealth Group Soon to Be Largest Employer of Doctors in the US; Clinical Laboratory Outreach More Critical than Ever Before and 50 largest US medical group parents).
It is obvious that these developments are going to “remake” the primary care market landscape. Referral patterns, reimbursement, economies of scale, and more will be reinvented by large chains of primary care clinics tied to health plans. If you are with an organization providing primary care services—whether a private practice model, a federally-qualified health center (FQHC), or some affiliated health clinic—your strategies for sustainability are being rewritten by these large and looming outside forces. But, if you are an executive of an organization, you may assume that primary care backward integration has little to do with your strategy. I would argue that is a dangerous assumption, from a strategy perspective.
I think this emerging primary care infrastructure will become the hub for consumer care management, reshaping specialty services along the way. Newly available technologies will enable these new primary care clinics to become purveyors of a range of specialty services—case management, mental health counseling, addiction treatment aftercare, applied behavioral analysis (ABA) services, women’s health services, administration of infusion therapies, and much more.
The counter argument is that primary care professionals don’t do a great job with specialty care—in terms of expertise, treatment planning, and more. There is ample evidence supporting that view. But the countervailing force is that tech-enabled specialty care platforms, rising telehealth reimbursements, and consumer convenience will drive consumers to primary care centers for some specialty care. I can see backward integration continuing at the primary care center level—adding specialty care staff as demand grows. This evolution will the change the role of specialist provider organizations in the health and human service system—with options for “complete care” models for special populations (like the emerging vertical carve-out plans) or for special niches in acute/urgent specialty care (for more see, Reinventing Your Organization: Key Management Best Practices For A Value-Based World).
We’ll continue to track the clinical care delivery trends of payers, health plans, and accountable care organizations (ACO). For some of our recent coverage, check out:
- Centene To Acquire Community Medical Group To Expand Its Provider Assets
- Centene To Acquire MHM Services, Expanding Correctional Health Care Reach
- OptumRx Acquires Genoa Healthcare
- UnitedHealth Bought Pharmacy Company Avella To Build Optum Unit
- UnitedHealth Acquiring Four Clinics Through Its Purchase Of Peoples Health
- Intermountain Launches At-Home Clinical Services
- Advocate Aurora Health & Oak Street Health To Open Primary Care Center For Medicare Consumers
- Dignity Health, GoHealth Urgent Care Acquire Six California Urgent Care Centers
- PeaceHealth To Acquire 37 Clinics Through Zoom+Care Purchase
- UnitedHealth’s Optum To Acquire A Stake In The Polyclinic
And for more on strategy in a disruptive market, check out these resources in the OPEN MINDS Industry Library:
- Building & Executing Strategy In A Complex Market—A Three-Phase Best Practice Model For Success
- No System Too Big? No Niche Too Small? Strategy Challenges Ahead
- Can Small Organizations Survive?
- If 1 In 8 Community-Based Organizations Are Insolvent, The Answer Is?
- David Versus Goliath?
- The Merger Of Retail With Health Plans-Strategy, Please
- The Path To Long-Term Sustainability
- Value-Based Reimbursement—The Numbers Are In
- The “M” Word In Health & Human Services Strategy—Why Marketing Should Be Part Of The Everyday Conversation
- The Strategic Planning Edition: Going From Strategy To Success
Or, for a deeper dive into strategy, mark your calendars for June 5 at The 2019 OPEN MINDS Strategy & Innovation Institute, and my keynote session, What Does It Take To Outlast The Disruptors? Building A New Strategy For A New Market.