CVS is buying Aetna. Executives are optimistic about the merger between Albertsons and Rite Aid. Amazon, JPMorgan and Berkshire Hathaway are looking to reform health care for their employees. Earlier this spring, speculation was rampant that Walmart might buy insurer Humana.
The rash of deals points to a widespread disruption in health care -- and it is none too soon. Health care spending will account for almost 20% of GDP by 2025, according to the Centers for Medicare & Medicaid Services. That’s such a big number that Berkshire Chairman Warren Buffett calls high health costs a “tapeworm” afflicting the U.S. economy.
The mergers reveal attempts to address market inefficiencies by combining business models and ecosystems to boost the quality of care while reducing waste and costs. The giants -- Amazon, JPMorgan -- are new to health care. Walmart already has pharmacies, but with Humana, it would also be one of the nation’s largest health insurers. These companies are all sophisticated, data-centric organizations looking to transform every part of the health care ecosystem. Even supply chains, with companies like Amazon in the fray, will be disrupted.
Data At The Heart Of Innovation
Data is at the heart of every digital transformation effort. The CVS-Aetna deal, for instance, gives CVS large claims datasets to combine with pharmacy and retail clinic data. (Full disclosure: Aetna and JPMorgan are MarkLogic customers.) Walmart and Humana, too, could combine pharmacy and health insurance data.
The combination of such data in health care, perhaps more than in other industries, will create something that’s much bigger than if data remained separate, as aptly described by CVS CEO Larry Merlo when announcing the Aetna deal: “With the analytics of Aetna and CVS Health's human touch, we will create a health care platform built around individuals."
As described by Merlo, putting consumers in the center of health care transformation efforts is key. After all, getting people to do things (take medicines, exercise, eat right) has always been the missing link in driving better patient outcomes. And getting consumers to change behavior is Amazon’s underlying expertise. While few details have been released about what Amazon, Berkshire and JPMorgan plan to do, you can bet that leveraging data will be a primary driver.
The Incumbent Advantage
How will legacy health care players compete with newly merged competitors and constant market disruptions?
They’ll have to digitally transform themselves so that their data is converted into a core business asset. If they don’t innovate, they’ll be at a disadvantage to any disrupter that has no legacy to protect. Legacy players need to turn their customers, relationships and data into ever more powerful assets -- and they need to do so with startup speed. Retailers the world over enjoyed an incumbent advantage when Amazon first arrived, but it wasn’t enough to help most of them successfully battle back.
Indeed, legacy health care players face a daunting task. While the leaders own and control phenomenal amounts of important data, the data is stuck in silos not only in different parts of the industry -- insurance vs. pharmacy, for example -- but inside different parts of the same company, too. From the doctor all the way up to the insurer, the health care ecosystem is highly specialized and fragmented.
That makes data sharing, especially given privacy concerns and regulations, all the harder. While there is no industry that can benefit more from integrating data assets, there is also no industry where privacy is more crucial. Every organization in the health care space will see tremendous value in leveraging integrated data while at the same time being pressed to provide better data privacy, accountability and integrity. Historically, more use of data meant more risk. Winning organizations will use technology to do more with data with less risk.
At the end of the day, the companies that leverage their data will have the data platform that they need to meet their aspirational goals and the companies that responsibly manage this data will eliminate the inherent risk of both managing and leveraging this information.
Legacy Can Lead
Despite the difficulty, companies that integrate data to improve patient care and reduce costs will see huge gains because there is so much room for improvement.
With Aetna, CVS will be the top of the hill, but only if the companies can integrate their data -- much of which is likely to be siloed even within the individual organizations. The very success of their merger will be determined by what they do with their combined data and how quickly they can do it.
Being able to track which patients pick up medications, which indicates whether they’re taking their medicines, is not only a patient care issue but also a data issue. And companies that best integrate and manage data to improve patient care will lead the industry’s transformation.