This is the CVS of the future

In November, CVS completed the acquisition of Aetna, the largest health transaction in history at $ 69 billion. Now, CVS is testing three "HealthHub" stores in Houston with a series of health care services that could be the pharmacy of the future.

The new HealthHubs are part of CVS (CVS) CEO Larry Merlo's ambitious plan to turn his company's 9,800 stores into a "health care destination." CVS wants to equip its extensive network of stores with a range of health services to protect itself from competition Amazon (AMZN) and a wave of mergers in the industry.

CVS already has 1,100 MinuteClinics walk-in medicines, offering basic care in case of strep throat or ear infection. But its HealthHub stores are much better equipped to treat patients with chronic diseases such as diabetes and respiratory diseases. The renovated stores, with on-site dietitians, nurse practitioners, lab services and medical supplies on the shelves, point out that CVS wants to move its stores beyond snacks and toothpastes.

"Do you need half a line for greeting cards? Probably not. And how many different types of shampoo do you need?" said Lisa Gill, health care analyst at JP Morgan.

Houston stores replace the less performing sections such as greeting cards with 20% more space dedicated to health products, such as asthma and sleep apnea, and iPads that explore the applications of health and well-being.

"This is a natural evolution since Aetna's recent takeover," said Ross Muken, analyst at Evercore ISI. CVS wants to present a "holistic approach to health care", he added.

The spiral of health costs

It is the largest chain of pharmacies in the country and nearly 70% of the US population lives within five kilometers of a CVS store.

The company's more than 30,000 health professionals also make the HealthHub strategy credible to consumers: "In the healthcare system, the pharmacist is one of the most trusted advisors," said Gill.

CVS bought Aetna to create a huge customer base: it collects health care premiums from about 39 million Americans. The company believes that the acquisition will reduce costs and increase earnings.

But these stores will face competition from emergency care clinics across the country, as well as retailers like Walmart, who also play a role in the health care sector.

CVS has targeted patients with chronic conditions as a critical way to reduce costs. Patients with chronic diseases are the most expensive to insure in the United States. Five conditions account for about 80% of the $ 3.5 trillion in annual health care expenditures: heart disease, diabetes, high blood pressure, asthma, and mental health.

"It's there that we see a great opportunity." People with diabetes, asthma, cardiovascular disease, we know their names, "Merlo said last year. "They do not reach their best health."

Hub stores, like Houston's new ones, will target these patients with expanded MinuteClinic services that can screen, diagnose, treat and provide follow-up care. Houston stores will also have more treatment rooms and courses for health and nutrition seminars. There is a course with the American Heart Association in Houston, for example.

Although Houston stores will not have doctors onsite, CVS has partnered with TelaDoc, a virtual health care platform that connects physicians and patients.

Avoid an emergency trip

CVS wants patients to come to its stores for more minor problems, rather than going to emergencies, which is the most expensive care option for insurers like Aetna. Emergency department travel can generate thousands of dollars from vendors each visit.

"Think of the number of visits that end in an emergency room," Merlo said. "They could be seen in a retail clinic at a fraction of the cost."

CVS thinks that he can become a "care coordinator for patients", advising him on exercise, diet and weight loss plans. Patients with chronic conditions can consult their doctor and go with a treatment plan, but they are often left to fend for themselves. It is there that CVS wishes to play a role.

"We will not cure diabetes, but we can help this diabetic patient improve his health and avoid the unplanned medical events that happen every day with thousands of people across the country," Merlo said.

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The company is considering a "star approach" for remodeling stores across the country.

CVS is always looking for what the hub stores will look like. Region by region, CVS says it will decide which conditions prevail the most in communities and which health services to provide can reduce costs.

"If there was a community where the rate of diabetes was high, experts would be stationed in these stores, offering clients outreach services, outlets, tools to lose weight and check your level "insulin," said Evercore & # 39; s Muken.

Visits to clinics increase CVS 'profits and allow it to reinvest in creating more competitive health insurance plans through Aetna.

CVS receives a payment for a customer visit, instead of writing a check for a visit to the emergency. In 90% of cases, patients go to a primary care clinic, an order will be written, said Gill.

So, CVS must fulfill these requirements. And if customers stay while the pharmacy fills their prescription, CVS hopes to be able to buy in-store an OTC supplement or one of CVS 'new healthy snacks.