How CVS is becoming a full-service health care provider
Fresh off its purchase of Aetna, drugstore chain CVS is refashioning itself as a full-service health care provider.
The company announced last week that it's testing its new HealthHUB store format at three Houston, Texas, locations. While the retailer will continue to offer health, beauty and personal care products, the new model will allocate more than one-fifth of a physical location to health services.
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In addition to flu shots and prescription refills, the new "hubspots" will focus on chronic care management for conditions like sleep apnea and diabetes. They'll also include health kiosks for measuring blood pressure, digital apps for weight loss and in-store dietitians for nutrition lessons.
"That has the potential to encourage more store traffic and increase store sales," said Ana Gupte, stock analyst at SVB Leerink.
CVS, which has been suffering from slowing sales due to increased competition online from Amazon, is betting the ramp up in health services will bring customers back through its doors. The drugstore company operates about 10,000 physical stores, and over one-tenth of those locations already offer MinuteClinics, its retail clinic service. CVS employs about 40,000 health care professionals.
While the health hubs are in the pilot program, Larry J. Merlo, chief executive officer at CVS, said he's not expecting to convert all physical stores into health hubs. Instead, he plans to target a set of stores in each market.
"Our goal is to not turn every store into that. We're thinking about this hub-and-spoke concept where every store may have a core set of offerings, but the hubs, if you will, would have the complete suite of services available," Merlo said at a company conference presentation last November.
CVS has been positioning itself as health care provider for years. Last November, it completed its purchase of Aetna, the nation's third-largest health insurance company, for about $69 billion. Aetna covers about 22 million people, creating a sizable consumer base for CVS's health hubs. CVS Caremark has 93 million members, making it the largest pharmacy benefit manager in the country.
In 2014, CVS bought Omnicare, which focuses on longer-term care in nursing homes. CVS is also focusing on chronic conditions, specifically cardiovascular problems, diabetes, hypertension, asthma and behavioral health. The same year, it also stopped selling tobacco products.
CVS isn't the only retailer getting into health care, though it may be going after the market more aggressively than others. Walgreens is considering a partnership with Humana, a health insurance company with more than 14 million members.