CVS STEPS UP

Health is mov­ing to di­ver­sify with its purchase of ma­jor health in­surer Aetna. The bid would make the Woonsocket-based firm the na­tion’s sec­ond largest com­pany — and that could mean big things for the Val­ley’s econ­omy

Woonsocket Call - - Front Page - By RUSS OLIVO ro­livo@woonsock­et­call.com

WOONSOCKET – Scott Gibbs has been an eco­nomic de­vel­op­ment pro­fes­sional most of his adult life, but ask him what the trickle-down might be for the re­gional econ­omy in the pro­posed $69 bil­lion mega-merger of CVS Health and Con­necti­cut-based Aetna, and he’s still scratch­ing his head.

“I have no idea, I re­ally don’t,” says the pres­i­dent of the Eco­nomic De­vel­op­ment Foun­da­tion of Rhode Is­land, the or­ga­ni­za­tion that man­ages High­land Cor­po­rate Park, where CVS Health main­tains its cor­po­rate head­quar­ters in roughly a mil­lion square feet of of­fice space. “What hap­pens af­ter this I don’t know, and I don’t think many peo­ple do.”

But as CVS Health makes a high­stakes gam­ble that it can forge a new, cut­ting-edge and con­sumer-friendly model for the de­liv­ery of health care in the U.S., Gibbs says one of the big­gest up­sides for the re­gion may come from be­ing known as the lo­cale where these heady in­no­va­tions are tak­ing place. As Gibbs puts it, “Be­ing at the epi­cen­ter of this is not a bad place to be.”

Per­haps be­cause CVS Health has been grow­ing right un­der our nose in this North­ern Rhode Is­land en­clave since the early 1960s, the scale of the phar­macy and health­care ben­e­fits man­ager is of­ten taken for granted. But CVS Health is al­ready the na­tion’s sev­enth largest com­pany, with some 9,700 phar­ma­cies and $177 bil­lion in an­nual rev­enue. And if the merger is ap­proved by share­hold­ers and reg­u­la­tors, it would be­come the sec­ond-largest – big­ger than Ap­ple,

Exxon and Berk­shire Hath­away, trail­ing only Wal­mart among the cor­po­rate gi­ants.

The com­pany em­ploys more than 7,000 peo­ple in Rhode Is­land, roughly 5,300 of them at its cam­pus-like head­quar­ters in High­land Cor­po­rate Park, strad­dling the Woonsocket-Cum­ber­land line.

Michael DeAn­ge­les, a spokesman for CVS Health, says the com­pany has no in­ten­tions of re­lo­cat­ing its cor­po­rate head­quar­ters from Rhode Is­land af­ter the merger. He also says the CVS Health/Aetna mar­riage will re­sult in new ca­reer op­por­tu­ni­ties for ex­ist­ing em­ploy­ees and the cre­ation of new jobs.

“CVS Health will con­tinue to be head­quar­tered in Woonsocket, Rhode Is­land,” DeAn­ge­lis said. “Over the years, we’ve seen ca­reer de­vel­op­ment and job op­por­tu­ni­ties open up for col­leagues fol­low­ing our pre­vi­ous ac­qui­si­tions of com­pa­nies in­clud­ing Care­mark, Co­ram and Om­ni­care, and we would ex­pect sim­i­lar op­por­tu­ni­ties to oc­cur fol­low­ing the ac­qui- sition of Aetna.”

When the merger was an­nounced, CVS Health Pres­i­dent Larry Merlo said the trans­ac­tion would fill a need to “re­de­fine ac­cess to high-qual­ity health­care” in lower-cost lo­cal set­tings. CVS al­ready made a bold move in shift­ing ba­sic health­care away from emer­gency rooms and ur­gent care cen­ters sev­eral years ago by launch­ing “Minute Clin­ics,” staffed by nurse prac­ti­tion­ers, in many of its stores. In team­ing up with Aetna, which pro­vides cus­tomers with myr­iad health in­sur­ance prod­ucts, CVS Health ap­pears poised to de­liver a broader range of med­i­cal ser­vices from phar­macy lo­ca­tions, redefin­ing it­self as a health care com­pany while re­duc­ing its reliance on tra­di­tional re­tail prod­ucts – a sec­tor un­der in­creas­ing threat from com­peti­tors like Ama­zon.

“This com­bi­na­tion brings to­gether the ex­per­tise of two great com­pa­nies to re­make the con­sumer health care ex­pe­ri­ence,” Merlo said. “With the an­a­lyt­ics of Aetna and CVS Health’s hu­man touch, we will cre­ate a health care plat­form built around in­di­vid­u­als. We look for­ward to work­ing with the tal­ented peo­ple at Aetna to po­si­tion the com­bined com­pany as Amer­ica’s front door to qual­ity health care, in­te­grat­ing more closely the work of doc­tors, phar­ma­cists, other health care pro­fes­sion­als and health ben­e­fits com­pa­nies to cre­ate a plat­form that is eas­ier to use and less ex­pen­sive for con­sumers.”

The com­pany says the use of Aetna’s health care data­base will also im­prove pa­tient care through­out the health care sys­tem, partly by re­duc­ing hos­pi­tal read­mis­sions. Com­bined, the two com­pa­nies will be po­si­tioned to bet­ter mon­i­tor and man­age post-hos­pi­tal home­care, as well as the treat­ment of chronic ail­ments such as di­a­betes, a con­di­tion that af­flicts 30 mil­lion Amer­i­cans at a cost of about $245 bil­lion a year. Be­tween doc­tor vis­its, for ex­am­ple, di­a­betes suf­fer­ers could ob­tain coun­sel­ing at “a store-based health hub” and re­mote mon­i­tor­ing at home, the com­pany says.

These are the types of in­ter­ven­tions the tra­di­tional health care sys­tem should pro­vide. Merlo said, but it “lacks the key el­e­ments of con­ve­nience and co­or­di­na­tion” needed to en­gage con­sumers in their own health. “That’s what the com­bi­na­tion of CVS Health and Aetna will de­liver.”

Christopher Bouley, a vice pres­i­dent of wealth man­age­ment at UBS Fi­nan­cial Ser­vices, says that what im­presses him most about the pro­posed ac­qui­si­tion is that CVS Health isn’t re­act­ing to changes in the mar­ket dy­nam­ics for health­care – it’s shap­ing them. Some of the na­tion’s legacy brands – J.C. Pen­ney and Sears come to mind – are proof that com­pa­nies need to be strate­gi­cally proac­tive to re­main rel­e­vant.

“They’re not wait­ing around for some­body to come along and eat their lunch,” said Bouley. “It’s great lead­er­ship by Merlo and the peo­ple at CVS.”

———

LIKE GIBBS, how­ever, Bouley says it’s too soon to tell how the ben­e­fits of the merger fil­ter down to the lo­cal and state level – ex­cept in mak­ing the com­pany stronger over­all. And that, he says, is no small thing.

For Bouley, the merger serves as a re­minder of just how im­por­tant a bul­wark of the econ­omy CVS Health is for Rhode Is­land, and it un­der­scores the need for gov­ern­ment of­fi­cials to con­tinue pro­vid­ing re­sources that make the state a hos­pitable place for the com­pany to be.

“It’s im­por­tant that we have fa­cil­i­ties for them, to make sure they feel val­ued and that there’s a part­ner­ship,” said Bouley.

When Gov. Lin­coln Chafee pro­posed elim­i­nat­ing the jobs-cre­ation tax credit sev­eral years ago, for ex­am­ple, Bouley thought that was ex­actly the wrong thing to do. “You don’t want to make a deal with some­body and then re­nege on it,” he said. “That’s the kind of thing you want to avoid.”

Gibbs couldn’t agree more.

The com­pany’s em­ploy­ment base in High­land Cor­po­rate Park alone may be big­ger than the pop­u­la­tion of some of the state’s towns, but Gibbs says there is no such thing as a com­pany that’s too dug-in to move if the eco­nomic con­di­tions are en­tic­ing enough else­where.

Even if the ac­qui­si­tion doesn’t re­sult in CVS Health ex­pand­ing its al­ready con­sid­er­able foot­print in High­land Cor­po­rate Park – and he doesn’t ex­pect it will – state and lo­cal lead­ers can­not af­ford to take CVS for granted, said Gibbs.

“We have to be ex­tremely dili­gent about main­tain­ing our re­la­tion­ships with CVS – they are the 800-pound go­rilla,” he said. “It is ab­so­lutely es­sen­tial to our econ­omy, and the state’s econ­omy. This isn’t just a lo­cal com­pany, it’s a global com­pany, with ma­jor busi­ness units scat­tered all across the United States.”

Gibbs urged pol­i­cy­mak­ers and elected of­fi­cials to think of CVS Health not only as an im­por­tant job cre­ator, but as “our cus­tomer.” De­pend­ing on how it’s served, the Aetna ac­qui­si­tion “could be a great op­por­tu­nity for Rhode Is­land, or not so great,” said Gibbs.

Mayor Lisa Baldelli-Hunt says her ad­min­is­tra­tion stands ready to as­sist CVS Health in any way it can. She said she’s “ex­cited” that some of the most promis­ing changes in health-care re­form are hap­pen­ing in the city and she’s proud to see a home­grown com­pany an­swer­ing the call.

“I of­ten won­der if the health care in­dus­try un­der­stands the con­sumer’s needs,” said Baldelli-Hunt. “But here we have a com­pany that’s demon­strat­ing the abil­ity to have high-qual­ity health care which is rea­son­ably priced.”

John Gre­gory, pres­i­dent of the North­ern Rhode Is­land Cham­ber of Com­merce, says cor­po­rate ac­qui­si­tions and merg­ers tend to raise ques­tions about where the re­or­ga­nized com­pany will land. But he was pleased to hear that CVS in­tends to main­tain its head­quar­ters in North­ern Rhode Is­land.

“I guess the good news is, they’re the ac­quir­ing com­pany,” he said.

Upon the clos­ing of the trans­ac­tion, three of Aetna’s di­rec­tors, in­clud­ing Aetna’s Chair­man and CEO Mark T. Ber­tolini, will be added to the CVS Health Board of Di­rec­tors, CVS Health said. In ad­di­tion, mem­bers of the Aetna man­age­ment team will play sig­nif­i­cant roles in the newly com­bined com­pany. Aetna will oper­ate as a stand-alone busi­ness unit within the CVS Health en­ter­prise and will be led by mem­bers of its cur­rent man­age­ment team.

CVS Health was founded in 1963 by two brothers from Woonsocket, Stan­ley Gold­stein, his late brother, Sid­ney and an­other part­ner, Ralph Hoagland. They opened their first “Con­sumer Value Stores” lo­ca­tion in Low­ell, Mass., stocking shelves with off-price candy, sham­poo, shav­ing cream and other per­sonal care prod­ucts.

“They’re not wait­ing around for some­body to come along and eat their lunch. “It’s great lead­er­ship by Merlo and the peo­ple at CVS.” – Christopher Bouley

Photo by Ernest A. Brown

CVS Health head­quar­ters in Woonsocket is a busy place not­with­stand­ing its po­ten­tial merger with Aetna In­sur­ance. The com­bined com­pany is poised to be one of the largest firms in the United States.

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