How CVS' $70B Aetna deal will upend supply chain operations — 5 Qs with CEO John Kupice

CVS' $70 billion acquisition of Aetna will transform the healthcare supply chain, according to John Kupice, CEO of H-Source, an online marketplace for hospital groups to buy and sell medical supplies. 

After the transaction closed Nov. 28, H-Source CEO John Kupice told Becker's ASC Review how he believes it will affect purchasing, consumers, patient care and his own company.

Note: Responses have been lightly edited for style and clarity.

Question: How will the CVS/Aetna merger change how surgical supplies and other products are purchased?

John Kupice: The influence and impact to the healthcare supply chain from the CVS purchase of Aetna will likely, in time, change the face of the overall healthcare supply chain and how products [ranging] from pharmaceuticals to surgical supplies are purchased and delivered to patient care. CVS's ability to control the benefit management, wholesale and retail distribution, and [now] be the payer, gives CVS a purchase and distribution advantage that manufacturers and providers will have to learn to how to navigate.

Q: How will this new purchasing model impact costs and practice operations for providers?

JK: The integration of operations will ultimately determine the overall consumer impact. However, the immediate need for manufacturers to be prepared to reduce cost across all healthcare delivery models for the continuum of care — from acute to home health providers — will be unprecedented. Those manufacturers not in a strategic relationship with CVS will be hard-pressed to find ways to offset losses in revenue and ultimately profit.

Q: What impact will this have on patient care?

JK: Overall, this provides unique opportunities for cost reductions and better population health outcomes. One way of improving outcomes will be to analyze the treatment data for various conditions using statistical analysis and artificial intelligence on the combined data available from both companies. In time, the combined entities will determine the most cost-effective treatments with the best outcomes for the patient. The combined entity with its purchasing power and ability to deliver supplies to the full continuum of care should reduce costs and improve population health.

Q: Do you have any observations about what else the merger means for healthcare?

JK: This will be the start of [a period of] mergers and acquisitions and consolidations in healthcare over the next 24 months. I think that several years from now the healthcare supply chain will look very different with fewer layers, helping to reduce costs and waste.

Q: Big retailers such as CVS, Walmart and Amazon have been making waves in healthcare. What are the implications for H-Source?

JK: I think it is good for us. Traditional distribution channels are being replaced by new models. The changes in healthcare and declining operating margins are forcing healthcare executives to rethink strategic supply chain structures. It is increasing adoption of our platform, enabling providers and influencers such as consulting groups and [group purchasing organizations] to create and manage new, measurable cost-reduction and recovery strategies.

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