By Doug Holroyd, Founder, The Norgay Group
One of the largest corporate mergers of the 2017 was CVS’s proposed takeover of health insurance giant Aetna. There is a lot of well-documented financial and economic rationale for the move, most of which focuses on lowering costs, economies of scale and growth.
But the inevitable nature of the proposal is more fundamental – the customer always wins in the end, a market force that has always provided a path to success. And the healthcare industry’s ability to fight this is eroding.
In any retail category, the customer weighs choices on price, level of service, product quality, convenience, and, more and more, the availability of digital tools. Brands that offer the best combination of any given individual’s wants and needs rightly earn the business.
It has become quite apparent in recent years that these competitive battlegrounds are not reserved for traditional retailers like Target, Walmart and Amazon. Winners in businesses such as banking, insurance, lending, groceries and even taxes are all growing by honing their focus on their biggest asset - the customer.
The current healthcare system, on the other hand, is structured around its own costs. And it is in crisis.
The situation is intensely complex, but also a common story. Underlying costs get passed through until they finally reach the customer, in this case the patient. As costs escalate to the point prices are unaffordable, the very choices people seek as customers get limited, or even eliminated. In this case, tens of millions of people today do not get the care they need, many of which have insurance but what they want simply isn’t available.
The driving philosophy behind the ACA admirably sought to solve the cost issues and expand access to all. However the CVS-Aetna merger is more poised to dramatically reduce costs and increase basic care accessibility as a byproduct of a free enterprise, market-driven orientation.
Getting the deal closed and approved may be the hardest step in the marriage. Once completed, the new conglomerate will not only be in a position to compete on customer choice, but also on a path to domination as the only one in the market offering it in any meaningful way.
What happens after the initial disruption is when things will get interesting. The new venture is sure to attract millions of people looking for an alternative. But not all customers want the same things, and CVS-Aetna will do some things better then others.
Between the intelligent people in the healthcare business and the smarts of the market, new entrants will inevitably enter this race for the customer with lower prices, improved services and newer innovations. How various brands carve out different territories will guide the development of a new customer-oriented industry.
The CVS-Aetna merger, if accomplished, could be the beginning to the end of the healthcare crisis. And the customer will be truly served once again.
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