At a shareholder’s meeting in June 2019, CVS Health outlined it’s latest series of digital transformation efforts designed to consumerize and personalize the healthcare customer experience. At the heart of this newfound approach: data and analytics.

“Building out our technology infrastructure is essential to our goals by simplifying the consumer experience, improving health outcomes and driving efficiencies,” CEO of CVS Health Larry Merlo explained during the meeting. 

A year later, CVS elaborated on its digital transformation efforts and outlined 4 key priorities: 

1. Developing centers of excellence for data and robotics 
2. Moving to a hybrid cloud environment to lower costs and significantly reduce the time to build and deploy new capabilities
3. Streamlining the number of applications used across the enterprise
4. Deploying artificial intelligence, natural language processing and robotics to optimize call center operations
5. Advanced data and analytics to leverage enhanced workforce-management tools for improved scheduling

Backing up a bit, this transformation really started back in 2017 when CVS Health announced its acquisition of AETNA health insurance company. At the time, Mr. Merlo and his C-Suite colleagues were completely transparent about what motivated this highly complex and legally challenging merger: data. 

Mr. Merlo went on to explain at the aforementioned analysts meeting, “Uniting CVS Health with AETNA provides us direct access to an unparalleled breadth of data. We're creating a new data ecosystem to protect this data as well as leverage it across our organization to provide a holistic view of the patient, garner insights into the Next Best Action to improve their health and determine how to best communicate with the patient. Our aim here is very simple, to turn data into insights and then insights into action.”

As Amazon emerges as a key player in the pharmacy space, these words reflect more than just an altruistic desire to help patients. In order to survive, CVS Health and its peers are going to have to evolve from traditional pharmacy retailers into high tech, consumer-driven, omni-channel healthcare providers, a business model that is much more difficult for Amazon (or anyone else) to replicate and undermine. However, doing so will require a significant investment in data infrastructure and analytics capabilities. 

Personalized Healthcare Experiences

Instead of relying solely on selling products, over the past 3-4 years, CVS Health has focused on developing new, consumer-facing healthcare services. For example, it’s Transform Diabetes Care program “brings together our advanced data analytics with our clinical, brick-and-mortar and digital assets to provide a comprehensive solution that is personalized, predictive, and prioritized.”

In other words, using machine learning, AI and advanced analytics, CVS health is able to synthesize and analyze massive amounts of pharmacy and biometric data in order to deliver personalized medical treatments for diabetics. During the first two years of the program alone, 50% of its members with uncontrolled diabetes were able to move to controlled status. 

Since then, CVS health has expanded its Transform Diabetes Care program and developed a number of others. Transform Oncology Care, for example, uses AI to expedite the therapy prescribing process and match eligible patients to clinical trials based on, among other factors, genomic testing results.

Another interesting thing about CVSs approach to digital transformation is how they merge more traditional personalization efforts (i.e. personalized discounts, discounts, product recommendations, etc.) and healthcare experiences.

For example, using Azure Databrick, a data lake storage and analytics platform,   

CVS Health has built a massive personalization environment designed to not only provide personalized marketing offers based on past shopping behavior, but also remind a patient when it is time for a refill, let them know when their prescription is ready for pickup, and even help patients identify any side effects they may be experiencing. 

By integrating two types of very different customer data, pharmaceutical and retail, CVS Health is not only able to unlock new streams of revenue and data monetization, but also save lives. According to the Databrick’s website, CVS Health’s personalization engine has increased medication adherence by 1.6%. Seeing as though CVS Health has about 100 million customers, even a small increase represents a significant change in behavior.

This year, CVS Health has also started opening about 1,500 HealthHubs, essentially “minute clinics” that offer everything from dieticians to sports physicals to immunizations. First and foremost, the goal here is to provide quick, easy and affordable health services to patients. However, there’s no doubt about it, the depth and quality of the data CVS Health will collect from these efforts will be nothing short of transformational. In addition to having massive amounts of pharmacy and health insurance data, they’ll also have access to a goldmine of real life, actionable clinical and biometric data at their disposal as well. 

The Pandemic Payoff

As we’ve discussed before, digital transformation is the key business resilience. CVS Health is a powerful example of how all of the IT infrastructure and data analytics investments they made during the 2017-2019 time period majorly paid off in 2020, a year defined by the Coronavirus crisis and economic turmoil. 

As the Covid-19 crisis took hold this past spring, CVS Health delivered strong first quarter results. According to its Q1 financial statements, the company reported earnings of $1.53 a share on revenue of $66.8 billion, up 8.3% from a year ago.

Despite the dramatic dip in in-store traffic that resulted from stay at home orders this spring, CVS stores had the infrastructure in place to swiftly expand its delivery, telemedicine and digital health care capabilities. Plus add new services such as its contactless payment program and Covid-19 testing. As Mr. Merlo explained in the Q1 earnings report, “Utilization of telemedicine for virtual visits through MinuteClinic is up about 600% compared to Q1 '19. Retail prescription home delivery is up more than 1,000%. Additionally, we saw a fourfold increase in the number of consumers adding front store items to their prescription deliveries. We also saw a double-digit percentage increase in app usage across CVS Pharmacy, Caremark and specialty year-over-year. And as an example, in specialty pharmacy, digital refills were up approximately 50%.

Additionally, in our AETNA health app, we engaged more households in Q1 than we did in the first 3 quarters of 2019. And to support our COVID-19 testing sites, our team used our digital platform to quickly launch a streamlined experience, which has enabled online screening and scheduling for testing, with 85% of consumers highlighting a positive experience.”

While many businesses have continued to struggle, according to CVS Health’s latest earnings report released on December 6, 2020, shares have increased by 21.3% since early November, outperforming the S&P 500 and expectations. This is all despite a significant, 9.7% dip in stock value just a few weeks ago in response to the launch of Amazon Pharmacy services on November 22.  

All in all, CVS Health seems to be well on its way to becoming the integrated, data-driven healthcare giant it envisioned almost 2 years ago. The next challenge on the horizon? The distribution of a COVID-19 vaccination. The good news is they seem to be more than prepared to handle the challenge.