3 Looming Questions from the J.P. Morgan Health Conference

Providers, payers, data analytics companies and others working to transform health care gathered last week at the 41st annual J.P. Morgan Healthcare Conference to give updates on their strategies and progress. And while the presentations provided important news, they left some key questions unanswered.

1 | Can Walgreens meet its 2023 health care financial target?

After several multibillion-dollar acquisitions over the past couple of years to expand its primary care, home care and other services, Walgreens leaders say they expect their health care operations to be profitable in 2023.

They hope to deliver 30% growth in adjusted earnings year over year in the second half of 2023, CEO Rosalind Brewer noted. Much of that growth will come from fewer business challenges related to the pandemic and a recovery in prescription volumes.

But Walgreens hopes to reap bigger dividends in the future from its recent acquisitions of Shields Health Solutions, a specialty pharmacy company, CareCentrix, an at-home care provider, and VillageMD, which has more than 300 retail primary care clinics, many adjacent to Walgreens stores. The number of VillageMD locations is projected to swell to 600 in more than 30 U.S. markets by 2025 and 1,000 by 2027.

Together with VillageMD’s $8.9 billion acquisition late last year of Summit Health+CityMD, a major provider of primary, specialty and urgent care services, this gives Walgreens and its allied partners like Evernorth, a Cigna subsidiary and investor in VillageMD, an expansive platform to diversify their care delivery reach.

Key Question for 2023

Can Walgreens quickly and successfully integrate its acquisitions and effectively share data with hospital and health system providers as it grows? The company plans to expand its multispecialty care footprint over the next few years and will build out its clinical trials business. The company also is considering further investments to boost its presence in population health and provider-enablement capabilities, said James Kehoe, global chief financial officer, Walgreens Boots Alliance.

2 | Will CVS Health’s M&A appetite be satiated in 2023?

After announcing earlier last week that it would buy drugstore operator Carbon Health for $100 million, a Bloomberg report stated that CVS Health was exploring a $10 billion acquisition of primary care provider Oak Street Health.

It may be weeks before we know if a deal can be reached, but the news is further indication that the retail health care chain has not lost its appetite for huge acquisitions to further diversify its services. CVS CEO Karen Lynch would not directly comment on the possible Oak Street Health deal but said the company was in the market for a primary care asset.

If it does acquire Oak Street Health, it would enable CVS to expand care offerings to seniors. Oak Street, which went public in 2020, has 169 primary care clinics targeting Medicare-eligible patients (many in underserved communities) in 21 states, with 159,000 at-risk patients receiving care.

In addition, CVS invested $25 million in a Series C funding round for the virtual outpatient mental health practice Array Behavioral Care. Array’s services are in network with most payers — including Aetna, which is part of CVS Health. The company documents all patient visits in its electronic health record and submits claims to health plans. The company also integrates its clinicians into other provider groups.

Key Question for 2023

How would the potential acquisition of Oak Street impact CVS financially as it builds out its vertically integrated health care business? Oak Street is expected to lose more than $200 million in 2023 and not to be profitable until 2025 at the earliest, according to various reports.

3 | Will insuretechs find a path to sustainability?

Startup health insurers that have pitched their respective solutions around modernizing the payer world and bringing greater efficiencies to reduce costs have experienced turbulence. Investors, once eager to take part in the movement, have been less willing to make bets on companies like Clover Health, Bright Health Group and Oscar Health.

Officials from all three companies took the opportunity at the conference to reset expectations, share where they’ve made progress and where they’re headed.

Clover Health will continue to expand its tech stack Clover Assistant as it builds out its home care practice, CEO Andrew Toy, noted. The model is designed around palliative and support care in the home in an effort to prevent hospital readmissions. Clinicians provide postdischarge in-home assessments to identify and address issues that could surface after a patient leaves the hospital.

After dramatically reducing its business last year due to financial struggles, Bright Health Group will spend the next two years trying to maintain its Affordable Care Act plan memberships, CEO G. Mike Mikan said. Once its aligned care model is delivered, the company will focus on growth.

Faced with implementation challenges, Oscar Health still plans on commercializing its campaign builder tool, an internal platform. Oscar's tech can be used to distinguish between patients who are healthier and those who have more chronic concerns and craft messaging, outreach and follow-up that fits their specific needs. The platform also has significant potential in value-based care, CEO Mario Schlosser said, as the company thinks about ways it can push for more value-based arrangements with its provider partners.

Key Question for 2023

As seed money from investors is harder to come by, will we see more mergers and acquisitions in the field and which companies’ concepts will prove their long-term value?