What went wrong at CVS

Last year, when my son needed ankle surgery after a bad fall, I sent him to Dr. John G. Kennedy, director of the Foot and Ankle Center at NYU Langone. Because I was enrolled in Aetna through my previous employer, I reluctantly paid more than $20,000 upfront for the outpatient procedure, assuming I would be reimbursed for most of it since we had maxed out our annual copays. Despite numerous After contacting Aetna, the hospital and the employer, I had to pay the entire bill. (The doctor had shaved $5,000 off the initial cost of $25,500 after I said it was incredibly high for this single mother.) My employer at the time and NYU Langone both insisted that the mistake was at Aetna while the insurer cited various reasons when it refused to reimburse the costs of a medical practice. I vividly remember the frustration of the patient representative at Aetna who claimed it wasn’t always that hard to get paid.

That experience was in the back of my mind as I read last week about the struggles at CVS Health, the owner of Aetna, and the ouster of CEO Karen Lynch. For a closer look at what went wrong, check out this article by my colleague Shawn Tully.

CVS faced several challenges, including an activist shareholder demanding changes at the top. However, the company blames much of the pain on soaring medical costs at Aetna, which were not covered by premium costs. It doesn’t help that Lynch’s predecessor, Larry Menlo, paid a hefty $68 billion, or 73% premium, to buy Aetna in a deal struck six years ago.

I have had great respect for Aetna over the years. This is not the first time a trend reversal has been necessary. I watched CEO Jack Rowe, a well-known geriatrician, transform Aetna from a poor-performing insurer with a bullying reputation into a profitable and doctor-friendly innovator about two decades ago. Among other things, Rowe made a controversial move back in 2002 and began collecting racial and ethnic data from its members to enable the company to better understand and address racial disparities in healthcare. Aetna was also early in developing disease management programs and related services to help people adhere to treatment plans.

Aetna is just one of the challenges now facing new CVS CEO David Joyner. (Geoff Colvin points out that Roger Farah’s arrival as CEO could also help, given his track record at Ralph Lauren and elsewhere.) I’m no longer a member of Aetna; After canceling a family trip partly due to the cost of damage, I may be able to avoid being one again. To be successful, CVS must do more than just grow its bottom line.

More news below.

Diane Brady
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