On Thursday, Reuters and The Wall Street Journal independently reported that Walmart is considering an acquisition of health insurer Humana. Citing people familiar with the matter, Reuters said the companies are in early talks about developing closer ties, with one possibility being an acquisition.
 
Our Take: Let’s recall what has transpired in just the last few months. In December, Humana and two private equity firms agreed to acquire Kindred Healthcare for $4.1 billion. Kindred is the nation’s largest home health company and one of the largest hospice providers. At the time, Humana said that Kindred would complement its Humana at Home care coordination initiative, and that Kindred’s footprint already matched 65 percent of Humana’s membership.
 
At about the same time, CVS announced that it was buying Aetna in a deal worth $69 billion. And just a few weeks ago, Cigna announced that it would acquire Express Scripts for about $67 billion. According to Bloomberg research, there has been more merger and acquisition activity in Q1 2018 than in the last dozen years (see chart below).
 
These deals are largely about bracing for a competitive threat from Amazon, through service line diversification and by linking up and fortifying disconnected parts of the value chain. 
 
And no one is more threatened by Amazon than Walmart.
 
Walmart and Humana already have close ties through a cobranded Medicare drug plan. In addition, some Walmart stores have embedded primary care clinics. But for Walmart, the acquisition of Humana brings with it data for millions of patients—data that it can tie in to its pharmacies and potentially, if HIPPA-compliant, to its entire store.
 
Humana also has its own pharmacy benefit management (PBM) unit, which in 2017 had revenue of about $21 billion.
 
Collectively, then, a combined Walmart-Humana not only would be the largest big-box retailer in the world, but also the largest employer in the U.S. and the nation’s third-largest pharmacy chain, fourth-largest insurer, fifth-largest PBM and top home health and hospice company.
 
We don’t yet know the implications of these mega-mergers. But it at least appears that sometime in the next few years we’ll see a few major retailers—Amazon, Walmart, CVS and Walgreens come to mind—responsible for much of how health care is paid for and delivered across the nation. That’s mind-blowing.
 
Given what we’ve seen, it isn’t impossible to imagine one of these future combinations including a health system with a nationwide footprint. Can you imagine an Ascension-UnitedHealthcare deal? A CVS-Tenet powerhouse?
 
We can.

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