By Andrew Nusca
August 21, 2018

In December 2017, CVS Health and Aetna announced a $69 billion merger that left an awful lot of people—shoppers, doctors, and executives—scratching their heads.

A drugstore combined with a health insurer? Is nothing sacred?

The deal, which was met with resistance by the American Medical Association but not U.S. regulators, is expected to close this year. (Aetna will become a standalone unit of CVS Health.) It will also almost certainly radically change the landscape of the healthcare industry.

So why CVS and Aetna? In March, at Fortune’s Brainstorm Health conference in Laguna Niguel, Calif., I sat down with Aetna CEO Mark Bertolini to ask that very question.

His answer? It’s about getting closer to the community. CVS has 10,000 stores within five miles of 80% of the American public; that’s a huge footprint to leverage, he says. But there’s a lot of work to do to accomplish that. “The insurance company isn’t going to be about making money anymore,” Bertolini says. “It’s [going to be] about facilitating the financing of affordable and convenient care.”

Yes, but you have to make money, too. In 2017, Aetna made $60 billion and CVS made $185 billion. Surely shareholders won’t stand for losses. “But you don’t have to make it there,” he says of the insurance component. “When you bring together owner economics in a vertical integration, where you make your money should be where the customer value sits.”

That changes the context of how you think about customers, too. Technology has allowed for more personalization in health—but “that means reaching each person, not populations,” Bertolini says. “Right now, we manage populations of risk.” The health industry is moving toward managing risk on an individual level, he says. “The price arbitrage is so significant between what goes on in the current medical-industrial complex of health care and providing other services in the community that can help a person live a healthy life,” he says. So it makes sense to do things that “are not covered by benefits” and “not part of the traditional health care system.”

And that means you just might need to get closer to 80% of the American population. “You’ve gotta get local, you’ve gotta get personalized, you’ve gotta get in the home,” Bertolini says. “None of which can be done from Hartford.”

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