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As more health care companies creep toward the top of the Fortune 500 and spending on health care explodes, Fortune's Erika Fry and CVS's Karen Lynch explain what's driving the growth.


How health care came to dominate the Fortune 500

Health

As more health care companies creep toward the top of the Fortune 500, Fortune's Erika Fry and CVS's Karen Lynch explain what's driving the growth.


So currently the health care industry is the second largest industry group on the Fortune 500 it's poised to become the largest. If you look back to the 1995 Fortune 500 list of the top 25 companies, zero were health care companies. If you look at this year's list, the top 25 companies, there are eight health care companies. I think a number of factors have contributed to the growth of health care in America and the number of companies on the list. Clearly, the demographics have been changing dramatically. We see an aging population. There's more people today that are between the ages of 50 and 64 than they are over 65. So that's one um big contributing factor. You've also seen an increase in the number of companies that have entered into the health care space. You've seen a proliferation of tech companies coming into health care. So some of it is just the overall growth in spend in health care. Um that continues to be obviously a major component of GDP. Some of it is also consolidation, the primary way of these companies getting larger for many years. Was horizontal consolidation, hospitals acquiring other hospitals, insurers acquiring insurers or other health plans. And what's really sort of a new trend that we're seeing in the industry is a twist in terms of the consolidation and rather than horizontal consolidation, we're seeing vertical consolidation. And that means insurers getting into the business of actually providing health care CV S started as a consumer value store and basically a pharmacy, but we've drastically changed where the company is headed. We are really shifting the company to be a health solutions company. CBS has made a number of transactions over the course of the last year, we've bought two companies. One is in home based care, one is in primary care. And so what we're trying to accomplish is is that connectivity that simplicity with the intent to have better health outcomes, better access and lower cost of care. So we've really seen these very large American health care companies expand in scope. Uh One example, United Health Group, which going back about a decade really went big into health care delivery, buying up doctors groups, buying up surgical clinics, buying up a a pharmacy benefits management company that ability to connect the system to find ways in which financial services can support value based care, find ways in which pharmacy can help our benefits business, our benefits business can inspire our delivery business. We think it's a truly sustainable way to modernize the health care system for all of the key participants. So there are a few reasons why United Healthcare started to go this direction. Back in 2007 one, it had really run out of horizontal uh consolidation options. And a few years later with the Affordable Care Act, there was a policy change and what that did it was it effectively capped profits for insurers. So for companies like United Healthcare to become more profitable, they really needed to look somewhere else. The Affordable Care Act also tried to drive a major change in the health care system. And the thinking was, you know, we need to pay not for doing more care, but we need to pay for quality of outcomes. And so the way to do that is value based care. I think first and foremost, what really needs to change is that we need to move forward with value based care that everyone in the uh health ecosystem needs to have um an intense focus on the patient or the member and making sure that we're engaging them in better health outcomes and better quality and in better access to care. So, you know, with all this growth, we really wanted to ask the question is big health care good for our health. There are many studies that show, you know, despite promises otherwise, consolidation drives up prices. It really hasn't helped with quality now vertical consolidation, which we're seeing more of is quite new and it's less studied and less understood. A lot of experts told us it's really too early to tell, but they're skeptical that this is the fix for the American health care system.

Karen Lynch, Chief Executive Officer, CVS Health
Javier J. Rodriguez, Chief Executive Officer, DaVita
Moderator: Clifton Leaf, Former Editor-in-Chief, FORTUNE, and Founder, Brainstorm Health 

Brainstorm Health 2023 - The Future Of Integrated Care 

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Karen Lynch, Chief Executive Officer, CVS Health
Javier J. Rodriguez, Chief Executive Officer, DaVita
Clifton Leaf, Founder, Brainstorm Health

Karen Lynch, Chief Executive Officer, CVS Health
Javier J. Rodriguez, Chief Executive Officer, DaVita
Moderator: Clifton Leaf, Former Editor-in-Chief, FORTUNE, and Founder, Brainstorm Health 


I don't often talk about silver linings from the pandemic, but there is little doubt that people are more focused on their health, more more now than they've ever been. We're more knowledgeable about it too. Um But with all this focus, we do want convenient, affordable, accessible care that is connected at all levels, integrated services, holistic approaches and a continuum of care are not new concepts, but they are being implemented more broadly across the health landscape to the benefit of patients and providers. So that's exactly what our next our next guests are here to talk about. Karen Lynch is the CEO of CV S health, one of the five largest companies in the United States and one of the 10 largest companies in the world. Uh I would also like to note that Karen has topped Fortune's most powerful women's list for two years running and CBS is the highest ranking Fortune 500 company ever led by a woman. We also have Javier J Rodriguez Ceo of devita, one of the largest providers of kidney care in the US with operations in 10 countries worldwide. They join, they join Fortune's former editor in chief Clifton leaf for this very timely conversation. Please join us in welcoming them to the stage. Well, it is great to have you both here and those are some accolades for both of you. Um I've gotten a chance to hear you present your company strategy for many years and you're a great, very clear and compelling communicator. Two action verbs have always stood out, one is extend and the other is engaged and the extent I think is clear from your strategy, you've got the minute clinics, you've got 9000 stores, you've got, you've just spent all of this money $20 billion almost to buy two big primary care providers going into the home care industry. What is the engage? How do you envision the engage in this? Well, first of all, hi, everyone. Thanks for having us here. We're really thrilled to be here to talk about integrated care. You know, I think the most important thing if you think about someone's health, right is it is all about engagement. And if you want to be healthier, what we saw with the pandemic, people are more concerned about their health and engagement is the power of being healthy or getting to health. And the way we've really thought about it. And you said, you know, we're kind of accumulating kind of extending our assets. The way we've really thought about it is how are we going to use technology in different ways so that people can engage in a simple and connected. One of the things that if you all kind of like think about your experiences in health care. What's the first thing that comes to your mind? Fragmentation? Not simple, hard to navigate? You think about every other experience that you have in your everyday life, you think about simplicity, you think about engagement, you think about easy access. So we're thinking about how do we engage people in their health, using technology in various ways so that people have a connected and seamless experience with the ultimate goal of making Americans healthy. That's really what we're trying to accomplish. And the rest of your life is simple, easy. What were the so Javier, I mean, engagement, this is, this is something where your relationship with your the patients you serve is very intense. I mean 100 and 44 times a year people come in for hemodialysis to your centers. That is more engagement with a health care provider than, than most of us who don't have end stage kidney disease can imagine, talk a little bit about how you are improving that relationship because you know, for many, it's sort of a very dire and, and, and, and and brutal experience. Uh First of all, good, good to see you and be on this steam panel with the most powerful woman. And I don't know how many uh spheres. I'm just another guy here. Uh from uh from our perspective, the most important thing that you have is when, when a patient is as sick as our patient population is, you want to comfort them and make them sure that they have that relationship. The first week when I was the CEO of DaVita, I went to a center in Iowa and I wanted to meet a patient. His name, his name is Jack and he has been on dialysis for 46 years, 46 the, the average person is on dialysis for five years. And I said, this guy has got to have something special. So I said, Jack, tell me what makes you special. He goes well, my name is Jack. So I have a shot of Jack Daniels every day. And I said, please tell me there's more. I came all the way to Iowa. Uh and then what came across was the relationship that they have with the caregivers. And so for me, one of the mandates that I want to do now for DeVita is create a culture where every one of our 40,000 caregivers has that relationship with the patient. And that is very, very hard to do in today's world. Uh with all the technology, all the things they have to do and all the fragmentation of care that you talked about. And we have important point though is that relationship, um you know, with providers and patients or providers because that makes a difference. We talk about technology very often and we need technology for us. But you know, we're, we're partners with um manages uh many of our patients as well and you can't replace that personal relationship in health care because health is one of the most valuable assets that you have. And I think that as, as um as technology and everything evolves, we can't forget that human engagement and that human connection that you do so well. Is CV S Caremark going to preapprove Jack Daniels? Now? Can we, can we get some news, man? I would love to see that. Um So Javier like like CV S uh uh your predecessor bought a primary care physician practice. You had it for about five years. Uh Your, your predecessor sold it. It, it didn't really integrate into your uh into your journey to create a uh to move dialysis from a dialysis company into a kidney care specialty company. But what did you learn from that experience? How did you learn about how to integrate? Well, a couple of things, uh what we want to do is revolutionize the way care is delivered. And we, we want to make sure like you that we take on a broader part of health care. So our patients come to us incredibly sick and, and people say put wrap around services on them and it's a little like building a house without a roof and then it rains and pours and whatever and someone says go fix it and you're like well, you know, you should have put a roof on the house, right. So from our perspective, what we wanted to do in that acquisition was move upstream and have broader access so that we can avoid the progression of kidney failure. What what we ended up doing is we started to get a lot of learnings. Of course, when you make an acquisition of that size, and we realized that uh that model wasn't scalable around the country. So that was our first finding. And then secondly, that there was a better owner of that asset. And so it wasn't that we didn't like the model. It's just that when you uh when you start to see that someone is willing to pay more for something uh than what we were willing to have, it was, it was good to divest it. You know, you both have invested a lot in analytics and data. And one of the challenges is to find people before they get into kidney failure before they need more serious help. Talk a little bit about how you're sort of moving into this preemption model with the data you have. Well, I think, you know, it first starts, you know, as, as you said earlier, one of the things that we've been extending our services into primary care. Well, you know, we have found uh you know, people are interacting with their primary care and if, if they do that gives them, you know, we've seen better health outcomes as a result, which is why we did the acquisition of Oak Street Health. And I think it's an important part because, you know, primary care wield significant influence over the entire health care ecosystem. And they've been using a lot of data and analysis to really understand, you know, kind of patients and how to interconnect with them. At the same time, you know, we, we have people in our home health asset through, you know, signify health where we're using data to really understand their needs. And then one of the things that's really powerful is that we'll be able to return those individuals to care, using technology, using those interactions, using our pharmacy information to do adherent. So you can see tech is gonna weave and and analytics will weave through that entire sort of continuum as we advance value based care, which is critical to, I just want to let people know that the Oak Oak Street and the sign both they have a lot of Medicare advantage, but a lot of Medicaid patients as well. And so there, there is a lot of people who are, who are often sick and uh have a lot of comorbidities that you're you're dealing with trying to implement a value based care approach to this, right. So the data would be help you to prevent some of these diseases or complications of the disease. Yeah, absolutely. And it's mostly Medicare. And if you think about just step back and you look at what's going on in the market. There are more people between the ages of 50 and 64 than there are over 65. So, you know, you can imagine there's like this tsunami of people coming in to Medicare. And really what you want to do is make sure you're engaging because that's going to put pressure on the entire health care system, right? So you want to make sure that you're engaging with them using the the technology and analytics. So we can kind of help with some of that preventative to keep sort of that, you know, keep them healthy and manage their chronic diseases more in real time. That's tsunami. Just to put a little finer point on it. Uh In 2000, we had 30 million Americans above 65. And in the next 10 years, we'll have 65 million Americans. It will be the first time that we will have more seniors than Children. And so that's got massive consequences of what we want to do right now. And the most powerful woman in end stage kidney disease, the only way out is a transplant, it's a kidney transplant. Uh Correct. And so there and so there aren't that many kidneys available for transplantation. So the only other option is to really try to prevent people from getting to that point. How are you using your data and some of your acquisitions to identify those patients. And what can you do to actually stop that progression? We're, we're really excited about this part of our strategy, which is there's 35 million Americans that have kidney disease and only around a million will have their kidneys fail. And so this is a little like finding a needle in the haystack. So you can actually make an intervention because you can't make an intervention on the 35 million. And so what we're devoting all our algorithms and our intelligence and working with people like Karen is to make sure that we put the equation together and move upstream. So those care teams actually intervene before you actually have all of this uh downstream illness on this stage. Uh many years ago, not that many years ago, I should say. But uh one of our heroes uh Bernard Tyson um talked about reconnecting the body and the head, the head and the body and, and really his devotion to the idea that we need to reintegrate mental health care with, with the rest of our physical health care because they really aren't separated. I know mental health is an area you're moving into and it's very personal for you. Talk a little bit if you would about how you plan, how CBS plans to start bridging that integration. Yeah. So, um you're right, it is very personal. Um And it is right now in, in the US. Um It is uh you know, a huge issue um with mental health, particularly in Children. And what we're seeing is we're seeing an enormous increase in suicide of um young adults. And so we're in um you know, an area that I think the country has never uh been in. Uh So we're doing a lot on, on this front. You know, one is we, we, we've expanded our E A P resources. We've actually put counselors in some of our CV S locations and we've also expanded our T A um mental health capability. So people have access and just to put a finer point on that before the pandemic, we had 9000 tele tele mental health visits. Now we're up to almost 20 million. So the 9000 to 20 million, right? And so the demand is, is amazing. Uh but it just, you know, shows that there is a uh a need in this country. Uh But we have a lot to do. Uh the provider system isn't working. People aren't going into the profession. We need to figure out ways to get people, people to go into the profession. And um you know, because your head is connected to your body. And, you know, I always use this example if you've heard me talk before women when they're uh you know, when they have a baby, it's the most joyful time. A lot of women suffer from postpartum depression and we never talk about it and we aren't ready and equipped um in their, you know, kind of post discharge plan to say this could be something you may experience and what do you, what what are the tools and capabilities that are available? So we're kind of we're thinking through all of those experiences so we can have those care plans. So we think about it holistically because until we think about it holistically, we're not gonna address those issues. And just to put some numbers on this, I think among Americans, 50 age 15 to 30 or 34 suicide is the number two cause of death. It's kind of amazing when you think about that and, and you know, the other thing that's, you know, that kind of uh talking numbers, you know, one in college, one in 12 college students have an actual suicide plan. So it's just been an amazing um you know, kind of issue that we all, we all have to deal with Javier. I mean, when people think about kidney disease, we think about this life and death situation. But what you also discovered in your very enormous practice um is how powerful the psychosocial effects are, how depressing it is. People literally go into a sort of a almost a death spasm emotionally. Um when they're thinking, when they realize that they've got to go through this, it's, it's a tough thing, right? And, and if you hear that you have cancer, you have age renal disease or you have any of these it's, it's obviously uh too much for people to take. So what we try and do is educate you through the process very slowly because we know at the beginning you're not even listening, you're just trying to go through that process. And so our education is months, not days or weeks, but we wanna make sure that you act to the new lifestyle, the new diet. So we surround yourself with a care team, dietician, social worker, uh et cetera so that you can address all of your life elements. But, but it's, it's really hard and, and one of the things that, that I want to do and, and Karen is doing as well is uh there's a lot of you that are taken on point to point solutions, right? And, and chasing a bit of the dollar if you will and, and it's, you know, called attribution and it's got all these different technical names that only people in this room know if not, you wouldn't be very popular in a cocktail party. Uh But at the end of the day, what we're trying to do with DaVita is to, to think like a patient, they don't think of attribution, they don't think of an app, they don't think of a, a point to point solution. So we're reverse engineering everything as if we were a patient and then surrounding ourselves with the best partners or the best acquisition in order to bridge that whole continuum. And the other thing that we're, we're working on together too, I think is just the reimbursement thing. Because if you think about health care in the future, there's two things that really are gonna change health care in the future, value based care, which we have models um together and tech. And those are the two things that if you think about what's going to make health care evolve and, and be more patient centered. It's those two things, you know, the other item is cost and, and part of the evolution, we have to figure out a way to make things uh less expensive or we're gonna drown in these costs. You're both in areas where, where you understand that the pressures of cost, um obviously how the air kidney, kidney cancer is extremely expensive or kidney disease is extremely expensive. 1% of the patient population, 6% of the US health care costs. Part of that is this engagement, we talked about the 140 or so. Um you know, visits that, that everybody has to go through. Um But how do you rethink the cost structure? Well, we're trying and, and one of the things that we're really proud of is when you put those type of stats, you're like, whoa, well, the reality is if you do it by the hour of care, so our patients are with us for four hours every session. We charge roughly like $90 an hour and I haven't had any health care, uh, in my life, even if I go get my teeth cleaned, be at that level. So we are very happy at the way we standardized care and we've delivered the efficiency of care, but that doesn't make it any cheaper because of the frequency of the exchange. Right. And so what we're trying to do is of course, do more things for patients to go home and to have more of the care that they want, wherever they want it. We have just a minute left um, here and I know you both actually have venture groups where you invest in innovation. Where are you looking? Uh what's the most exciting new technology that you, you're looking at now? Well, we're, we're taking a look at, um, you know, kind of all health tech services mostly, you know, looking at things in the home where, where are some of the advancements in the home? Because, um you know, we saw over the last couple of years, people are much more willing to do things in the home. And so we're looking at kind of that health, you know, health services tech in the home. Um Mostly, well, I have to say this is the first time we've had such uh esteemed Boston college graduates, both of them on our stage. Not, not since Doug Flutie drove the passing yard. Uh uh for I was actually there when he was there. Oh, you were so have we had this kind of a just PC crowd here. So thank you both for being here. Thank you. Thank you.

CVS wants to change how you receive your healthcare - and CEO Karen Lynch is not afraid to spend big to make that happen.

Leadership Next: CVS Health CEO, Karen Lynch

Leadership

As I said to you earlier, just celebrated a big birthday. Yeah, exactly. I'm not going to share. You can just look it up and welcome to Leadership next podcast about the changing rules of business leadership. I'm Alan Murray and I'm Ellen mcgirt. When you have a health issue, you know, you don't know what to do. And um we're here and what I want to do as the company is, have you think about CVS health as your kind of place to go and I want to make it easy and I want to make it simple and I want to make it affordable and um have people engage with us in, in ways that we haven't thought of before. We're repositioning the company with our overall intent to really change the way consumers experience and engage with their healthcare system. So extending into broader health services. And we said we were going to extend into primary care because primary care is the center of the connection of healthcare. Why aren't there more women running fortune? 500 companies? I think we're up to about 10%. Uh Well, let's let's start with um the reason I don't know the reason why. But let me tell you want some of my experiences when I was young in my career. And this is a great story. When I was young in my career, I walked into a room and it was all men. And I said, where should I sit? And the guy looked at me and he said, you should sit over in the corner because women just take up space in the boardroom, right? And so that might give you a sense. And I, I share that story because, you know, when I was named CEO, my, I came out in a T shirt and my husband said you're wearing a T shirt on your first day of CEO. I said we're virtual. My shirt said um taking up space. Yeah.

Walmart takes the number one spot for the tenth straight year.

Introducing the 2022 Fortune 500 list

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Amazon has taken the number two spot behind Walmart.

Watch: Introducing the 2022 Fortune 500 list

The Fortune 500 is America's largest company that's measured by revenue. This is the 68th edition of the Fortune 500. And really the list is synonymous with big business success. The companies in the Fortune 500 this year produced a total of $16.1 trillion $1.8 trillion dollars in profit. That's $16.1 trillion dollars in revenue is equal to two thirds of the GDP of the United States This year. To crack the 500, companies had to have at least $6.4 billion 19% from the year before. And that really shows the strong year that American business had the order of the companies at the top of the Fortune 500 this year stayed the same as last year, walmart was number one amazon number two. Apple, number three Cbs Health, number four and UnitedHealth group number five walmart, the giant retailer based in Bentonville, Arkansas is number one on the Fortune 500 this year. For the 10th consecutive year, Walmart earned $13.7 billion 27th among the entire 500. And it shows that in that retail business, the margins are not nearly as high as for some of these big tech, Apple came in number three on our list, but it is the number one in terms of profit generating companies in America, it's generated $95 billion dollars in profits. So number four, we have CVS Health. It's run by Karen Lynch, she is one of 44 women C. E. O. S in the Fortune 500. She's one of the most powerful women in the world and she's helping one of the most powerful companies in the world. Amazon made another huge leap towards catching up with walmart. It grew its revenues 21% of $470 billion. Amazon's profits also jumped up by more than 50% to $33 billion, nearly three times the profitability of Wal Mart. Amazon of course is one of the companies that really got a big boost over the past year from the pandemic as people turn to online shopping and also from the streaming world from amazon prime to others that use amazon's cloud services. There wasn't much change in the makeup of the top 10 in the Fortune 500 this year, but one notable development was that Exxon mobil jumped from number 10 back up to number six and that was boosted by higher oil prices. Exxon's revenues shot up 57% to around $285 billion last year. The biggest mover in the Fortune 500 this year was Blackstone. The new york based investment house which jumped 295 spots to number 1, 59 in the rankings as its investment portfolios had huge returns in 2021. Another company that made a really big jump in the rankings this year was Carve Ana, Which moved up 193 spots to # 290. Carbonneau is another one of those companies that really benefited during the pandemic. Some other notable trends from the Fortune 500 this year, where we had our first crypto company, you'll notice coin bases on the list for the very first time. Coin base is a big benefactor of the crypto craze were recently, of course, crypto prices have started to sell off and we're not sure if coin base is going to be around on the 500 next year. Moderna jumps onto the list this year and number 1 95 with $18 billion in sales. And Moderna of course, is one of the companies that brought us the M RNA vaccines and it's really brought that company from being a startup with potential to being a Fortune 500 company almost overnight, More than half of the sectors in the Fortune 500 recorded record profits last year, including financials, retail and big tech. In fact, it was an incredibly strong year for the Fortune 500 across the board. Total sales and total profits hit record levels this year, even adjusted for inflation And revenues grew the most since 1975. While profits jumped the most since 2010. One of the things I found most interesting about the list was actually the people on it. They remained relatively unchanged. We saw there were 44 women ceo, this time that's the highest number of women that have ever been on the Fortune 500 list. But it's only three more than last year. We're gonna expect a lot of movement amongst c. E. O. S. In the next year. So I suspect that leadership of the Fortune 500 will be pretty drastically different next year this time around.

CVS Health

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