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.