Happy Thursday, Hospitalogists, and what a week it has been. Some major national events have shaken up our entire outlook on the future of the healthcare industry.

No, I’m talking about the Hospitalogy AI retreat that happened this week. What were you thinking of?

Reflections on the Hospitalogy AI RetreatCopy anchor linkCopied

This week, a group of thoughtful Hospitalogists gathered at the JW Marriott in Phoenix to talk shop behind closed doors for a couple of days on what health system transformation actually looks like, and what winning enterprise strategies entail in 2027 and beyond.

• We learned about the future of autonomous vehicles and Geisinger’s AI strategy from Dr. Jon Slotkin.
• We dove into the depths of what social capital truly means and how to unlock it as a sustainable competitive advantage in the era of AI with Dr. Tom Lee.
• We chatted about what the hell you’re supposed to do with the AI thing once it’s deployed (AKA, governance) with Dr. Nadia Smati, Michael Batt, and Dr. Neil Gheewala
• We held closed doors sessions around outpatient migration and the site of service shift as well as AI best practices and experimentation with leading health system folks around the nation
• We learned that a record number of folks are interested in sharing their perspectives in HIHpoint and I can’t wait to see the platform purpose-built for healthcare strategy and finance and innovation folks continue to grow.

If you missed this year’s retreat, you shouldn’t have.

But there’s always next year (which is also what I’ve been saying about the Dallas Cowboys).

A huge thank you to everyone who showed up and took a bet on this event, an even bigger thank you to my team who made it possible (because I am severely logistically challenged), and I’ll be reaching out soon with contact information, the slideshows that were presented, and finally a recap you can take home to your respective organizations (honoring Chatham House Rules).

Now let’s chat CVS for a bit to close things out!

The CVS Breakup, VisualizedCopy anchor linkCopied

CVS is f**ked.

No, literally. They are forking their business into 2, and it’s the talk of the town (well, besides the whole blue tsunami thing that happened this week). They’re forked.

Following activist investor pressure, execution hurdles across its insurance division, and PBM regulatory disruption, CVS’s Board of Directors approved a complete structural separation into 2 distinct newco’s, and both will become public companies. Here’s a quick breakdown:

1. Healthcare Solutions, AKA all of the attractive vertically integrated healthcare delivery assets:
   • CVS Caremark (PBM), Oak Street Health, Signify Health, and CVS Specialty along with Aetna. The segment will remain under David Joyner’s leadership and operates under the umbrella CVS Health name while maintaining its payor, care-delivery, and specialty distribution alignment.
2. Retail Pharmacy & Consumer Health*, AKA, the stuff that works OK but not as fun to invest in***:**
   • 9,000 CVS retail pharmacies, traditional mail-order pharmacy, MinuteClinics, and the Health100 digital/AI tech division. Led by Prem Shah (former Group President) and operates under the standalone CVS Pharmacy brand.

So that’s really straightforward. CVS Health and CVS Pharmacy (would expect a rebrand here ASAP, marketers get your RFPs ready).

What’s REALLY ironic is that I literally just recorded a podcast with CVS’s Dr. Sree Chaguturu, EVP and President of Health Care Delivery, on October 28. And absolutely not a peep about this. Unbelievable. Where was my tip-off?? (By the way, that episode is dropping sooner rather than later and you can find it here when it does).

Anyway, I’ve seen plenty of commentary here already and so as a self proclaimed political and healthcare commentating expert pundit extraordinaire, some of my thoughts are below:

• The biggest tell from this announcement is that CVS couldn’t figure out the true retail → healthcare delivery flywheel. The one they laid out in their 2023 investor day:

(this was a slide I put together in early 2024):

• The retail → healthcare failure is interesting to me given CVS’ recent commentary around becoming more consumer oriented - coupled with the fact that the strategy was built around this holistic engagement platform idea - even as recently as their December 2025 investor day. So CVS Pharmacy future co becomes an industry agnostic, separate company that now gets to court every payor and PBM for business.

• This is not really a failure of the vertical integration managed care thesis. For instance, the PBM, specialty pharmacy, insurance arm, and care delivery segments are all still under the same umbrella. I’m guessing CVS just wants to tighten the ship around those assets and make them more attractive - and separate - from the retail footprint from an invest-ability standpoint. The discount on CVS’ retail business weighed on the business’s overall value. Actually divvying it up lets investors value the ‘pure’ healthcare side.
  • CVS bet deliberately on two areas - primary care and the home, and segmented primary care by population: MinuteClinic for under-65 commercial patients, Oak Street for Medicare Advantage seniors at full risk. The separation follows that line exactly.
    • Risk-bearing senior care stays with the insurer;
    • consumer primary care goes with the stores.
• MinuteClinic as an asset moving forward could be leveraged to a greater degree:
  • More than 150 services.
  • Two-thirds of sites contracted with payers as primary care.
  • Clinically integrated network partnerships with Mass General Brigham, Hartford HealthCare, OhioHealth, Fairview, Rush and Emory. In theory, the breakup opens up leeway for health system partnerships to work with MinuteClinic separated from an insurance parent.
  • 50-state virtual primary care.
  • $29 GLP-1 weight management with no subscription.
  • Solid, growing demand this year.
• I wonder how the breakup works given all of the likely intercompany transactions occurring and debt and whatnot. How does Health100, an asset meant to serve both companies, get governed? Does CVS Pharmacy win more business as a standalone? Will CVS Pharmacy follow the path of Walgreens (AKA, sliced up by private equity) given its detachment from a stronger vertically integrated healthcare business?

MISCELLANEOUS MADDENINGS

A day after the Hospitalogy Retreat I managed to sneak a round in at the Waste Management - TPC Scottsdale Champions - course alongside Saint Francis’ Cliff Robertson (podcast coming soon as well - stay tuned) and shot a 79! A glorious return to form with multiple birdies on the first 2 par 5’s, though I absolutely botched #16 wiht a wedge skulled into the right rough. We’ll get em next time.

Hook ‘em always - have a great weekend Hospitalogy fam.

Thanks for the read! Let me know what you thought by replying back to this email.

— Blake