Primary Care

VillageMD Acquires Summit Health for $8.9B

Walgreens and VillageMD

Sometimes when there’s smoke, there’s fire, and that was definitely the case with the recent rumors suggesting that VillageMD was getting set to acquire Summit Health.

Walgreens-backed VillageMD locked in the acquisition of Summit for the cool sum of $8.9B, immediately establishing it as one of the largest primary care providers in the country.

Summit Health was formed in 2019 by the merger of multi-specialty Summit Medical Group and urgent-care center operator CityMD, and has since doubled in size to 370 locations and 2,800 providers.

  • The general idea behind combining the companies is that adding Summit’s specialty care operations to VillageMD’s value-based primary care business will allow Walgreens to better manage patient spend throughout their care journey. Capturing that extra revenue probably doesn’t hurt either.
  • The combined reach of the joint company now includes 4,100 providers (2,150 PCPs), 7M patients, and 125,000 full-risk Medicare Advantage lives – all backed by an expansive 680 location footprint.
  • The transaction was made possible through a $3.5B investment from Walgreens, which retained a 53% stake in VillageMD, as well as a minority investment from Cigna-subsidiary Evernorth.

With only so many high quality primary care assets available, it’s easy to see how VillageMD’s acquisition of Summit, not to mention Amazon’s acquisition of One Medical, might be making other would-be acquirers feel pretty motivated to get something done sooner rather than later.

  • CVS recently took some heat in the Q&A portion of its Q3 earnings call for its own primary care acquisition (or lack thereof), originally promised before the end of the year.
  • Although acquiring Signify gave CVS momentum within patient homes, negotiations to scoop up Cano Health apparently fell through, leaving CVS without a true beachhead in the primary care market.

The Takeaway

VillageMD is already Walgreens’ largest driver of revenue growth, and adding Summit’s huge physician base will only help with Walgreens’ transition from corner drugstore to bona-fide health services company. Other pillars of that strategy include specialty pharmacy company Shields Health Solutions and in-home care provider CareCentrix, meaning Walgreens is well on its way to being a major force in retail healthcare… assuming it can integrate all those moving pieces.

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