Blog | Strategic Partnerships, Mergers, and Acquisitions

Walgreens to provide primary care via VillageMD clinics in 500 to 700 of its drugstores

Blog | Strategic Partnerships, Mergers, and Acquisitions

Walgreens to provide primary care via VillageMD clinics in 500 to 700 of its drugstores

  • Over the next five years, Walgreens and VillageMD plan to open doctor offices in 500 to 700 drugstores based on a new deal between the two, according to a CNBC article.
  • According to the deal, more than half of these doctor offices will open in areas with a shortage of health professionals and a population that’s underserved, CNBC reported.
  • Walgreens, which has expanded its focus on medical care as it cuts costs, said it will own about 30% of the primary-care company after the multiyear investment, according to CNBC.

CNBC is reporting, “Walgreens and VillageMD have struck a deal to open doctor offices in 500 to 700 drugstores over the next five years. More than half will open in areas with a shortage of health professionals and a population that’s underserved. Walgreens said it will own about 30% of the primary-care company after the multiyear investment. Walgreens is expanding its focus on medical care as it cuts costs and invests in new areas. It has closed hundreds of stores and laid off employees, while experimenting with innovative business models. The company wants to turn its drugstores into health and wellness destinations where people spend more time and money. The chain is also testing a small-format pharmacy designed to strengthen relationships between pharmacists and patients, particularly those on multiple medications. Through the new partnership, patients will be able to visit the Village Medical at Walgreens clinics for a wide range of medical services from annual checkups to walk-in appointments if they feel sick. Each clinic will have nine exam rooms, a waiting area and a four-person physician-led staff that coordinates with store pharmacists. They can also request a home visit or get care around the clock through telemedicine.”

Takeaway

It’s an interesting move by Walgreens, particularly given that it appeared they had abandoned delivering care in favor of strategies to leverage foot-traffic (e.g. relationships with Jenny Craig, For Eyes) to drive sales of consumer goods in their stores. However, the focus on establishing clinics in health professional shortage areas and addressing the needs of underserved populations they may be trying to replicate models like Iora, Chen Med or Oak Street, where there’s a whole-person focus on the patient supported by a risk-bearing contract instead of fee-for-service. If only they had a payer partner to ensure aligned financial incentives that support the delivery of whole-person care…

United Healthcare just might be that payer partner. Late last year, Walgreens announced a relationship with UHC in certain regions to create Medicare Member Services Centers to help market UHC’s Medicare Advantage (MA) plans to Walgreens customers and answer questions about plans for existing members.

At the time, it looked like another foot-traffic play but it may have been laying the groundwork for a deeper value-based arrangement that will support UHC’s strategy with Optum physicians to lower the total cost of care for its MA members. And if it can lower its total cost of care, it can reduce bids for its MA products and increase its already substantial market share driving more profit to UHC shareholders. 

About the Author

Chad Mulvany, FHFMA,

is director, healthcare finance policy, strategy and development, HFMA’s Washington, D.C., office.

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