VillageMD, backed by Walgreens, reaches $8.9B deal to buy Summit Health

VillageMD, backed by Walgreens Boots Alliance, is buying Summit Health-CityMD in an $8.9 billion deal that is yet another indicator of the changing healthcare landscape.

Walgreens, the nation’s second largest pharmacy chain, owns the majority of VillageMD, a primary care provider. Cigna Corp.’s Evernorth is also investing in the transaction. SummitHealth-CityMD, which offers primary, specialty and urgent care, operates more than 370 clinics in the Northeast and Oregon.

With the merger, VillageMD and Summit Health will operate more than 680 healthcare sites in 26 markets. The companies hope to close the deal in the first quarter of 2023.

• Read more: Hospital mergers and acquisitions may be picking up

Roz Brewer, CEO of Walgreens Boots Alliance

Roz Brewer, Walgreens CEO, described the deal as the next step in the company’s expansion into healthcare delivery.

“Summit Health-CityMD joining VillageMD is transformational for our U.S. Healthcare segment and reinforces our intent to create greater access to quality healthcare across the care continuum,” Brewer said in a statement. “This transaction accelerates growth opportunities through a strong market footprint and wide network of providers and patients across primary, specialty and urgent care.”

Tim Barry, CEO and chair of VillageMD, called the deal “an epic milestone in our journey to transform healthcare in the United States.”

“Summit Health-CityMD has been a leader in delivering coordinated, multi-specialty care for decades,” Barry said in a statement. “We are honored to work side-by-side with their 13,000 strong workforce who are passionately committed to delivering the best outcomes for millions of patients.”

The nation’s largest drugstore chains are increasingly getting into the business of providing healthcare. In September, CVS Health announced the $8 billion acquisition of Signify Health, a network of doctors providing care to patients at home.

It was only a year ago when Walgreens announced it was pouring $5.2 billion into VillageMD, raising its ownership stake of the company to 63%. The company said it plans to open at least 600 Village Medical at Walgreens primary care practices by 2025 and 1,000 practices by 2027.

Primary care continues to see more competition from corporate heavyweights. Amazon announced a $3.9 billion deal to buy primary care provider One Medical in July.

Walmart is also moving into primary care. The retail giant operates 32 primary and urgent care facilities in several states, and announced last month it is opening 16 new health centers in Florida next year.

Paddy Padmanabhan, CEO of Damo Consulting, told Chief Healthcare Executive in July,  “Primary care is clearly in play.”

“The competitive forces in primary care are very intense,” he said.

In a news release, Walgreens touted VillageMD’s expertise in value-based care and Summit Health-CityMD’s experience in multispecialty care.

Jeff Alter, CEO of Summit Health-CityMD, said the two companies possess “a shared core belief that taking excellent care of the patient will remain the cornerstone of our success.

“Adding our expertise and geographic coverage to VillageMD’s proven value-based primary care approach will enhance the lives of so many patients and physicians across the country, helping to lower healthcare costs and improve the health of our communities,” Alter said in a statement.

Evernorth, Cigna’s health services organization, is investing a minority stake as part of the company’s goal of expanding value based services, said Eric Palmer, CEO of Evernorth.

“Our collaboration with VillageMD accelerates our efforts to improve the way care is accessed and delivered,” Palmer said in a statement. “Harnessing the breadth of Evernorth’s health services capabilities and connecting them with physicians who provide care in a value-based model like VillageMD, helps more people to get the right care at the right time – driving better health and value.”

Hospitals and health systems say they are feeling the pressure of non-traditional rivals entering the healthcare space. Health system executives have acknowledged they are going to have to improve the consumer experience, an area where their newer rivals have decades of expertise.

Echoing the sentiments of other healthcare leaders, Kerry Heinrich, president and CEO of Adventist Health, said at the American Hospital Association Leadership Summit in July, that his system is looking at providing a better customer experience.

“We have only scratched the surface of consumerism and how it will impact how we deliver healthcare,” Heinrich said at a seminar on hospital leadership.