Just a week after reports that VillageMD had its eye on Summit Health-CityMD, the former announced that it has entered a definitive agreement to acquire the latter. With investments from Walgreens Boots Alliance Inc. (Nasdaq: WBA) and Evernorth – Cigna Corporation’s (NYSE:CI) health services organization – the deal is valued at $8.9 billion.
“You think about the power of what these organizations can do focused on value-based care — it’s really quite exciting,” Tim Barry, CEO and chair of VillageMD, told Home Health Care News. “The combined entity will have 20,000 employees and we’ll be taking care of millions of patients, all with this idea around a value orientation and multi-specialty delivery that is focused on excellent clinical care.”
Overall, Walgreens Boots Alliance will invest $3.5 billion — an equal split of debt and equity — while Evernorth will make an unspecified minority investment in VillageMD. Walgreens Boots Alliance will still be VillageMD’s largest consolidating shareholder. It has a 53% ownership stake.
“For [Cigna], the minority investment replicates its existing provider strategy, which emphasizes strategic partnerships over direct ownership of hard clinical assets,” Stephens analyst Scott Fidel wrote in a note. “The investment in VillageMD is also intended to accelerate Evernorth’s value-based care strategy and provide additional leverage points for its emerging Evernorth Care+ platform, which supports care delivery, care enablement and behavioral health.”
As a company, Chicago-based VillageMD delivers primary care services across 22 markets to more than 1.6 million patients through its subsidiary Village Medical. Walgreens has been one of VillageMD’s chief investors over the years and has injected billions into the company.
Summit Health-CityMD is the result of the 2019 merger of Summit Medical Group and CityMD. The organization provides primary and specialty care. It has more than 2,800 providers, 13,000 employees, and roughly 370 locations in New Jersey, New York, Connecticut, Pennsylvania and Oregon.
Ultimately, VillageMD is looking to provide a more comprehensive health care model, which made Summit Health-CityMD an attractive acquisition target.
As a combined entity, the organizations will lean into VillageMD’s immense value-based care capability and Summit Health-CityMD’s multispecialty, connected care delivery model.
“It really made sense for us to think about, and start to look at what we believe are the best organizations that provide this type of integrated, connected multi-specialty care,” Barry said. “Summit really jumped to the top of the list. Summit itself has been around for over 100 years. What makes them unique is that, unlike some [organizations] that are multi-specialty in nature, but where the doctors are not all that integrated or coordinated, they’ve been focused on this idea of connected care.”
Upon completion of the transaction, VillageMD and Summit Health-CityMD will be a multi-payer platform and combined will have more than 680 provider locations in 26 markets.
“Summit Health-CityMD and VillageMD are patient-centered and physician-led companies that have complementary offerings and a shared core belief that taking excellent care of the patient will remain the cornerstone of our success,” Jeff Alter, CEO of Summit Health-CityMD, said in a press statement. “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 health care costs and improve the health of our communities. We are incredibly excited about the potential of these combined companies.”
VillageMD’s purchase of Summit Health-CityMD also allows the company to bring the process of meeting the needs of patients with complicated health conditions in-house.
Prior to this, VillageMD worked with local specialists in its respective markets, but that has its challenges, according to Barry.
“Frankly, you don’t necessarily always know that the patients will receive the level of timely follow-up, or the timely access,” he said. “We thought this is really important for our patients. It really makes sense for us to be evolving our approach to one that’s more multi-specialty in nature. Us just going out and hiring a bunch of specialists wouldn’t achieve that specific outcome. We wanted to make sure that we could find an organization who’s been doing this.”
Barry noted that acquiring Summit Health-CityMD will also help the company avoid making mistakes as the company makes this transition.
Also top of mind was increasing access to primary care at a time when the U.S. struggles with this.
“[This transaction] allows us to continue to make the investments that we’ve been making in primary care, and it allows us to accelerate it at an even more significant pace,” Barry said.
Barry pointed out that markets and communities that have a healthier balance of primary care to specialty care have better outcomes and a lower total cost.
Looking ahead, he is excited about the ability to incorporate this multi-specialty model of care in the home.
“It’s not just primary care doctors who patients will be able to see in the home, but also cardiologists and oncologists and other types of specialties depending upon the need of that patient,” he said. “At the end of the day, the health care system should be focused around what are the needs of the patient. If a patient is homebound or wants to receive care in the home, we should be able to meet their needs.”