Walgreens Continues To ‘Rapidly Scale’ Its US Healthcare Segment

Walgreens Boots Alliance Inc. (Nasdaq: WBA) hasn’t been shy about making health care services — including home-based care — a strategic priority.

To that end, the company referred to Q1 as a “landmark quarter” for building out its U.S. Healthcare segment.

For one, it made a $3.5 billion investment to support VillageMD’s acquisition of Summit Health-CityMD.

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“We recognize the critical importance of scale and value-based care delivery and density and attractive markets,” Walgreens Boots Alliance CEO Roz Brewer said Thursday during the company’s Q1 earnings call. “This highly strategic transaction expands VillageMD’s addressable market with primary care, multi-specialty [care] and urgent care, and reinforces our approach across the care continuum. We see meaningful synergy potential over time.”

Source: Walgreens Boots Alliance

VillageMD has cemented its spot as a major player in the value-based care space. In total, the company has 393 clinics – including 200 co-located with Walgreens — achieving its 2022 target.

With the close of the Summit Health-CityMD acquisition earlier this week, VillageMD now operates over 680 locations across 26 markets.

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“The addition of Summit held will further enhance our portfolio of leading assets across the care continuum, drive meaningful synergy opportunities and accelerate the path to profitability,” James Kehoe, chief financial officer at Walgreen Boots Alliance, said during the call.

Brewer also noted that CareCentrix continued to perform well, which led to the accelerated acquisition of the health-at-home solutions company. The CareCentrix transaction is slated to close in Q3 of 2023.

“Our health care strategy is coming to life through all of our best-in-class assets, which drove a combined 38% pro forma sales growth in the quarter,” Brewer said. “This growth is funded through actions we continue to take to better align our investment portfolio and simplify the business.”

Looking ahead, Walgreens sees major opportunities for synergies that enable the company to go after value-based care and risk arrangements.

“[It] will demonstrate the value of an integrated approach,” Brewer said. “We are focused on expanding our risk business, supporting integrated care models, expanding our pharmacy value proposition and driving operational efficiencies.”

Overall, Walgreen Boots Alliance’s U.S. Healthcare segment had Q1 sales of $989 million, a 38% increase, compared to $938 million the previous year.

“Our U.S. Healthcare business continues to rapidly scale, with almost $1 billion of sales in the quarter,” Kehoe said.

VillageMD grew 48.7% due to existing clinic growth and clinic footprint expansion.

“VillageMD had 440,000 value-based patients at quarter end, up 46% from 300,000 at the end of the prior year quarter,” Kehoe said. “At quarter end, the Walgreens Health organic business had 2.9 million contracted lives, up from 2.3 million at the end of the fourth quarter. As existing payers added new lines of business, we exceeded our original goal of 2 million lives. As we scale our access to lives and add new partners, we will continue to build out our Walgreens headquarters.”

In its first full quarter, CareCentrix brought in sales of more than $330 million, and pro forma sales growth was 22%.

“In summary, we performed strongly against our key objectives, and we are well positioned for future success in the coming year,” Kehoe said.

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