With Walmart’s announcement last week that it plans to shutter its Walmart Health business, this week’s graphic takes stock of the company’s healthcare delivery journey over nearly the past two decades.
In about 2007, Walmart launched “The Clinic at Walmart,” which leased retail space to various third-party retail clinic companies, and then later health systems, to provide basic primary care services inside Walmart stores, with the ambition of eventually becoming “the largest provider of primary healthcare services in the nation.”
However, low volumes and incompatible incentives between Walmart and its contractors led most of these clinics to close over time. In 2014 Walmart partnered with a single company, the worksite clinic provider QuadMed, to launch “Walmart Care Clinics.” These in-store clinics offered $4 visits for covered Walmart employees and $40 visits for the cash-paying public. Despite these low prices, this iteration of care clinic also suffered from low volumes, and Walmart scrapped the idea after opening only 19 of them.
The retail giant’s most recent effort at care delivery began in 2019 with its revamped “Walmart Health Centers,” which it announced alongside its goal to “become America’s neighborhood health destination.”
These health centers, which had separate entrances from the main store, featured physician-led, expanded primary care offerings including X-ray, labs, counseling, and dental services. As recently as April 2024, Walmart said it was planning to open almost two dozen more within the calendar year, until it announced it was shutting down its entire Walmart Health unit, which included virtual care offerings in addition to 51 health centers, citing an unfavorable operating environment.
Despite multiple rebranding efforts, consumers have thus far appeared unwilling to see affordability-focused Walmart as a healthcare provider.
Almost two decades of clinic experimentation have shown the company is willing to try things and admit failure, but it remains to be seen if this is just the end of Walmart’s latest phase or the end of the road for its healthcare delivery ambitions altogether.
Walgreens’ decision to slash VillageMD’s clinical footprint has reverberated to the financial accounts of the primary care chain’s minority owner — Cigna.
Dive Brief:
Cigna has written off more than half of its multibillion-dollar investment in VillageMD amid the declining value of the primary care chain.
Cigna invested $2.5 billion into VillageMD in late 2022, with the goal of accelerating value-based care arrangements for employer clients by tying VillageMD’s physician network with Cigna’s health services business, Evernorth — hopefully reaping profits from shared savings as a result.
But on Thursday, Cigna wrote off $1.8 billion of that investment, citing VillageMD’s lackluster growth after its majority owner Walgreens elected to close underperforming clinics. The writedown drove Cigna’s shareholder earnings down to a net loss of almost $300 million, compared to profit of $1.3 billion in the same time last year.
Dive Insight:
Overall, Cigna’s first-quarter performance was solid, especially amid the mixed results of its insurer peers, analysts said. The Connecticut-based payer grew its revenue 23% year over year to $57.3 billion.
Yet Cigna’s bet on VillageMD is a new thorn in its side, as the investment’s value becomes increasingly bogged down by Walgreens’ operational decisions, along with broader challenges in the primary care sector.
Walgreens began closing underperforming VillageMD centers last year in a bid to force the segment to profitability, and quickly blew past its initial goal of 60 closures. Now, the retailer expects to close 160 clinics overall, majorly downsizing VillageMD’s footprint.
That decision is reverberating to the financial accounts of VillageMD’s minority owner — Cigna.
“The writedown was largely driven by some broader market dislocation that is hitting the space … as well as Village determining that they are going to pull in supply lines and constrain some of the growth in some of the new clinics that they were establishing,” CEO David Cordani told investors on a Thursday morning call.
However Cigna’s priorities for VillageMD remain unchanged, management said. Cigna is still aiming to link VillageMD’s primary care centers to its own clinical assets to build a high-quality provider network that can serve its own patients, and those of health plan and employer clients.
The partnership has already launched in four markets, and the companies plan to continue scaling, according to Cordani.
“At the macro level our strategic direction in terms of what we are seeking to innovate with Village has not changed despite the writedown of the asset,” Cordani said, though “no one likes a writedown of the asset.”
In the quarter, Cigna’s health benefits segment emerged unscathed by headwinds that buffeted other major payers: notably, spending and regulatory pressure in Medicare Advantage.
Yet the majority of Cigna’s business is with employer clients, which served as a “well-underwritten shelter from the MA storms,” TD Cowen analyst Gary Taylor wrote in a Thursday morning note.
Cigna is planning on getting out of Medicare coverage altogether, having agreed in January to sell its Medicare business to Chicago-based insurer Health Care Service Corporation. That deal remains on track, executives said, after a key waiting period for antitrust regulators to challenge the deal came and went in mid-April. The divestiture is expected to close in early 2025.
Cigna’s medical loss ratio — a marker of how much in premiums insurers spend on patient care — was 79.9% in the quarter, better than analysts had expected. Cigna did see higher utilization in areas like inpatient care for employer-sponsored members in the quarter, but the payer’s pricing decisions for its plans covered the trend, executives said.
Cigna cut its MLR guidance for 2024, along with raising earnings expectations. The insurer now expects an MLR between 81.7% and 82.5% this year, suggesting management is confident in their ability to control medical costs, J.P. Morgan analyst Lisa Gill wrote in a Thursday note.
CVS, which previously held the contract, cited its loss as a factor in declining revenue and income for its pharmacy benefit management business on Wednesday.
Cordani specifically called out specialty pharmacy — which already represents a major portion of Evernorth’s revenue — as an “accelerated growth opportunity” for the business.
Roughly a week ago, Evernorth announced it will have an interchangeable Humira biosimilar for $0 out-of-pocket cost for eligible patients of its specialty pharmacy arm, Accredo.
Currently, 100,000 Accredo patients use Humira or a biosimilar for the frequently prescribed immune disease drug, which has long been the top-selling drug for its manufacturer AbbVie. In addition, all of its PBM clients and patients will have access to the biosimilars, according to Cordani.
Evernorth has also taken steps to ramp up coverage of GLP-1s, expensive diabetes drugs that have soared in popularity for weight loss. In March, the company announced cost-sharing agreement for GLP-1s covered in a condition management program, to insulate health plan and employer clients from the soaring costs of the medication.
The program has seen “strong interest,” and Evernorth has enrolled more than 1 million people in it to date, Cordani said.
In this week’s graphic, we highlight how the primary care provider workforce has evolved over the past decade in both the pursuit of team-based care models and value-based care, as well as in response to rising labor costs and physician shortages.
In 2010, physicians made up more than 70 percent of the primary care workforce. But over the next 12 years, the number of primary care providers nearly doubled, largely driven by immense growth of nurse practitioners in the workforce.
As of 2022, more than half of primary care providers were advanced practice providers (APPs), who continue to have a strong job outlook across the next decade (especially nurse practitioners).This shift has been beneficial to many provider organizations.
In a study from the Mayo Clinic, the return on investment was positive across a variety of APP practice models, especially in procedural-based specialties but across both independent practice models and full care team models as well.
APPs also receive similar patient experience scores as their physician counterparts.
Continued integration of APPs in team-based care models remains a key strategy for health systems seeking to improve access while lowering costs, especially in primary care.
On Sunday, Miami, FL-based Cano Health, a Medicare Advantage (MA)-focused primary care clinic operator, filed for bankruptcy protection to reorganize and convert around $1B of secured debt into new debt.
The company, which went public in 2020 via a SPAC deal worth over $4B, has now been delisted from the New York Stock Exchange. After posting a $270M loss in Q2 of 2023, Cano began laying off employees, divesting assets, and seeking a buyer. As of Q3 2023, it managed the care of over 300K members, including nearly 200K in Medicare capitation arrangements, at its 126 medical centers.
The Gist:
Like Babylon Health before it, another “tech-enabled” member of the early-COVID healthcare SPAC wave is facing hard times. While the low interest rate-fueled trend of splashy public offerings was not limitedto healthcare, several prominent primary care innovators and “insurtechs” from this wave have struggled, adding further evidence to the adages that healthcare is both hard and difficult to disrupt.
Given that Cano sold its senior-focused clinics in Texas and Nevada to Humana’s CenterWell last fall, Cano may draw interest from other organizations looking to expand their MA footprints.
Bloomberg reported this week that retail behemoth Walmart has engaged in talks to acquire a majority stake in ChenMed, a closely held value-based primary care company based in Miami, FL.
The deal would significantly expand Walmart’s primary care footprint and capabilities, adding to the 39 Walmart Health centers slated to be in operation by the end of this year.
ChenMed, which operates 120+ clinics across 15 states, delivers primary care to complex Medicare Advantage beneficiaries, taking risk for the total cost of care, and has grown its membership by 36 percent annually across the last decade. It has remained privately owned by the Chen family, but recently revamped its leadership structure and tapped UnitedHealth Group (UHG) veteran Steve Nelson to run operations. ChenMed has an expected value of several billion dollars, a price that could be driven upwards if other bidders express interest. Bloomberg’s sources emphasized that the deal could still be weeks away and that no terms have been finalized.
The Gist: Should this purchase go through, it might change Walmart’s status as a “sleeping giant” in healthcare.
ChenMed’s primary care model and strong foothold in the Southeast would dovetail with Walmart’s store clinic footprint and its 10-year partnership with UHG to drive value-based care adoption in that region.
With ChenMed competitors Oak Street, One Medical, and VillageMD now backed or owned by some of Walmart’s biggest competitors, Walmart may view ChenMed as its best opportunity to scale its primary care footprint through a large acquisition.
However, much of ChenMed’s success to date has been attributed to its strong culture and track record of physician recruitment and retention—something a large company like Walmart may have challenges preserving.
Walmart Health opened three new clinics in Jacksonville, Fla., starting June 6 as the company continues its push into retail healthcare, the Florida Times-Union reported.
The retail giant now has more than 30 Walmart Health centers across Florida, Arkansas, Georgia, Illinois and Texas, with plans to grow to 77 by the end of 2024 and expand into Arizona and Missouri.
Florida is one of Walmart Health’s biggest markets, with 22 coming to the state by fall 2023. They are also located in the Orlando and Tampa metro areas. They include medical, dental, vision, hearing and behavioral health services.
“With only one primary care doctor per 1,380 Florida residents, these Walmart Health centers will help address the demand for care in three major cities in the Sunshine State,” David Carmouche, MD, senior vice president of omnichannel care offerings for Walmart, said in a 2022 Times-Unionstory. “We are part of these communities, and we are excited to bring more options for in-person and telehealth care services to our neighbors. We’re making healthcare available when and where you may need it.”
Less than a month after CVS Health acquired Oak Street Health, the primary care provider plans to expand into four more states.
The company plans to open value-based primary care centers in Little Rock, Arkansas; Des Moines and Davenport, Iowa; Kansas City, Kansas and Richmond, Virginia, beginning this summer.
Oak Street Health will operate centers in 25 states by the end of the year.
The provider also aims to open new centers in existing markets this year with additional centers planned for Arizona, Colorado, Georgia, Illinois, Indiana, Louisiana, New York, Ohio and Pennsylvania.
CVS finalized its $10.6 billion acquisition of the Medicare-focused primary care company in early May, picking up, at the time, about 169 medical centers in 21 states.
The acquisition significantly broadens CVS Health’s primary care footprint and the retail pharmacy giant said the deal will improve health outcomes and reduce costs for patients, particularly for those in underserved communities.
The two deals will help advance the health giant’s push into value-based care and mark its latest moves to get further into healthcare services.
Oak Street specializes in treating Medicare Advantage patients and its network of clinics is expected to grow to over 300 centers by 2026.
The provider says it developed an integrated care model that incorporates behavioral healthcare and social determinants support and patients can access care in-center, in-home and through telehealth appointments.
Oak Street Health says it has reduced patient hospital admissions by approximately 51% compared to Medicare benchmarks, and driven a 42% reduction in 30-day readmission rates and a 51% reduction in emergency department visits.
“One of the most critical ways we advance our mission to rebuild healthcare as it should be is by bringing our high-quality primary care and unmatched patient experience to more older adults across the country,” said Mike Pykosz, Oak Street Health’s CEO. “We look forward to meeting and caring for new deserving patients in Arkansas, Iowa, Kansas and Virginia, as well as the opportunity to create meaningful jobs for those passionate about improving health outcomes for patients and bridging health equity gaps in their communities.”
The CVS-Oak Street Health deal marks the latest example of vertical integration in healthcare. In addition to operating thousands of pharmacies and MinuteClinics, CVS also is the parent company of major health insurer Aetna and pharmacy benefit manager CVS Caremark.
After rumors of a possible deal first surfaced in early January, CVS Health announced on Wednesday that it has entered into a definitive agreement to acquire value-based primary care provider Oak Street Health for $10.6B. The Chicago-based company will join CVS’s recently formed Health Care Delivery organization, bringing with it roughly 600 physicians and nurse practitioners working at 169 senior-focused clinics in 21 states. This move is the latest by CVS to expand its care offerings, following its $100M investment last month in primary and urgent care provider Carbon Health, and its $8B acquisition of in-home evaluation company Signify in September.
The Gist: If this deal goes through, CVS will have the key pieces of the national primary care physician network it needs for a value-based care platform focused on Medicare Advantage—although how they will combine Oak Street’s clinics with retail-based HealthHUBs and other primary care assets remains unclear.
The fact that CVS is paying about a 50 percent share price premium shows how competitive the market for large physician organizations has become, driving up bidding prices such that only cash-rich payers, pharmacies, and retailers can afford them as they seek to emulate UnitedHealth Group’s Optum strategy.
Of note, the same day CVS announced the deal, Aetna competitor and erstwhile investor in Oak Street, Humana announced a five-year network partnership with Oak Street competitor ChenMed.
We’ll be watching for whose strategy proves most effective as we enter the next phase of the physician arms race between vertically-integrated payers, and the emphasis shifts from how many providers are employed to how they’re integrated and deployed.
CVS Health is close to a deal to acquire primary care provider Oak Street Health for around $10.5 billion, including debt, marking the latest move among major healthcare stakeholders in acquiring primary care companies, the Wall Street Journal reports.
According to people with knowledge of the matter who spoke to the Journal, the two companies are discussing a deal in which CVS would acquire Oak Street for a price of around $39 a share. If the deal goes through, it could be announced as soon as this week.
According to the Journal, “the Oak Street acquisition would further the company’s long-term shift to broaden into businesses beyond retail pharmacy by adding doctors who can more fully manage patients’ care.”
Oak Street has more than 160 centers across 21 states and focuses mainly on caring for patients enrolled in Medicare. The company, which is based in Chicago, was founded in 2012 and specializes in caring for patients under value-based care arrangements.
Aetna, which is owned by CVS, has a growing Medicare Advantage business that would likely tie in with Oak Street’s clinics, which care for about 159,000 patients under value-based arrangements, the Journal reports.
The move is the latest among major healthcare stakeholders acquiring primary care companies. In September 2022, CVS announced an $8 billion deal to acquire home healthcare company Signify Health.
Meanwhile, Amazon in July 2022 announced a $3.9 billion deal to acquire primary care company One Medical, Humana in September 2022 announced its intention to spend up to $550 million to purchase 20 CenterWell Senior Primary Care clinics, and Walgreens Boots Alliance in November 2022 announced a roughly $9 billion deal to acquire Summit Health.
On Monday, San Francisco-based Carbon Health—a virtual-first primary and urgent care company with 125 clinics across 13 states—announced a partnership with CVS Health, which includes a $100M investment, as well as plans to pilot its operating model in select CVS stores. The announcement came just days after Carbon reported its second round of layoffs in the past year, as it scales back on less profitable business segments to focus on expanding its primary care model.
The Gist: It’s been over a year since CVS CEO Karen Lynch said the company was moving with “speed and urgency” to construct a physician-staffed primary care model. Last fall it purchased in-home health evaluation company Signify Health for $8B, after rumors that it had been close to acquiring One Medical.
Between its convenient retail footprint, insurance arm, and Signify’s risk-assessment tools, a nationwide primary care physician network is the last puzzle piece CVS needs to field a comprehensive and formidable primary care strategy.
While it’s currently rumored to be evaluating a $10B acquisition of Oak Street Health, this partnership with Carbon Health is a better bet to deliver value quickly, as CVS should be able to more easily integrate and leverage Carbon’s retail health expertise across its growing care delivery platform.
HENRY KOTULA 