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.
The demise of Haven — a coalition of three big employers aiming to lower the cost of healthcare for their workers — was met with a surprising reaction from Jamie Dimon, CEO of JPMorgan Chase: “We want to do this again.”
A Dec. 6 report from Bloomberg details some of the aftermath of Haven’s end and also the origins of Morgan Health, the bank’s second go at lowering healthcare costs that was rolled out in spring 2021. While still in its early stages, one tenet of its strategy is a return to basics, including appointments between clinicians and patients that take at least 30 minutes if not an hour.
Haven was the healthcare partnership formed in 2018 by Amazon, JPMorgan Chase and Berkshire Hathaway with an aim to lower healthcare costs for their 1.2 million workers. It disbanded in 2021. As its end neared, Mr. Dimon set out to learn what had gone wrong.
When he asked the question of Bill Wulf, MD, CEO of Central Ohio Primary Care, the internist told the businessman the initiative had moved too slowly. A virtual care program drew in only 150 people in Ohio, for example, before it was scrapped.
Shortly after the debrief with Dr. Wulf, Mr. Dimon assigned a lieutenant to restart the work on lowering employer healthcare costs, this time focusing on JPMorgan Chase alone. That leader was Peter Scher, vice chairman with the bank, who had his doubts at first. “There are a lot of things we could be spending our time on,” he told Bloomberg. “I was perfectly prepared to go back to Jamie and the operating committee and say, ‘Listen, it was a good try.'”
Mr. Scher stuck with it and brought on Dan Mendelson, founder and former CEO of healthcare advisory group Avalere Health, to lay the groundwork for JPMorgan’s second healthcare attempt. Mr. Mendelson, who had been a skeptic of Haven, spent three months crafting a strategy and playbook that recognized where Haven had fallen short and avoided repeated mistakes. He signed on to lead the group, dubbed Morgan Health.
The group has made more headlines since its launch than its predecessor Haven, which premiered with much bravado but went nearly a year without releasing any news except for its name and a new website. In fall 2022, Morgan Health openedthree advanced primary care centers in Ohio for a total of five and formed a healthcare venture capital team targeting early- to later-stage healthcare companies with innovations in areas like genetic medicine, autoimmune diseases, cardiometabolic diseases and rare disorders. It also hired Cheryl Pegus, MD, Walmart’s executive vice president of health and wellness, as a managing director.
Morgan Health’s strategy is marked by what appears to be common sense and a return to basics, including the placement of clinics in office building atriums — “a full-service practice where employees can develop long-term relationships with primary-care providers, wellness coaches, mental health providers and care coordinators.”
All appointments are booked for at least 30 minutes with many going an hour, according to Bloomberg. Patients generally see the same practitioner for each visit to build long-term relationships. Clinicians’ payments are tied to goals like avoiding emergency room visits, providing cancer screenings and keeping high blood pressure in check. If it plays out as designed, JPMorgan says the investment in prevention and primary care will curb high-cost services and hospital stays, ultimately leading to meaningful savings.
The goal is to “identify high-risk patients and then bubble-wrap them,” Dr. Wulf told Ohio business leaders in an October meeting, Bloomberg reports. “How do we keep you out of the hospital?”
JPMorgan has opened five clinics in the area of Columbus, Ohio, which will also be open to other employers who want to sign on. The clinics and primary care centers are managed and staffed by Vera Whole Health and Central Ohio Primary Care. JPMorgan is seeking “like-minded” medical groups in markets like New York, Chicago and Dallas where it has hubs of workers, Bloomberg reports.
VillageMD, which is majority owned by Walgreens Boots Alliance, plans to shell out nearly $9 billion to pick up medical practice Summit Health, the parent company of urgent care clinic chain CityMD.
The deal, announced Monday morning, is valued at $8.9 billion and includes investments from Walgreens Boots Alliance and Cigna Corp’s healthcare unit Evernorth, which will also become a minority owner in VillageMD. Bloomberg first reported on a potential deal back in late October.
The deal will expand Walgreen’s reach into primary, specialty and urgent care. The transaction creates one of the largest independent provider groups in the U.S., the organizations said. Combined, VillageMD and Summit Health will operate more than 680 provider locations in 26 markets. The two companies will have 20,000 employees.
Walgreens said Monday it will invest $3.5 billion through an even mix of debt and equity to support the acquisition, which is expected to close in the first quarter of 2023. The company will remain the largest and consolidating shareholder of VillageMD with about 53% stake.
Walgreens also raised its fiscal year 2025 sales goal for its U.S. healthcare business to between $14.5 billion and $16 billion from $11 billion to $12 billion previously. That business segment is now expected to achieve positive adjusted EBITDA by the end of fiscal year 2023.
Last year, Walgreens invested $5.2 billion in VillageMD and said it planned to open at least 600 Village Medical at Walgreens primary-care practices across the country by 2025 and 1,000 by 2027.
The deal comes amid a frenzy of M&A activity in the past two years. Major retailers like CVS, Walgreens and Amazon are ramping up their focus on providing medical services to gain bigger footholds in the healthcare market.
Drugstore rival CVS Health won the bidding war for home health and technology services company Signify Health and plans to shell out $8 billion to acquire the company. Amazon also plans to buy primary care provider One Medical for $3.9 billion.
The M&A move signals that Walgreens wants to become a “dominant entity in the overall healthcare services ecosystem,” according to David Larsen, healthcare IT and digital health analyst at financial services firm BTIG.
“Walgreens Boots Alliance is graduating up from being a drug retail store to owning the life-cycle of members’ health,” he wrote in an analyst’s note. “We view this transaction as being a statement by the market that primary care continues to be one of the key drivers of healthcare long-term.”
The deal also will put additional pressure on CVS Health to break into the primary care business “sooner rather than later,” Larsen wrote.
“I think at the most strategic level, I think there continues to be recognition that an integrated, coordinated, connected model of care is one that will ultimately deliver the best results. You see this through Optum’s acquisition of Kelsey-Seybold Clinic and VillageMD’s acquisition of Summit Health,” Tim Barry, CEO and chair of VillageMD, said in an interview with Fierce Healthcare.
“If we’re going to ultimately stem the rising tide of this fee-for-service healthcare system, we need a better solution, and that solution needs to have doctors working with other doctors in a coordinated way and trying to solve the unique problems that these patients have and making sure that the right doctors are accessing the patient at the right time, and doing it all underneath the umbrella of a risk-based contract,” Barry said.
He added, “We think that this is going to continue to be where healthcare goes. And, we have to do it in a way that is integrated and value-oriented. Any organization focused on doing that, and doing that at size and scale, is going to continue, I think, to be the successful winners of our healthcare system.”
In 2019, Summit Medical Group, a physician-owned and governed multispecialty group, merged with CityMD, a leading urgent care company in New York City. The combined organization, Summit Health, has more than 370 locations in New Jersey, New York, Connecticut, Pennsylvania and Oregon.
VillageMD provides value-based primary care for patients at traditional free-standing practices, Village Medical at Walgreens practices, at home and via virtual visits. VillageMD and Village Medical have grown to 22 markets and are responsible for more than 1.6 million patients, according to the company.
Barry said the combination of VillageMD and Summit Health-CityMD will enable the organizations to scale up value-based care and build out integrated primary and specialty care services.
“If you look at the long history of Summit Health, it’s an organization that has done some very innovative things. The way that they deliver multispecialty care, it is truly integrated, it’s truly connected and they are known as the preeminent brand in their marketplace. They also have CityMD, which is one of the more unique and differentiated urgent care models out there in the market. They really are a best-of-breed organization,” he said.
“When I look at what we’ve been able to do at VillageMD, we built this incredible model of value-based primary care delivery. The idea of bringing these two organizations together to bring those best-of-breed capabilities under one umbrella was just so compelling. We will soon be able to offer a more comprehensive, integrated and connected model by also offering other specialty services to our patients, but all still done through a value or risk-based reimbursement structure.”
Barry is bullish on the combined capabilities of the two companies in the primary and specialty care markets.
“We’ll be delivering a consistent value-based model of integrated, multispecialty care in a way that delivers the best clinical results on the planet,” he said.
Jeff Alter, CEO of Summit Health-CityMD, said in a statement that the deal adds Summit Health’s expertise and geographic coverage to VillageMD’s proven value-based primary care approach.
The acquisition also expands Walgreens’ reach into providing medical care directly to patients. “This transaction accelerates growth opportunities through a strong market footprint and wide network of providers and patients across primary, specialty and urgent care,” Roz Brewer, CEO of Walgreens Boots Alliance, said in a statement.
With Cigna’s investment, the combined company will be able to tap into Evernorth’s health services capabilities to potentially lower healthcare costs, Barry said. Evernorth encompasses Cigna’s health services businesses including pharmacy benefit manager Express Scripts
“In order to be a risk-based provider or a value-based provider, you have to have contracts with a payer that allows you to work in this value or risk-based construct. We learned over the years that Cigna has been a really good partner to us on that journey,” Barry said.
“There are companies that [Cigna] has purchased over the years that have different specializations and capabilities that we believe ultimately will allow us to deliver better care to our patients,” he noted. “Evernorth has some capabilities tied to behavioral health, and they have some capabilities tied to the management of specialty pharmaceutical spend, which everyone knows those costs continue to be soaring. We both liked the idea of supporting an organization like ours that’s going to continue to grow and continues to be focused on risk and value.”
With the investment in VillageMD and Summit Health, Cigna gets a leg up in the primary care space as it looks to build out its Evernorth division.
“Our collaboration with VillageMD accelerates our efforts to improve the way care is accessed and delivered,” said Eric Palmer, CEO of Evernorth, 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.”
Retailers and insurers are building out their primary care strategies in a bid to become the new front door for patients seeking healthcare services, especially seniors on highly profitable Medicare Advantage (MA) plans. In the graphic above, we examine the capabilities of three of the largest pharmacy chains—CVS Health, Walgreens, and Walmart—to deliver full-service primary care across in-person and virtual settings.
CVS pioneered the pivot to care provision in 2006 with its acquisition of MinuteClinic, which now has over 1,000 locations. The company has further expanded its concept of pairing retail and pharmacy services with primary care by opening over 100 HealthHUBs, which provide an expanded slate of care services. However, CVS lags competitors in the rollout of full-service primary care practices, with its proposed physician-led Super Clinics still stuck in the planning stages.
Walgreens, with its majority stake in VillageMD (on track for 200 co-branded practices by the end of the year) and the recent acquisition of Summit Health (which operates another 370 primary and urgent care clinics) has assembled the most impressive primary care footprint of the three companies.
Walmart, the largest by number of stores but also the newest to healthcare, has opened more than 25 Walmart Health Centers, a step up from earlier experimentation with in-store care clinics, offering more services and partnering with Epic Systems to integrate electronic health records.
CVS’s key advantage over its competitors comes from its payer business, having acquired Aetna in 2018, now the fourth-largest MA payer by membership. Walgreens and Walmart have both aligned themselves with UnitedHealth Group (UHG) to participate in MA, with Walmart having struck a ten-year partnership to steer UHG MA beneficiaries to Walmart Health Centers in Florida and Georgia.
While aligning with UHG expands the reach of these retail giants into MA risk, UHG, whose OptumHealth division is by far the largest employer of physicians nationwide, remains the healthcare juggernaut most poised to unseat incumbent providers as the home for consumers’ healthcare needs.
According to reporting from Bloomberg, primary care company VillageMD, which is majority-owned by Walgreens, is engaged in talks to merge with New Jersey-based Summit Health, a large medical group network and urgent care chain backed by private equity firm Warburg Pincus.
In 2019, Summit merged with CityMD, a New York City-based urgent care chain, and operates over 370 clinic locations based in and around New York City, as well as in central Oregon. The combined entity would be valued between $5B and $10B.
The Gist: Should this deal go through, it would epitomize recent trends in healthcare M&A:a well-established independent medical group using private equity funding to rapidly expand its operations before selling off to an industry giant.
If that industry giant ends up being VillageMD, Walgreens would finally have a physician practice with deep experience in managing risk, on which they can anchor their larger ambitions in care provision. And if the deal with Walgreens falls through, Summit, with its combination of mostly suburban value-based care practices and largely urban urgent care chains, is sure to attract plenty of other suitors, including any of the major national insurers.
While Amazon has been amassing a range of healthcare assets in recent years, including an online pharmacy, virtual and in-home care capabilities, and even diagnostics, this marks the e-commerce giant’s first significant push into bricks-and-mortar healthcare delivery.
One Medical, which went public in 2020, operates 182 medical offices in 25 markets, and acquired Medicare-focused primary care provider Iora Health last year. It offers an access-forward, concierge-lite model to employer clients and individual consumers, and more recently has pursued a partnership strategy with anchor health systems in the markets where it operates.
The Gist:Amazon’s pricey purchase of One Medical, for which it will pay a 77 percent premium over market value, is sure to set the healthcare punditocracy afire—even more than its earlier, ill-fated arrangement with JPMorgan Chase and Berkshire Hathaway.
Clearly, Amazon is shifting from a build-and-tinker to a buy-and-scale approach to its Amazon Care business, which has been slow off the mark since the company first started selling its own employee clinic services to other employers. With One Medical, Amazon gets thousands more employer relationships, a much larger physical footprint, and a buzzy brand in primary care.
But the deal is less “disruptive” than it might first appear. There is still a missing piece—namely, a risk model that lets Amazon profit from managing patients in the primary care setting. One Medical’s model is expensive—it has yet to turn a profit—and despite the acquisition of Iora’s population health platform, it has doubled down on creating linkages with high-cost health systems rather than truly investing in care management.
Primary care on its own is not an attractive growth business, even in a hybrid virtual/in-person model, even at Amazon’s scale. To truly disrupt healthcare, Amazon will need to wade into the risk business, either by partnering with a health plan or creating its own risk arrangements with employer clients.
That’s going to be hard, for all the same reasons that Haven was hard—entrenched payer relationships, slow-moving benefits managers, and a murky and conflicted broker channel. We’d love to be proven wrong, but this deal feels less like true innovation and more like a frothy story for slide decks and conference panels.
Amazon plans to acquire virtual and in-person primary care company One Medical, the online retailer said July 21.
In a cash deal valued at $3.9 billion, the aim is to combine One Medical’s technology and team with Amazon, it said in a news release. The goal of the acquisition, according to the two companies, is to offer more convenient and affordable healthcare in-person and virtually.
“The opportunity to transform healthcare and improve outcomes by combining One Medical’s human-centered and technology-powered model and exceptional team with Amazon’s customer obsession, history of invention and willingness to invest in the long-term is so exciting,” said Amir Dan Rubin, CEO of One Medical, in a company news release. “There is an immense opportunity to make the healthcare experience more accessible, affordable, and even enjoyable, for patients, providers and payers. We look forward to innovating and expanding access to quality healthcare services together.”
Amazon will acquire One Medical for $18 per share.
Completion of the transaction is subject to customary closing conditions, including approval by One Medical’s shareholders and regulatory approval.
If the acquisition is approved, Mr. Rubin will remain CEO of One Medical.
Concierge primary care company One Medical is reportedly considering a sale after receiving interest from CVS Health, according to Bloomberg. While talks with CVS are no longer active, sources familiar with the situation say the company is weighing offers from other suitors. Also this week, there were rumors that Humana is interested in acquiring Florida-based Cano Health, which provides comprehensive care to over 200K seniors enrolled in Medicare Advantage plans across six states.
The Gist: We’ve long thought that the ultimate buyer for these primary care startups would be large, vertically integrated insurers, as many have struggled to achieve profitability while maintaining strong enrollment growth.
Competition among insurers to acquire care delivery assets has intensified, as payers look to Medicare Advantage as their primary growth vehicle, and aim to amass primary care networks capable of managing their growing senior care businesses.
The digital platform is designed to provide consumers with a coordinated healthcare experience across care settings. It’s being sold to Aetna’s fully insured and self-insured plan sponsors, as well as CVS Caremark clients, and is due to go live next year. According to CVS Health, the new offering “enables consumers to choose care when and where they want,” whether that’s virtually, in a retail setting (including at a MinuteClinic or HealthHUB), or through at-home services.
Patients will have access to primary care, on-demand care, medication management, chronic condition management, and mental health services, as well as help in identifying other in-network care providers.
The Gist: CVS Health has been working to integrate its retail clinics, care delivery assets, and health insurance business. This new virtual-first care platform is aimed at coordinating care and experience across the portfolio, and streamlining how individuals access the range of services available to them.
CVS is not alone in focusing here: UnitedHealth Group, Cigna, and others have announced virtual-first health plans with a similar value proposition. Any payer or provider who aims to own the consumer relationship must field a similar digital care platform that streamlines and coordinates service offerings, lest they find themselves in a market where many patients turn first to CVS and other disruptors for their care needs.
We recently caught up with a health system chief clinical officer, who brought up some recent news about CVS. “I was really disappointed to hear that they’re going to start employing doctors,” he shared, referring to the company’s announcement earlier this month that it would begin to hire physicians to staff primary care practices in some stores. He said that as his system considered partnerships with payers and retailers, CVS stood out as less threatening compared to UnitedHealth Group and Humana, who both directly employ thousands of doctors: “Since they didn’t employ doctors, we saw CVS HealthHUBs as complementary access points, rather than directly competing for our patients.”
As CVS has integrated with Aetna, the company is aiming to expand its use of retail care sites to manage cost of care for beneficiaries. CEO Karen Lynch recently described plans to build a more expansive “super-clinic” platform targeted toward seniors, that will offer expanded diagnostics, chronic disease management, mental health and wellness, and a smaller retail footprint. The company hopes that these community-based care sites will boost Aetna’s Medicare Advantage (MA) enrollment, and it sees primary care physicians as central to that strategy.
It’s not surprising that CVS has decided to get into the physician business, as its primary retail pharmacy competitors have already moved in that direction. Last month, Walgreens announced a $5.2B investment to take a majority stake in VillageMD, with an eye to opening of 1,000 “Village Medical at Walgreens” primary care practices over the next five years. And while Walmart’s rollout of its Walmart Health clinics has been slower than initially announced, its expanded clinics, led by primary care doctors and featuring an expanded service profile including mental health, vision and dental care, have been well received by consumers. In many ways employing doctors makes more sense for CVS, given that the company has looked to expand into more complex care management, including home dialysis, drug infusion and post-operative care. And unlike Walmart or Walgreens, CVS already bears risk for nearly 3M Aetna MA members—and can immediately capture the cost savings from care management and directing patients to lower-cost servicesin its stores.
But does this latest move make CVS a greater competitive threat to health systems and physician groups? In the war for talent, yes. Retailer and insurer expansion into primary care will surely amp up competition for primary care physicians, as it already has for nurse practitioners. Having its own primary care doctors may make CVS more effective in managing care costs, but the company’s ultimate strategy remains unchanged: use its retail primary care sites to keep MA beneficiaries out of the hospital and other high-cost care settings.
Partnerships with CVS and other retailers and insurers present an opportunity for health systems to increase access points and expand their risk portfolios. But it’s likely that these types of partnerships are time-limited. In a consumer-driven healthcare market, answering the question of “Whose patient is it?” will be increasingly difficult, as both parties look to build long-term loyalty with consumers.