Pharmacy chains rapidly expand into primary care

https://mailchi.mp/cfd0577540a3/the-weekly-gist-november-11-2022?e=d1e747d2d8

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.

Walgreens-backed VillageMD rumored to be exploring Summit Health purchase

https://mailchi.mp/46ca38d3d25e/the-weekly-gist-november-4-2022?e=d1e747d2d8

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. 

Inside the ‘wave’ of health care acquisitions

Amazon and several other major companies have made numerous attempts to “disrupt” health care over the years without much success. But new acquisitions in primary care, home health care, and more may allow them to more successfully expand into the industry, David Wainer writes for the Wall Street Journal.

Competition heats up in the health care industry

According to Wainer, the United States spends a greater proportion of its economy on medical services than any other developed nation, making health care “too big of an opportunity to ignore” for many companies, including those in technology, retail, and more. 

For example, Amazon has launched several forays into health care in recent years, although not all of them have been successful. Some of these health care efforts include its now defunct partnership with Berkshire Hathaway and JPMorgan Chase, as well as Amazon Care, the company’s primary care service that will shut down at the end of the year.

Amazon has also acquired several smaller health care companies in an effort to expand its reach. In 2018, Amazon purchased PillPack for $1 billion as a way to expand its online pharmacy business. Similarly, Amazon in July reached an agreement to acquire One Medical, a primary care company, for roughly $3.9 billion.

Several other companies, including retailers like Walmart and Walgreens and large insurers like UnitedHealth Group* (UHG) and CVS Health‘s Aetna, are also looking to expand their health care offerings. In fact, CVS announced last week that it had purchased home health care company Signify Health for roughly $8 billion—beating out several other competitors.

So far, “[s]hifting social attitudes and market conditions have helped fuel the wave” of health care acquisitions from major companies, Wainer writes, and more are likely to occur going forward.

What companies are targeting in health care

In contrast to the more traditional fee-for-service model, many health care startups are moving toward value-based care, which encourages providers to help prevent illnesses, rather than just treat them.

According to Wainer, UHG, which includes a pharmacy benefit manager, an insurance business, and 60,000 physicians, has made the most progress transitioning to value-based care so far. For example, many of the multi-specialty physician practices UHG has purchased through its medical provider arm Optum Care focus on proactively providing patients home, virtual, and on-site care to help them stay out of the hospital.

In addition, UHG and Walmart last week announced a partnership to provide services and “improve the patient experience” for certain Medicare Advantage enrollees. Through the partnership, UHG will use analytics to help Walmart clinics deliver value-based care to patients.

Aside from value-based care, many companies, including Amazon and CVS, are looking to expand their businesses into primary care. Currently, there is a nationwide shortage of primary care doctors, which has led to worse health outcomes for many Americans.

By providing primary care services directly to consumers, Amazon and other companies are hoping to use the relationship between patients and their providers to sell even more services, such as prescription drug deliveries and more.

Overall, “staying healthy probably will never be the sort of frictionless, one-click experience that Amazon pioneered,” Wainer writes, but the company’s current involvement in the health care industry “is a testament to the fact that there’s a lot of money to be made by fixing America’s broken system.” (Wainer, Wall Street Journal, 9/9)

*Advisory Board is a subsidiary of Optum, a division of UnitedHealth Group. All Advisory Board research, expert perspectives, and recommendations remain independent. 

Walmart partners with UnitedHealth Group (UHG) in its continued push into healthcare

https://mailchi.mp/6a3812741768/the-weekly-gist-september-9-2022?e=d1e747d2d8

The nation’s largest retailer and its largest insurer announced a 10-year partnership to bring together the collective expertise of both companies to provide affordable healthcare to potentially millions of Americans. Set to start next year with 15 Walmart Health locations in Georgia and Florida, the collaboration will initially focus on seniors and Medicare Advantage (MA) beneficiaries, and will include a co-branded MA plan in Georgia. Walmart Health Virtual Care will also be in-network for some UnitedHealthcare beneficiaries. Plans for future years involve expanding the collaboration across commercial and Medicaid plans, as well as including pharmacy, dental, and vision services. 

The Gist: We have long wondered if this powerhouse pairing was in the works, as this kind of partnership makes a lot of sense for both parties. While Walmart has reportedly been considering an insurance company acquisition for years, and more recently been dabbling in its own insurance efforts, partnering with UHG provides the retailer with a share of the upside potential of getting into the insurance market without having to fully commit to entering that complex business. And given that 90 percent of Americans live within 10 miles of a Walmart store, and more than half of Americans visit a store every week, Walmart provides UHG with low-cost healthcare access points all over the country, especially important in markets where United’s own Optum physician network is not (yet) present.

Why hospitals are creating health center ‘look-alikes’

Kaiser Health News analysis of federal data published Sept. 9 highlights an increasing trend among hospitals — establishing independent, nonprofit health center “look-alikes” for primary care patients to improve their financial picture.

Federally qualified health center look-alikes, as designated by the federal government, deliver primary care services to underserved communities. They receive federally qualified health center prospective payment system reimbursement through CMS — a higher rate than if the sites were owned by the hospitals — as well as help with the recruitment and retention of primary care providers via HHS’ National Health Service Corps.

However, they don’t receive health center program funding from HHS to cover operational expenses.

Some hospitals increasingly view look-alikes as a strategy to help with their financial picture, since they can divert primary care patients without urgent needs to look-alike clinics from expensive emergency rooms, according to Kaiser Health News.

The Kaiser Health News analysis published Sept. 9 found that at least eight hospitals and health systems have converted or built new clinics designated as look-alikes from 2019 through 2022. This includes Mount Carmel, Ill.-based Wabash General Hospital, Beverly Hospital in Montebello, Calif., and Parrish Medical Center in Titusville, Fla., among others.

To read the full Kaiser Health News report, click here

Amazon Care is shutting down at the end of 2022. Here’s why

https://www.fiercehealthcare.com/health-tech/amazon-care-shutting-down-end-2022-tech-giant-said-virtual-primary-care-business-wasnt

Three years after it began piloting a primary care service for its employees that blended telehealth and in-person medical services, Amazon plans to cease operations of its Amazon Care service.

Amazon announced Wednesday afternoon that it would end Amazon Care operations after December 31. In an email to Amazon Health Services employees, Neil Lindsay, senior vice president of Amazon Health Services, said Amazon Care wasn’t a sustainable, long-term solution for its enterprise customers.

Amazon provided a copy of the email to Fierce Healthcare.

The decision only impacts Amazon Care and Care Medical teams and not Amazon’s other healthcare services. 

While operating Amazon Care, the company “gathered and listened to extensive feedback” from its enterprise customers and their employees and evolved the service to continuously improve the experience for customers.

“However, despite these efforts, we’ve determined that Amazon Care isn’t the right long-term solution for our enterprise customers, and have decided that we will no longer offer Amazon Care after December 31, 2022,” Lindsay wrote.

“This decision wasn’t made lightly and only became clear after many months of careful consideration. Although our enrolled members have loved many aspects of Amazon Care, it is not a complete enough offering for the large enterprise customers we have been targeting, and wasn’t going to work long-term,” he said.

The online retail company piloted virtual urgent care and primary care service with its employees and their families in the Seattle region in 2019.

Amazon Care has since expanded rapidly with telehealth services available in all 50 states and in-person services in at least seven cities, including Dallas, D.C. and Baltimore. As part of its ambitions in healthcare, Amazon then focused on ramping up partnerships with employers and signed on other companies as clients including Silicon Labs, TrueBlue, Whole Foods Market, Precor—a Washington-based fitness equipment company that was acquired by Peloton—and Hilton.

Some industry insiders have said that Amazon Care struggled to gain a foothold with employer clients.

The company was on track to rapidly expand its hybrid care model to more than 20 additional cities in 2022, including major metropolitan areas like San Francisco, Miami, Chicago and New York City.

CEO Andy Jassy has made health care a priority, naming Amazon Care as an example of “iterative innovation” in his first letter to shareholders earlier this year. In July, the company announced plans to buy concierge primary care provider One Medical in a deal valued at approximately $3.9 billion.

If the One Medical deal goes through, it would significantly expand Amazon’s foothold in the nearly $4 trillion healthcare market, specifically in the competitive primary care market.

One Medical markets itself as a membership-based, tech-integrated, consumer-focused primary care platform. The company operates 188 offices in 29 markets. At the end of March, One Medical had 767,000 members.

The deal also gives Amazon rapid access to the lucrative employer market as One Medical works with 8,000 companies.

The One Medical acquisition has not yet closed.

Lindsay said the company’s work building Amazon Care has deepened its understanding of “what’s needed long-term to deliver meaningful health care solutions for enterprise and individual customers.

“I believe the health care space is ripe for reinvention, and our efforts to help improve the health care experience can have an immensely positive impact on our quality of life and health outcomes. However, none of these reasons make this decision any easier for the teams that have helped to build Amazon Care, or for the customers our Care team serves,” he wrote.

The decision to cease Amazon Care’s operations will likely mean some employees will be laid off. Lindsay said in his email to employees that many Amazon Care employees will have an opportunity to join other parts of the Health Services organization or other teams at Amazon. “Well also support employees looking for roles outside of the company,” he said.

Amazon to acquire primary care company One Medical for $3.5B

https://mailchi.mp/efa24453feeb/the-weekly-gist-july-22-2022?e=d1e747d2d8

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 to acquire One Medical in $3.9B deal

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. 

Primary care companies attract growing interest from insurers

https://mailchi.mp/9e0c56723d09/the-weekly-gist-july-8-2022?e=d1e747d2d8

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.