Walgreens Boots Alliance finalized its majority stake investment in post-acute and home healthcare company CareCentrix as competition in the home health space heats up.
Last October, the drugstore retail giant announced the rollout of Walgreens Health, a new business segment focused on consumer-centric, tech-enabled healthcare that ramps up the company’s capabilities in primary care, post-acute care and home care.
As part of this new strategy, Walgreens also revealed a $330 million investment in CareCentrix, which will also be operated under Walgreens Health. The CareCentrix investment gives Walgreens an initial 55% stake of the company at an $800 million valuation, with an option to raise the stake in the future, Walgreens executives said in a press release.
In Walgreens Boots Alliance's fiscal year 2021, CareCentrix delivered pro forma sales of $1.5 billion. CareCentrix will continue to operate as an independent company under its current executive leadership.
"We created Walgreens Health to reimagine local healthcare and wellbeing for all. This partnership advances our ability to address the needs of people across care settings immediately following hospital discharge,” said Roz Brewer, CEO of Walgreens Boots Alliance in a press release. “Our collaboration with CareCentrix is one of the many ways we are expanding on our pharmacy and patient expertise to surround individuals with care when and how they need it.”
Healthcare services delivered after discharge, including care delivered in the home, are one of the fastest growing segments in healthcare today. Caring for patients from the hospital to the home represents more than $75 billion in annual healthcare costs for payers, providers and patients, according to Walgreens.
Walgreens' rivals and other disruptors in the healthcare industry also are looking to ramp up their own operations to provide home-based care. CVS, Amazon and UnitedHealth Group are all reportedly interested in buying Signify Health, a home health technology and services provider.
Signify is for sale in an auction that could value it at more than $8 billion, The Wall Street Journal reported. Bids are due around Labor Day, according to the sources.
Retailers, including online retail giant Amazon, are all making strategic moves to provide more medical services, particularly with a focus on the primary care market.
CVS plans to make a big move in primary care by investing or acquiring a provider by the end of this year. And Amazon's nearly $4 billion bid for One Medical has upped the game.
Walgreens has made significant investments to boost its operations in the primary care and home health markets. Last year, it invested another $5.2 billion in primary care company VillageMD as it looks to open hundreds of new clinics across the U.S.
Walgreens Boots Alliance and VillageMD have 52 co-located primary care practice locations currently open and will have more than 80 open by the end of this calendar year. Walgreens plans to open at least 600 co-located Village Medical at Walgreens primary care practices in more than 30 U.S. markets by 2025 and 1,000 by 2027, the company said.
CareCentrix manages care for 19 million members through approximately 7,400 provider locations, according to Walgreens.
By partnering with health plans and health systems, CareCentrix has reduced the total cost of care for members by 20%, including a greater than 11% reduction in emergency department usage and a 23% reduction in skilled nursing costs, Walgreens executives said.
“The most challenging part of the healthcare journey is the last mile—extending healthcare delivery into people’s homes,” said John Driscoll, CEO, CareCentrix in a press release. “Together with Walgreens Health, CareCentrix is able to combine Walgreens trusted community presence with our powerful technology-enabled care to better address patients’ unique health needs in their homes.”