Walgreens doubles down on primary care, home health with major investments in VillageMD, CareCentrix

an exterior photo of a Walgreens store with Village Medical clinic next door
Walgreens Boots Alliance 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. (Walgreens/VillageMD)

Walgreens is boosting its stake in primary care company VillageMD as it looks to open hundreds of new clinics across the U.S. 

The drugstore chain is investing $5.2 billion in VillageMD, making it the majority owner with a 63% stake, up from 30% previously.

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 announced Thursday.

VillageMD remains a standalone company, with its own board and management, and the company plans to conduct an IPO in 2022.

More than half of those practices will be located in medically underserved communities as part of the organizations' focus to increase access to primary care for patients in underserved urban and rural communities. More than 75% of Americans live within five miles of a Walgreens, according to the company.

The investment is part of the healthcare giant's strategic move to expand further into value-based primary care, a $1 trillion, fast-growing segment of the healthcare system.

RELATED: Walgreens brings VillageMD primary care clinics to Indiana

Also Thursday, Walgreens Boots Alliance 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 announced a $330 million investment in post-acute and home care company CareCentrix, which will also be operated under Walgreens Health. The CareCentrix investment will give 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 Thursday.

The U.S. post-acute care market represents approximately $75 billion in healthcare spend annually and is considered one of the fastest-growing segments in healthcare today.

“In support of the launch of Walgreens Health, we continue to make strategic investments in pharmacy and healthcare solutions that can improve care coordination and health outcomes, while lowering overall costs,” said Roz Brewer, CEO of Walgreens Boots Alliance, in a statement. “CareCentrix’s suite of home care solutions will advance our capabilities in this important segment for healthcare delivery, to help address the needs of people living with complex or chronic conditions in the home.”

CareCentrix manages care for 19 million members through approximately 7,400 provider locations and empowers more people to live, heal and age at home. 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, according to the company.

RELATED: Walgreens expands digital services with Hinge Health, Abbott

Through its partnership with VillageMD, Walgreens says it's the first national pharmacy chain to offer full-service primary care practices with primary care physicians and pharmacists co-located at its stores all under one roof at a large scale.

“The best healthcare is deeply rooted in local communities, and Walgreens is committed to expanding convenient access to high-quality and affordable healthcare services to our patients and customers in our neighborhood locations,” Brewer said in a statement.

VillageMD currently operates more than 230 practices across 15 markets, with plans to expand nationally over time. The company has experienced rapid growth, increasing revenues from $217 million in 2017 to an expected $1.3 billion in 2021.

VillageMD's physician-led care teams include pharmacists, nurses, lab techs, behavioral health specialists and other types of providers with a national network of clinical best practices to help provide coordinated, personalized care for each patient.

With the $5.2 billion investment, VillageMD can accelerate its strategy of providing comprehensive, coordinated care through a primary care model, including expansion into broader service lines, executives said.

Walgreens' launch of Walgreens Health and the primary care expansion signals the healthcare giant's ambitions to move deeper into the healthcare business. Walgreens executives said the company is reimagining retail through expanded health and wellness offerings and mass personalization, accelerating its digital offerings and aiming to become a leading provider of local clinical care services.

Walgreens Health aims to provide equitable, personalized, whole-person healthcare to local communities across America to meet where consumers they are—in the store, at home, in the doctor’s office and via mobile app.

“Our strategy leverages an ecosystem including our trusted brands, exceptional assets, healthcare expertise and scale, integrated with a range of new talent, capabilities, resources and an intensified focus on operational excellence to drive long-term sustainable profit growth," Brewer said.