On Nov 7, 2022
VillageMD has entered a definitive agreement to acquire Summit Health-CityMD, a leading provider of primary, specialty and urgent care. The transaction is valued at approximately $8.9 billion with investments from Walgreens Boots Alliance, Inc. (WBA) and an affiliate of Evernorth, a subsidiary of Cigna Corporation. Together, VillageMD and Summit Health will have more than 680 provider locations in 26 markets.
Together, VillageMD and Summit Health-CityMD will create a multi-payor platform. The combined company leverages VillageMD’s deep expertise in value-based care to support and accelerate the transition to more risk-based care and Summit Health-CityMD’s expertise delivering multispecialty, connected care. It also enhances WBA’s portfolio of leading, integrated healthcare offerings across the care continuum.
“This is an epic milestone in our journey to transform healthcare in the United States. Summit Health-CityMD has been a leader in delivering coordinated, multi-specialty care for decades. We are honored to work side-by-side with their 13,000 strong workforce who are passionately committed to delivering the best outcomes for millions of patients,” said Tim Barry, CEO and chair of VillageMD. “Both organizations share a deep commitment to keeping our patients and clinicians at the forefront of what we do to best serve them.”
“Summit Health-CityMD and VillageMD are patient-centered and physician-led companies that have complementary offerings and a shared core belief that taking excellent care of the patient will remain the cornerstone of our success,” said Jeff Alter, CEO of Summit Health-CityMD. “Adding our expertise and geographic coverage to VillageMD’s proven value-based primary care approach will enhance the lives of so many patients and physicians across the country, helping to lower healthcare costs and improve the health of our communities. We are incredibly excited about the potential of these combined companies. I would also like to thank our incredible team of clinicians and support staff for their daily dedication to our patients, and to Warburg Pincus for their support and partnership.”
“Summit Health-CityMD joining VillageMD is transformational for our US healthcare segment and reinforces our intent to create greater access to quality healthcare across the care continuum,” said Roz Brewer, CEO, WBA. “This transaction accelerates growth opportunities through a strong market footprint and wide network of providers and patients across primary, specialty and urgent care.”
WBA will invest $3.5 billion through an even mix of debt and equity to support the acquisition of Summit Health-CityMD. WBA will remain the largest and consolidating shareholder of VillageMD with approximately 53% ownership. The company expects to maintain an investment grade rating.
As a result of the transaction, WBA is raising its US healthcare fiscal year 2025 sales goal to $14.5 billion to $16.0 billion, from $11.0 billion to $12.0 billion previously. WBA’s US healthcare segment is now expected to achieve positive adjusted EBITDA by the end of fiscal year 2023. Assuming a Jan. 1, 2023 closing date, WBA is raising the US healthcare adjusted EBITDA target for fiscal year 2023 to $(50) million to $25 million, from $(240) million to $(220) million previously.
Evernorth, Cigna Corporation’s health services organization that creates and connects benefits, pharmacy and care solutions, will also be a minority owner in VillageMD. The collaboration is part of Evernorth’s commitment to accelerating value-based services that deepen relationships with high-performing primary care physicians and specialists to improve outcomes and lower costs.
“Our collaboration with VillageMD accelerates our efforts to improve the way care is accessed and delivered,” said Eric Palmer, CEO of Evernorth. “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.”
The transaction is subject to the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and other customary closing conditions. It is expected to close in the first quarter of calendar 2023.
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