Walgreens’ VillageMD to Acquire Summit Health for $8.9B

VillageMD, a value-based primary care company owned by Walgreens Boots Alliance, has announced it will buy Summit Health, the parent company of urgent care chain CityMD, according to Fierce Healthcare. The deal is valued at $8.9 billion and will expand Walgreens’ footprint into primary, specialty, and urgent care.

Along with Walgreens Boots Alliance, Cigna Corp’s healthcare unit Evernorth will invest in Summit Health, creating one of the largest independent provider groups in the U.S., the companies said in a statement. Together, VillageMD and Summit Health will run more than 680 locations in 26 markets and employ about 20,000 people.

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Walgreens will remain the majority shareholder, with a 53% stake. The company said it will invest $3.5 billion through an even split of debt and equity. It invested $5.2 billion in VillageMD in 2021, saying it intended to open 600 primary-care clinics at Walgreens locations by 2025 and 1,000 by 2027.

The move is in keeping with recent M&A activity in the healthcare market. Competitor CVS Health is planning to acquire Signify Health for $8 billion, and Amazon has said it will buy primary care provider One Medical for $3.9 billion.

Walgreens’ deal indicates that it wants to become a "dominant entity in the overall healthcare services ecosystem," David Larsen, Healthcare IT and Digital Health Analyst for financial services firm BTIG wrote in an analyst’s note. "Walgreens Boots Alliance is graduating up from being a drug retail store to owning the lifecycle of members' health. 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 purchase of Summit Health will pressure CVS to get into the primary care market “sooner rather than later,” Larsen said.

"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, told Fierce Healthcare. "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.