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Will making house calls redefine CVS and Walgreens’ relationships with their customers?
CVS on Monday said it has entered into a definitive agreement to acquire Signify Health in an all-cash deal valued at around $8 billion.
The deal, which will need to go through the normal shareholder and regulatory approvals, will give CVS ownership of a company that uses proprietary technology and analytics to support doctors, nurse practitioners and physician assistants who make house calls to 2.5 million patients across all 50 states. Signify’s clinicians, according to the company, spend two-and-a-half times longer with patients on their visits than is spent on the average primary care visit to a doctor’s office.
“Signify Health’s mission is to build trusted relationships to make people healthier by using actionable intelligence to understand what’s really impacting outcomes and cost today,” said Kyle Armbrester, CEO of Signify Health, in a statement.
“Signify Health will play a critical role in advancing our health care services strategy and gives us a platform to accelerate our growth in value-based care,” said Karen Lynch, CVS Health president and CEO. “This acquisition will enhance our connection to consumers in the home and enables providers to better address patient needs as we execute our vision to redefine the health care experience.”
Ms. Lynch has been clear in her belief that CVS’s future lies in becoming a primary care giant. Her company is not alone in this strategy, as its chief rival Walgreens as well as Amazon.com and Walmart, to a lesser extent, all seem to have similar plans.
Walgreens has been rapidly scaling VillageMD clinics inside its stores to offer primary care services under the care of doctors. The chain expects to have 1,000 clinics in operation across the country by 2027.
The company is also moving into home healthcare, announcing last week that it now has a controlling interest in CareCentrix, a service that coordinates sending medical professionals to patients’ homes after they have been discharged from hospitals. The market for such services is currently estimated to be $75 billion annually, according to Walgreens.
“We created Walgreens Health to reimagine local healthcare and wellbeing for all,” said Roz Brewer, CEO of Walgreens Boots Alliance. “This partnership advances our ability to address the needs of people across care settings immediately following hospital discharge. 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.”
Discussion Questions
DISCUSSION QUESTIONS: Do you see the move into primary and other forms of healthcare significantly changing the drugstore business over the next decade? What will CVS’s acquisition of Signify Health and Walgreens’ deal for CareCentrix mean for each company and the primary care market?
Poll
Loading …BrainTrust
I believe that the moves by retailers into the healthcare space are exciting and represent a meaningful evolution of healthcare delivery in the U.S. It will radically transform a healthcare system that needs to better meet the needs of patients. CVS’s acquisition of Signify makes it clear that this is not a dabble but a meaningful, strategic play that, if successful, will define the future for CVS and its place in providing patient care.
What all retailers moving into primary healthcare have in common is a desire to diversify their business models away from retail. Retail is a very competitive sector where margins are under pressure. By comparison, healthcare is a lucrative industry which is growing at a rapid clip. The downside is that complexity and entrenched interests make disruption challenging. More specifically, as part of its ambition to become a one-stop shop for health, CVS wants to develop a stronger presence in the primary care arena which its rival, Walgreens, has already done via its takeover of VillageMD. A push into primary care helps generates incremental streams of revenue from fee-based services which, in turn, can feed other parts of the business such as prescription dispensing. All this said, the retail business still needs care and attention and this must be seen as complementary rather than a substitute.
For those of us who’ve had kids over the years, this would be a god-send. That and the elderly. We just did a study and allowing retailers and/or healthcare companies into consumers’ houses scored very high (which helped us understand why Walmart did it). Obviously it depends on what for but, as Geek Squad found out, we’re more than willing to bring services into our houses and healthcare is way up there on the list.
The return of house calls — what many now see only in old movies and TV shows — will be a game-changer for CVS and Walgreens. This is a brilliant back-to-the-future move by both pharmacy giants. Today it is even hard to see a primary care physician when you make a doctor’s visit, so this move to have a clinician visit your home is the perfect compromise. I see this as strengthening their brands, and it will certainly earn more respect and loyalty from customers.
CVS made a commitment to being a wellness company when they discontinued the sale of tobacco products. This move merely underscores their long stated intention of becoming a go-to resource for consumers seeking health and wellness assistance. As grocery, convenience and beauty sectors become significantly more accessible through social media channels and shop-in-shop partnerships, this is no longer the money maker for drugs stores that it used to be. CVS has taken the reins of their future by making an even stronger investment in healthcare, which ultimately will give them the means to stay more connected and relevant to customers.
Why sit in a waiting room with a bunch of sick people when you can have someone come to your house? Perhaps we’re on the verge of concierge healthcare for the masses? Services are certainly where the profits are.
The drug store business as we know it is morphing into a healthcare clinic that also happens to dispense prescriptions and sell OTC drugs and other items. The main difference between today’s clinics and the path that chain drug appears to be taking is the return of house calls. Something that the medical community to a large extent has stopped doing.
Remember when the drugstore was morphing into a convenience store? How much space is dedicated to health-related products? I guess they found that that growth path is not a sustainable one?
Talk about “back to the future” — and personalization. This is customized customer service on a whole new level for healthcare. If our appliances can be serviced in home, why indeed not ourselves? Schlepping to the doc’s office is no easy task for a lot of people under care. Sounds like a huge untapped market.
If there is one area in the U.S. that desperately needs reimagining, it is healthcare. These giants have highly mature core businesses. The moves are a natural domino strategy that will pay off big. Eventually, their retail businesses will be secondary to the healthcare options they offer.
CVS’s medical house calls is a brilliant strategy and should deliver huge profits to their company if managed properly. The combination of home healthcare plus add-on services/products has significant upside for CVS. Similarly, Walgreens will benefit from their CareCentrix acquisition. Both will begin to shape a new business model that will unfold in front of U.S. consumers that hopefully bends the cost curve down while at the same time improves the quality of care. We will likely see fewer trips to the retail store, but these would be offset by huge increases in the digital side of the business that would be transacted via the home visiting health professional.
My issues with Walgreens are well documented at this point. They have not gained my trust and until they get their act together, they won’t get it (or me) back. But I love the idea of CVS doing it. I think it’s an excellent play. They made the bold move to stop selling cigarettes several years ago, they were the go-to for COVID-19 vaccines — I love it.
Walmart’s not a terrible idea, but they’re not really set up for it. BIG WIN for CVS.
Everything CVS touches turns to gold. There are huge opportunities in healthcare and CVS is well-positioned to become the last mile, reaching millions of customers. It’s exciting to watch.
CVS has been focused on convenience and is highly customer-centric. From its CarePass program where you can have prescriptions delivered to now at-home visits, it is focused on the needs of the customer. This is a great move.
Anything CVS, Walgreens, or any other retailer in the drugstore business can do to offer ways to incorporate their brands into their customers’ lives is beneficial to both the brand and their customer. The move to primary and other forms of healthcare makes the brand a one-stop shop for many medical needs. That simplifies the customer’s life – and more and more, customers are gravitating toward simplicity and convenience.