Walgreens’ disposition of VillageMD clarifies with CEO/co-founder/board chair Tim Barry’s sudden and unceremonious departure. The news dropped on Wednesday 27 November, directly into the media black hole of the Thanksgiving holiday.

A tell-tale sign is that Walgreens’ board has appointed only an interim, VillageMD’s chief operating officer Jim Murray. It is not clear from company statements made to media if Mr. Murray will replace Mr. Barry on the board.

Mr. Murray was appointed only last April, having nearly all his experience on the insurance side. He retired from Centene in late March, having come aboard after being COO at Magellan Health when Centene acquired it (now mostly sold off) and with 28 years previously at Humana. [TTA 10 Apr and release] This may suit Mr. Murray, given his age at about 70 (from Centene regulatory filings). 

In a statement to the Chicago Tribune, a Walgreens spokesperson said that “We look forward to continuing to partner with Jim Murray as he assumes day-to-day leadership responsibilities.” (Editor Donna–as if a COO does not already have day-to-day leadership responsibilities?) Murray has been “integral in helping lead the company’s turnaround as VillageMD makes meaningful progress and positions itself for profitable growth.” Neither the Walgreens representative nor VillageMD spokesperson Molly Lynch answered media questions about why Mr. Barry left or the circumstances behind the sudden departure without even a fig leaf (or pumpkin pie) of a cover story or the usual ‘thanks for your service’–which leads to more questions and doubts about What Really Happened.

The larger picture of sinking Walgreens financials. They closed FY 2024 with an operating loss of over $14 billion, more than doubling FY 2023’s loss of $6.9 billion versus FY 2022’s profit of $1.4 billion during the pandemic. $12.7 billion of a total $13.4 billion impairment was due to VillageMD’s loss in value due to clinic closures, slow patient panel growth, and downward trends in Medicare reimbursement. The remainder of about $332 million was attributed to loss of value in the CareCentrix home care unit (Form 10-K 10 October 2024, document page 123; impairments page 97; also TTA 28 Mar)

The Big Idea of combining primary care with retail locations in the Roz Brewer/WBA’s Stefano Pessina vision (hallucination?) was a major misstep into a Big Hole.

• Bad timing was one factor. VillageMD added to a mound of miseries in retail and pharmacy sales caving, competition from direct vendors such as Amazon and Mark Cuban Cost Plus, plus  traditional brick-and-mortar CVS and Walmart. There were also expensive settlements around opioid prescribing. VillageMD also tapped Walgreens for $3.5 billion to acquire Summit Medical and CityMD–and defaulted on a $2.25 billion loan in August.
• Joining primary care clinics with retail footprints wasn’t based on testing consumer behavior and acceptance–or practice reality. The plan was to have 1,000 joint locations modeled on the picture above left by 2027. As a model, it depended on obtaining both sufficient providers and building loyal patient panels, a slow pull if there ever was one. Physically adding clinic locations to Walgreens’ stores proved to be both expensive and difficult. 
• These factors and others sank Roz Brewer’s CEO-dom, the share price, and the vision of Mr. Barry’s and VillageMD’s founders and physicians. The last dated back to 2013 and built into a network of hundreds of freestanding primary care clinics in value-based care. Many of the 140+ closures starting early this year were not only of expansions, but also of long-standing VillageMD offices, including in its core market of Chicago metro. Earlier this year, Cigna wrote off most of its $2.5 billion investment, throwing its Q1 into the red [TTA 2 May].

Many of the practices participated successfully in CMS’ advanced ACO shared savings models starting in 2016 such as Next Generation, Direct Contracting, and the current ACO REACH. The practices integrated telehealth as part of their value-based care models to achieve quality metrics. In CY 2023, VillageMD-operated ACO entities in the REACH model achieved $140 million in gross savings for Medicare, with $36 million shared back with the government and the remainder reinvested in the care model. (CMS reports are released 10-12 months after the prior year’s end.) 12 November release

Walgreens went big–and was sent home with the metaphorical tail between the hind legs. Perhaps engraved on VillageMD’s headstone will be what Walgreens CEO Tim Wentworth said of VillageMD during the Q4 earnings call in October, “… We’ve declared it’s not a crucial part of our future.” Mr. Wentworth and the board declared months ago that they wished to sell all or part of the business, at least below their majority holding at 63% [TTA 8 Aug, 2 July]  Who even wants to or is able to buy, with Walmart Health defunct and Oak Street Health and One Medical retrenching for their respective owners? Will VillageMD be part of anyone’s future? Healthcare Finance News, Healthcare Dive