In 2019, Walgreens opened its first primary care clinic, VillageMD, in Chicago. Throughout 2020, the pharmacy rapidly expanded VillageMD sites nationwide.
Now, several of the sites are shuttering as VillageMD pulls out of a number of key states, including Nevada, Illinois, Florida and Indiana.
The chain also recently sold 11 locations in Rhode Island to medical group management firm Arches Medical Partners.
As of June 2024, VillageMD operated 680 clinics majority-owned by Walgreens Boots Alliance, including 200 co-located with Walgreens and 170 third-party clinics at its stores.
In 2020, Walgreens invested $1 billion in VillageMD, investing an additional $5.2 billion in 2021, according to a briefing from Advisory Board.
At the time, Walgreens planned to expand VillageMD through hundreds of co-locations inside its existing stores, and by 2023, Walgreens had opened over 200 co-located clinics.
In 2023, the healthcare division saw a $1.73 billion operating loss, leading it to withdraw its expansion plans.
The company then announced a $1 billion cost-cutting initiative, which included closing over 60 VillageMD clinics.
The physician clinics then faced financial cutbacks, causing them to struggle to stay open. This coincided with other external market developments, including external competition from large-area health systems.
The Walgreens VillageMD value-based care model included a fixed fee per patient, but it required substantial patient resources, which Walgreens struggled to find.
Additionally, size limitations inside Walgreens stores likely made it difficult to scale VillageMD co-locations, according to the report. Clinics were not able to expand to hold services and exam rooms.
The company also likely faced recruitment challenges, struggling to compete with large health systems that offer better wages and benefits.
In a January interview in Forbes, Walgreens chief executive Tim Wentworth said VillageMD slowed the number of openings of physician-staffed clinics adjacent to Walgreens drugstores partially because the operators haven’t been able to fill their patient quotas.
It is not uncommon for a typical primary care doctor to manage a panel of 2,500 or more patients, but Walgreens did not disclose how many visits its physicians are taking on.
VillageMD clinics planned to turn their efforts away from scaling and toward recruiting more patients to its clinics and "filling out [VillageMD's] patient panels"
"As VillageMD focuses on increasing density in their highest opportunity markets, remember the previously announced plans to optimize their footprint and exit approximately 60 clinics in nonstrategic markets," Mr. Wentworth told Forbes in January. As of today, they are nearly halfway there, having already exited 27."
In 2020, Walgreens planned to open 500 to 700 physician-led primary care clinics across more than 30 markets over five years.
VillageMD is short of the original goal, with 211 clinics attached to Walgreens stores and 149 standalone centers.