Credit Suisse hosted Tim Barry, Co-Founder & CEO, Chris Ricaurte, CFO, & Rose Levine, Exec VP of VillageMD https://www.villagemd.com for a fireside chat. VillageMD, a national value-based primary care provider, delivers excellent clinical results through their care delivery model that optimizes quality, cost of care, and patient experience.
Credit Suisse’s produced prior notes on the company includes: The Best Way to Predict the Future is to Create It: Healthcare Disruptive Technologies & Innovations Conference Detailed Takeaways (June 2021), and Healthcare Disruptive Technologies & Innovations (HCDT&I) Chicago Day Recap (October 2019).
VillageMD, a value-based primary care provider which employs primary care doctors and affiliates with physicians, is leveraging technology to coordinate care, exchange data, get access, and help patients manage their disease to drive better outcomes across multiple modalities.
The company is now in 19 markets and cares for all patient populations (MA, Medicare FFS, Medicaid, commercial, etc.) with 368K value based lives of which 135K are MA lives (66%-75% capitated) and the remainder in commercial VBC.
Last year, WBA increased their VillageMD ownership stake from 30% to 63% through an additional $5.2 bin investment. Even though VillageMD is majority owned by WBA, the company notes that they remain independent by being independently managed with an independent board, which maintains independent decision-making.
The WBA commitment was expanded to 1,000 clinics by end of 2027 (vs 600-700 clinics by end of 2025 previously). Management noted the partnership provides a long runway and clear line of sight to unit economics. The key feature of the relationship is an integrated primary care and pharmacy model, which allows the two companies to collaborate on a pharmaceutical care plan.
Over the next 4-5 years, VillageMD plans to open~150 clinics per year with the majority co-located. Management notes that, due to the number of clinics being opened, the startup losses will offset the positive contribution from the more mature clinics.
As per the unit economics during the ramp, the first year is mostly FFS with a loss of about $600K. Once a clinic ramps at scale, revenues will be about $14 min which is driven by moving (Medicare) FFS patients into globally capitated contracts over time. As a result, VillageMD anticipates clinical care margins of 20-25% and contribution margin in the teens. Overall, in their capitated MA business, VillageMD sees margins approaching 25% while in the Direct Contracting business, the company anticipates a 10%+ margin business in the long run.
VillageMD highlighted the fact that the opportunity is vast and it will be decades before the market is saturated. Management argues that the real competition isn’t with tech-enabled peers (ONEM, PRVA, CANO in Credit Suisse’s coverage) but the status quo of the system and the transition to value-based care.
For prior notes on the company, ask questions, provide feedback, or news, email Jailendra Singh at jailendra.singh@credit-suisse.com or call 212-325-8121.