Alter said the acquisition will enable Summit Health to accelerate its transition to value-based care arrangements centered on primary care while continuing to expand its number of locations.
Crain’s Health Pulse spoke with Alter on Tuesday about the company’s post-acquisition growth plans and how the deal might ultimately affect patients in the New York metropolitan area.
When did talk of this acquisition first come up?
We knew VillageMD because we divested a medical group that we had owned a number of years ago in the Phoenix area to VillageMD. We've had casual conversations over the last year or so that heated up sometime in the late summer. We worked in earnest throughout the month of October and brought it to this conclusion over the weekend.
Was there ever consideration of an acquisition by someone else, or was VillageMD always the partner?
We had some conversations with others along the way. We always kept our option open to stay independent and seek a public offering, or there was always also an option to recapitalize with another private equity partner.
What does a deal like this offer patients in the New York metro area?
This one just made so much strategic sense. They have expertise that we are building—a primary care focus, risk-taking, managing people's care. For our patients in the tri-state area, [the acquisition] gives us a level of expertise that we would have to have built over the next few years. It really accelerates our connected care model, allowing our primary care physicians to adapt the tools and the process that VillageMD has honed.
Tell me more about that shift of moving to more value-based care arrangements and how you foresee that changing the way care is delivered at your locations.
We all recognize that our patients have a difficult time navigating the healthcare system. Our mission is to try to reshape that through this power of connection and putting that primary care physician as the center of that model. That primary care physician really is the best equipped to see you as a whole person. Perhaps you can't get in to see your primary care physician. You go to a CityMD and it's on a single medical record—your primary care physician will be informed and that physician inside CityMD has your record and can take care of what you need at that point but also get you back in if you need something else inside our system.
What will change on the ground?
We’ll begin after [the deal closes] to discuss with the VillageMD team what this really could bring to this market. I think the ability to experiment—putting primary care perhaps in a couple of CityMDs, linking more CityMDS to a standalone primary care office. There's excitement to determine whether we can use technology—a virtual care setting or something like that—to really complete the ability for our patients to get healthcare on their terms.
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What are your projections now for patient visits and revenue in 2023?
I won’t get into specifics but we’ve had around a 20% growth rate in both our revenue and earnings over the last couple of years, and we fully expect that to continue at around that rate for the next few years.
The slides on this deal noted $2.9 billion in revenue for 2022.
Yes, that’s about where revenue will settle, and margins in or around the mid-to-high teens.
Is there going to be a transition to a new technology platform?
The VillageMD folks use the same EMR as we do, so that works out well. It will accelerate some of the consumer tools that we were seeking to build. They have built a very nice data and patient-focused environment that sits on top of the same EMR as we do. This will accelerate some things that we were hoping to build over the next couple of years—patient-facing tools like online scheduling—because we won't have to change our EMR to take advantage.
Does the acquisition impact projections for how many facilities you might have at the end of 2023, 2024?
We continue to execute our own strategic plan, which has us opening up new sites in New Jersey, Westchester, southern Connecticut, on Long Island and another one in New York City. We certainly, like every company, have a list of projects that we don't have the capital to support. We will have those conversations and strategically look at the total capital of the company and decide whether we can do more. At a minimum, we will, for the next few years, continue down the path of building 15 to 20 de novo CityMDs every year, building at least one very large hub a year and then multiple smaller facilities to house our growing population of physicians.
What are some of the projects on that wishlist with more capital?
Probably the first conversation we would have is a very large campus-like setting on Long Island—in the 150,000 to 200,000 square foot range—where we could create a deep multispecialty model, much like our Berkeley Heights and Florham Park locations in New Jersey. Then perhaps a few more midsize facilities in southern Connecticut in the Fairfield County area.
Do you foresee expanding the CityMD brand to other states?
VillageMD has a very strong brand in the markets where they are, so, not to put words in their mouth, but I would think we would want to take the CityMD model but probably keep the VillageMD name in those marketplaces. That's an area up for discussion. We would certainly look at the data before we made a final decision.
This story first appeared in our sister publication, Crain's New York Business.