How VillageMD Went from Startup to One of Walgreens’ Most Important Partners

In 2020, Walgreens Boots Alliance (Nasdaq: WBA) announced that it would be investing $1 billion in a relatively new primary care company: VillageMD.

Since that point, the home- and community-focused VillageMD has thrived in the partnership with the behemoth retailer, so much so that Walgreens invested another $5.2 billion in the company this October.

Despite a clear vision and aspirational goals upon VillageMD’s founding, the position the company is now in is not a place its co-founders – including Chief Growth Officer Paul Martino – could have previously pictured.

Martino joined Home Health Care News for a conversation detailing how he and two other co-founders took an idea and turned it into a company they believe could be “the largest at-risk primary care provider” in the country.

HHCN is pleased to share the recording and transcript of our HHCN+ TALKS conversation with Martino. Read on to learn more about:

— What Walgreens’ investment in VillageMD means for home-based care in the U.S.

— How and why VillageMD created a successful strategy that turned it from a startup to a household name

— How Martino pitched VillageMD to other companies along the way – and also found the right partners

— Where VillageMD sees itself and the rest of the health care industry going in the future

The below has been edited for length and clarity.

[00:00:00] Andrew Donlan: Good afternoon, HHCN+ members. Thank you for tuning into this TALKS conversation. I’m HHCN reporter Andrew Donlan. For episode No. 5 of TALKS, I’m super excited to welcome VillageMD’s co-founder and chief growth officer, Paul Martino. Paul, thank you so much for joining me today.

[00:00:23] Paul Martino: Thank you, Andrew. I’m really looking forward to the discussion.

[00:00:25] Donlan: So let’s get to it. Paul, I think VillageMD is one of the most interesting companies that HHCN is covering right now for a variety of reasons. But before we get into that, I want to start with you. I know in the past you were with Anthem, but can you just go through your personal journey and how it ended up with VillageMD and that founding?

[00:01:15] Martino: Yes, sure. Happy to do that. I was born and raised in Connecticut and ended up going to the university with a degree in philosophy. In 1982, there was not this huge demand for philosophy majors, as you might expect. And so my dad, who was a career AT&T guy, said to me, “You’re going to have to get a job.” Of course, I had a different idea. I thought I was going to join the Peace Corps and run a fish hatchery in Nepal.

When you come from central Connecticut, … working for Aetna, Cigna, Travelers or one of those major institutions is what a lot of people do. My first opportunity out of college was with Cigna, and I spent about a dozen years working for them. As I got more and more into health care, as it turns out, many of the big companies like MetLife and Travelers and others exited. The other companies, the national companies, became more and more important in the world of health care insurance, as we called it.

For me, my mindset was, if I could get to a bigger health care company like Anthem, which is where I ended my 32 years in the plan world, I could get to a higher level. I actually believed that I might be able to impact the way health care was both delivered and financed. I was mistaken about that. I was mistaken for a variety of reasons, but mostly because if we really took a step back in time, there was a transition that occurred subtly, but significantly over the years.

Hospital organizations got out of bed one day and decided to call themselves health systems. And insurance companies got out of bed and said if they’re going to be health systems, we’re going to be health plans. The truth of the matter is health plans are really good at evaluating and underwriting risk. They’re not really very good at inserting themselves in the delivery of care, which is really between patients and physicians. The last job that I had at Anthem, which was the senior vice president of clinical strategy and innovation, was an unusual job for a non-clinician.

I thought about what the Affordable Care Act’s impact was going to be on how we compensate. We would say how we compensate the network, but paying physicians is what it comes down to. Inside a plan, one of the secrets that people don’t talk about much is that independent primary care on a total medical expense basis is the most efficient care setting. … If we could anchor around independent primary care and actually deliver value to them across all of their patients, we would have a winning formula. That was my idea.

Unfortunately, I never saw the light of day at Anthem for a variety of reasons, but that was the idea. That’s where I met Tim Barry and Clive Fields, who were the other two founders of the company. Originally, we were going to try to co-create a company and have a joint venture together. We were going to figure out if there was a way for them to leave their employer and maybe Anthem could fund the idea. Along the way, Tim and Clive said, “We should just do this ourselves.” And that began the journey of VillageMD.

[00:05:05] Donlan: When VillageMD was started, it was from scratch. You left your companies. What was your idea of growth then? Where did you think VillageMD could be in its infancy?

[00:05:23] Martino: I’ll tell you a story. I was a senior VP at Anthem. I had been there seven years. We started the company with a set of PowerPoint slides and an idea. We thought maybe we could get a plan to fund us. We decided to go down the path of angel investors. We were able to raise $4 million through friends and family to get the company going. Tim, Clive and I decided to not take an income until we got to a place where we felt we could afford to do that, so that was after Series A. We slugged it out for the first couple of years.

I’ll tell you a funny story. Along the way, probably September, October of 2013, I was in Houston with Tim, and we were in the conference room in Clive’s clinic because we had nowhere else to work. It got to be early evening, and I said, “Guys, we need to get a hotel room, and I need to get some food. I go to bed early, and I’m getting tired.” Tim said, “Hotel room? We’re sleeping at Clive’s.” I said, “Oh, all right.” Clive said, “Margie will have food for us.” That’s his wife.

We show up at Clive’s house, and his kids were there. I had met two but not all three. So we’re meeting the kids, and we’re having a little bit of food. It’s 9:30. I said, “Okay, it’s time. I got to go to bed.” We go upstairs, and Clive says, “Tim, you got the guest room. Paul, you’re in Joseph’s room.” Joseph is 13 at the time. I said, “Where’s Joseph going to sleep?” He said, “On the couch downstairs.”

I finally get upstairs. I call my wife, and she said, “Where have you been?” I said, “Well, we were in Clive’s conference room. Now I’m actually sitting in Clive’s house. I’m in Joseph’s room, sitting on a twin bed with a bedspread that’s ‘Joseph and the Amazing Technicolor Dreamcoat.’ I’m going to sleep here tonight.” She said, “Honey, are you sure this was a good idea?” I can tell you that I was scared to death in 2013. That growth, I had no idea what it was going to look like. I just knew one thing, Andrew: I knew that we had a really good idea.

I didn’t say this earlier but this idea of doing it inside of Anthem, we actually brought it to the CEO of Anthem and the CEO of Accredited Health at the time. Both of these very senior female executives got behind it and said, “This feels like a good idea.” It fell apart after they blessed it but it was really a good idea. The question was, could we convince physicians that it was a good idea? Could we convince payers to give us value-based contracts?

[00:09:14] Donlan: Yes, and that’s a perfect segue because I now want you to be able to say where you guys are at now. Can you describe your standing, where you’re at today in terms of locations, before we get into Walgreens and all that went into that?

[00:09:28] Martino: Yes, sure. Today, and this is mostly a matter of public record, we have about 260, maybe now 265, clinic locations. I posted a LinkedIn post today that we have entered the Dallas market, so we’re in 18 markets, probably 14 states. Some of those newer states look like Florida, Tampa, Orlando. We will end the year working with over 3,000 physicians, and if we do our job between now and the end of the year, we should end the year with more than $1 billion in revenue.

[00:10:02] Andrew: Okay. Fantastic. One of the things that I thought was very interesting from the start when I first got to know you guys, was the home and community focus of your practice. Can you explain why you guys decided from the start to make it a more home- and community-based model – and how that’s worked out for you?

[00:10:22] Martino: We could leave Walgreens for later, but it ties to the Walgreens conversation. We took a look at two things really. One, let me start with a philosophical and fundamental belief. What has happened in America over the last several decades is – the pendulum has swung to a lot of physicians being employed by health systems and a lot of care being redirected into institutional settings. There were a lot of ambulatory procedures that would be done in the hospital outpatient departments.

We had this belief the pendulum is going to swing the other way because consumers are going to demand it. How do we get in front of that? How do we lead that effort, that charge? We started to look at our high-acuity patients. If you look at Medicare, in a senior population, know what drives 62% of the admissions? We were looking at our own data, we were looking retrospectively at the last 12 months of data … 62% of hospital admissions were driven by one of three conditions: heart failure, COPD, or a combination of heart failure and COPD.

Those are the primary diagnosis. Then if you look at those patients and you look at secondary diagnoses, these patients have a lot of chronic comorbid issues. They’re diabetics often. They have hypertension, hyperlipidemia. Many times, they have behavioral challenges and issues. When you look at those kinds of patients, and you look at the profile of those patients, you realize that oftentimes you might be better off seeing them digitally or in their homes. We decided that the home was where people really wanted to be cared for, especially those that are frail, elderly and do not have reliable support systems.

Including people, caregivers, and transportation. If they can’t get to see us reliably, then we’re going to go see them. That was a big part of our thought process. That data supported it.

Most primary care is reactive care; somebody schedules an appointment with their doctor. We have to flip that model where more often than not, we’re seeing patients because we know they’re the patients we need to see as opposed to, “Somebody made an appointment with me today, so I’m going to see them.”

[00:13:28] Donlan: Actually, we have a question from the audience. With all the clinical locations that you have and an in-home care division, how do you balance the priorities as a company? Do those grow together or does one side grow faster at times?

[00:13:43] Martino: It’s a great question. Sometimes one side grows faster. I would say that as we enter a market, like Dallas, and we’re working with a clinic that’s already established (because that’s our model, working with clinicians that are already serving a patient panel in a community), we will say, “Okay, you’re already doing this great work in your community. Here’s how we think about patient care in an extension to neighborhoods, in the home.” We might bring the home-based model to Dallas after we’ve already established a presence. That’s usually how it happens.

We’ll lead, I’ll call it, the initial business model of the company, and then we’ll complement that with a home-based model, as well as the co-located Walgreens partnership as a neighborhood health destination. That’s Walgreens’ term. They want to be a neighborhood health destination, and they’re conveniently located in most communities in America.

Just think about what we can do in the home. We can have specialty care delivered in the home. We can have infusion care delivered in the home. We can have prescriptions delivered to the home. If necessary, as part of our model, we could have meals delivered to the home.

There was an article that hit the wire today that talked about how the small mom-and-pop pharmacies in rural America are going out of business. When I saw that article, I sent it to a bunch of my friends and said, “This is a void that VillageMD can and should fill.” All across rural America, where people just don’t have access to care. They have to drive 15 or 20 minutes just to pick up a prescription. There are deserts, as we call them. There are food deserts. There are care delivery deserts all over America. We can play a significant role in that. We’ve actually been having conversations with the new chief medical officer of, I think, Dollar General for this same reason.

[00:15:53] Andrew: How do you even get in contact with a company like Walgreens? How did Walgreens even come on your radar, and how did you guys get in contact and in a relationship?

[00:16:27] Martino: My mistake working for health plans – and I worked for a lot of them, Cigna, Aetna, Kaiser, Anthe – was thinking I could accomplish things that I couldn’t. But one thing that I did accomplish was meeting a lot of senior executives throughout the 32 years that I worked for health plans. One of those people, who happens to be a dear friend of mine, him and his wife, is Brad Fluegel. Brad, after leaving Anthem, became the chief strategy officer for Walgreens.

One weekend in September of 2017, Brad had said to me that he was going to retire from Walgreens at the end of the year. I said to Brad, “I’ve never asked you for a professional favor, but I’m going to. I would love to meet the folks that are running the clinics for Walgreens, because no offense, I bet we could run them and more efficiently than you can.” My friend Brad introduced us to the chief medical officer and the chief pharmacy officer of Walgreens, and we had an initial discussion.

If you know the story of Walgreens, there are 10,000 or so pharmacies in the U.S. They had about 500 clinics. … They had about half that they were running themselves, and about half had outsourced to health systems. Here in Chicago, where I live, Advocate actually runs those clinics. The original idea — they have 146 pharmacies in Houston, and they had 17 clinics. They were about to outsource to a health system, and we said, “Well, before you do, let us take a close look at them.”

Then I had the painful experience of realizing that this was not a winning formula. I called my friend Brad, and I said, “Brad, this is frankly a crummy business. We could maybe make it less crummy, but I don’t know that we’re going to make it a great business. Would you consider having the executive team at Walgreens give us 3,000 square feet in a store, where we could build a primary care clinic for real?

It will have nine exam rooms, and two of those will be telehealth, and we’ll have a lab. And if you’re willing, you’ll have a clinical pharmacy that is available. I believe we can actually create this intersection of the most frequently used provider, which is primary care, with the most frequently used service, which is a prescription, and I think we’re going to get a better clinical outcome.”

Brad was very skeptical. But then, after a year of showing our clinical model and demonstrating results, and proving to them that the intersection of pharmacy and primary care was the right answer, it changed.

Instead of all of primary care and pharmacy consumption being reactive, our pharm techs would actually outreach to patients and say, “I see that you’re going to be in the clinic on Wednesday at 10:15 for a visit with Dr. Fields and you’re on Metformin, would you like us to have a refill waiting for you when you check-in?” When you start taking this proactive approach, you can actually change care delivery, and that’s what we wanted to do with Walgreens.

I’ll take it a step further, Andrew. I don’t think it ends there. If you looked at the press releases with Walgreens, we said two things: 50% of them would be in underserved communities, and we also said that 10% of those would be a large format – and that large format is actually going to provide room for 22 exam rooms instead of nine.

I believe that the future is going to be everything that I’ve described – lab, behavioral health, telehealth, pharmacy support, primary care, … and I think we’re going to get flat-panel imaging and rotating specialty. So if we get smart about the logistics of this business scheduling, if you have a patient that has COPD, and you think he or she might need a visit with the pulmonologist, why not do it on Thursday and have the pulmonologist there rotating specialty for pulmonology on that same day?

Why do patients not demand same-day specialty consults with pulmonology in this example, as opposed to what my dad lived with, which was waiting six weeks? Which is a really uncomfortable place for an 88-year-old, who knows he has a degenerate regressive disease. He’s going to die from COPD, and when his primary care doctor says you should see your pulmonologist, and he has to wait six weeks, that’s 42 uncomfortable days.

[00:21:46] Donlan: In terms of the business side, did you have to prove it before they invested?

[00:22:13] Martino: We did have to prove it. There’s a white paper on our website that demonstrates the clinical improvements by co-locating pharmacy. And it’s around what we call the “triple-weighted measures.” … I’m not speaking for Walgreens, but my perspective is that they’ve had some partnerships that maybe didn’t live up to their expectations, and we said that we were going to open 50 clinics in the first year of our “deal,” and we actually ended the first year at 52 clinics.

We’ve said that we would open 80 clinics by the end of the 2021 calendar year and we’re on track to do 81 clinics by the end of this calendar year. One thing about our business that I give Tim and Clive and our other executive team members a lot of credit for is that if we say that we’re going to do this, we’re going to deliver on the commitments that we make. We’re going to deliver on patient care in the home.

I think I’d mentioned to you that we’ve hired one of the most well-known experts in home care in the country, Dr. Tom Cornwell. He has personally delivered over 26,000 home visits to those exact profile of patients that I mentioned earlier. We don’t just want to talk about doing something; we actually want to show up and deliver on it. And I think we’ve had awesome support from our board and awesome support from the partners that we’ve worked with like Walgreens.

[00:25:04] Donlan: Even a year later, they’ve now invested $6.2 billion dollars into you guys. So what happened between the initial investment and then the second investment?

[00:25:34] Martino: What I would say is this: I think half of making a relationship work is delivering on what you say you’re going to deliver on. I had to go to Phoenix yesterday for an uncomfortable conversation with a plan because things are not going like they need to, and we need to fix it. It’s up to us to fix it because we made a commitment. The other half of the battle is making people comfortable with who you are – the ethos of who you are and what you’re trying to accomplish.

[00:27:04] Donlan: Since you guys brought this idea to Walgreens, do you think this changed their strategy moving forward? Or do you think they have this larger strategy and that you guys just fit really well into it?

[00:27:23] Martino: I’d like to say that we changed this [massive] company’s strategy, but that might be a bit of a reach. … They thought that we actually understood health care. We’re a group of guys that started this company. Me, Tim and Clive are not three programmers who were working for Microsoft, defected and tried to start some new tech company.

We are from completely different walks of life, and I think as they understood what kind of quality physician Clive was, what kind of visionary Tim is and what kind of person I am. They looked at that and said, “I think these guys are onto something here.” If you fast forward the story, think about what CVS announced today. They announced that they’re going to convert some of their HealthHubs and MinuteClinics into primary care. Think about what Walmart is doing today.

Were we on the front end and the tip of the spear of this revolution? I think so. Have they proven to be a great partner? Yes. Were they maybe wondering if we had the ability, could we have done this on our own? The answer, I think, is sure. Could they have done it at the speed and the rate we’re doing it today with them? Maybe not.

I just love their commitment to it. They’ve proven to be a good partner. I love the fact that they’ve allowed us to say in a press release that we’re going to remain an independent company, we’re going to have an independent board, and we’re going to become a public company. Very few companies would have given us the latitude to do that.

[00:29:15] Donlan: You mentioned it – Walmart and a lot of these other retailers are following suit. Do you think that these kinds of partnerships are setting the stage for a completely different future for retailers and health care?

[00:29:36] Martino: I really do. I think that there’s going to be a fundamental change in health care from the center being a hospital. No offense to hospitals – we all need good hospital care.

[These retailers] happen to have some of the most convenient locations in America. They typically have ample, well-lit parking. They feel like a safe place to go, and they sometimes feel like safer places to go than a clinic that’s off of an interstate freeway. I just think this notion of retail neighborhoods and the convergence of health care, … I think it’s going to be the future. And I want to personally participate in driving that future because I do think it’s the right thing.

[00:30:50] Andrew: You mentioned your aspirations for the company to remain independent, to continue growing even outside of Walgreens? What are other areas of business that might pique your interest from a growth perspective?

[00:31:10] Martino: A few things. And I really appreciate that question because for those that paid attention to the press release, I think what it said was that this investment would allow us to broaden our platform. We have made some positions that we have not yet announced, and one we will announce soon. I frankly have to make a trip to one of our markets to meet the team, but we’ve acquired a business that’s in the home care business.

There might be very few independent primary care clinics that own a vascular center, and we’re going to acquire one. And why would we do that? Because there is going to continue to be chronic morbid obesity in this country. That will lead to things like chronic disease, diabetes, amputations, … and if you could have vascular procedures done in an ambulatory setting, not associated with a system facility, why would we not think about that? It’s going to help in terms of cost and quality and actually, in my opinion, patient experience, because people don’t love going to hospitals.

[00:33:31] Donlan: What do you want VillageMD to look like three to five years from now?

[00:33:50] Martino: The largest at-risk primary care provider in the country. That’s what I want to be.

I thought back to one of the first physician forums that we had in 2016, and there was a person in the room that raised his hand and he asked me a question. He said, “You guys founded this company. You guys are going to go out, you’re going to grow this company, you’re going to raise a lot of money, you’re going to sell it, you’re going to get rich. Good for you guys. That’s how you define success, right?”

I said, “Actually, no. That’s not how I define success at all. For me, personally, if we could host this physician forum at the Allstate Arena because we had so many people who wanted to be part of this movement that we needed a bigger venue, that would be success for me.” I really believe that and I feel that. I’m not going to give up until we [do that].

Donlan: Okay. That’s awesome. Hopefully, I’ll be there. Thank you so much, Paul.

Martino: Thank you.

Donlan: I really appreciate it. Wish you all the best of luck in the future.

Martino: Thanks so much. Appreciate your time today. Take care. Have a nice Thanksgiving.

Donlan: Yes. Likewise. Thank you to all of you who are listening in. If you have any questions for me, you can email me at [email protected]. Also, just remember that there’ll be a recording of this that will be posted online. Otherwise, I’m HHCN reporter Andrew Donlan. See you next time, and thank you for listening in. Thanks again, Paul.

Martino: Bye, now.