Walgreens’ Success Formula Focused on Workflow Improvements

Sept. 22, 2023
The retail giant has partnered with a New York technology company to connect with more community-based primary care doctors.

John Driscoll wants his team to be nice and invisible to its value-based care customers.

Speaking on the sidelines of the inaugural Nashville Healthcare Sessions conference last week, the president of Walgreens Boots Alliance’s U.S. healthcare group said the Chicago area-based company is focused on making life more convenient for the providers with which it works rather than having them get up to speed on yet another workflow or software system. Succeeding with that, he added, will help Walgreens’ healthcare division—which booked nearly $2 billion in revenues in the company’s spring quarter—meet its long-term profitability targets.

“When it comes to closing gaps in care, we want to make connections without people seeing the work,” Driscoll said. “We’re looking to surprise and delight before people realize they need it.”

A new partnership with three-year-old Pearl Health will be one key to realizing that approach. Walgreens and New York-based Pearl earlier this month said they will work together to pair Pearl’s data analytics and recommendation tools with Walgreens’ services to help independent primary-care doctors build their value-based care networks. The basic idea, Pearl CEO Michael Kopko said, is to reshape patient care workflows that today are reactionary into an ecosystem where information flows more freely. That will enable doctors to treat patients more effectively and, over time, more cheaply.

For Walgreens, partnering with Pearl is a path to driving more activity through its roughly 9,000 stores and other divisions without investing hundreds of millions or more to expand the VillageMD clinic chain, of which it is the majority owner, into every corner of its retail network.

“It’s a game of inches and we’re giving people information before they need it,” Kopko said. “And Walgreens has the multiple contact points, anchored by the pharmacy, to help us.”

Walgreens has generated big headlines in recent years with the acquisitions of Shields Health Solutions and home health company CareCentrix (where Driscoll had been CEO) as well as multibillion-dollar investments in VillageMD and the Summit Health-CityMD clinic chain. The goal: Make Walgreens a healthcare services powerhouse by weaving together that portfolio of assets with the company’s stores.

The financials for Driscoll and his team—who are working under temporary CEO Ginger Graham after former boss Roz Brewer stepped down at the end of August—are big, both in terms of cost and potential: Early this year, Brewer and former CFO James Kehoe had projected that Walgreens’ healthcare portfolio would generate $1 billion annually in adjusted EBITDA two years from now. That target has been pushed back because of a spring shortfall in traffic and the Summit operations requiring more cost-cutting attention. But no Walgreens executive has said it isn’t still the goal.

“We’ve got a unique opportunity because we have trust, data, relevance, reach and traffic,” Driscoll said Sept. 21 at the 8th Annual FutureHealth Conference hosted by research firm TD Cowen. “We’re investing in places where our pharmacy experience is relevant and where it can be added value.”

Walgreens’ peers at CVS Health Corp. are on a similar journey—and a similar point in that journey. Speaking at a Morgan Stanley investor conference earlier this month, CVS President and CEO Karen Lynch said her team is primarily focused on integrating its recent acquisitions and starting to see some “overall execution” results. The leadership teams of both companies have said they are looking for technology tools, such as Pearl, to enable and the accelerate that execution.

At both the Nashville Healthcare Sessions and TD Cowen conference, Driscoll said the goal isn’t to change patient behavior, something that has proven excruciatingly difficult for many a healthcare stakeholder. Nor is it the Walgreens team’s aim to “mosh together” its assembled holdings. The essence of success, he said, will come down to improving workflows across the company’s clinic, pharmacy, clinical recruiting and other operations.

“We’re not going to build on the tech stack of legacy healthcare to get into a brand new world,” he said in Nashville. “And we don’t need to change everything to make things a little better in a lot of places.”

Shares of Walgreens (Ticker: WBA) were changing hands around $21.50 in late trading Sept. 21. Over the past six months, they have lost about 35 percent of their value, cutting the company’s market capitalization to about $18.5 billion.