CVS Health will acquire primary care clinic operator Oak Street Health for $10.6 billion. The purchase, which was announced by CVS in early February, comes five months after the company said it would buy home healthcare provider Signify Health for $8 billion.
The acquisitions, along with Walgreen’s November investment of nearly $9 billion in VillageMD’s purchase of Summit Health-CityMD, mark a move by retail chains into comprehensive health care aimed at helping customers avoid and control chronic medical issues, reduce expensive hospitalizations, and stay on their medications.
The quick expansion of value-based care is popular with bill-payers such as the government’s Medicare program. The focus on wellness rewards doctors for maintaining their patients’ health rather than paying them for services.
Oak Street, which employs physicians, social workers, and other providers, specializes in preventive care that can help people avoid big medical problems.
“Solving that problem creates a massive, massive market opportunity for Oak Street Health,” Chief Executive Officer Michael Pykosz said in January at an annual conference hosted by JPMorgan.
Eleven-year-old Oak Street runs centers that are mostly for lower-to-middle-income people with Medicare Advantage plans, which are privately-run versions of the federal government’s program for people aged 65 and older. It operates 169 locations in 21 states.
Its revenue grew to $1.43 billion in 2021, and analysts expect that it exceeded $2 billion in 2022, according to the Associated Press.
Primary care is a key to improving patient health, CVS Health CEO Karen Lynch told analysts in mid-February, the AP reported. Though it represents just 10% of healthcare spending nationally, primary care holds “significant influence” over healthcare use, she said.
As competitors including UnitedHealth Group enhance their medical staffs, CVS has wanted to add more primary care centers for at least a year, the AP reports. CVS Health covers more than 3 million people with Medicare Advantage plans in addition to operating drugstores.