The Buzz This Week 

CVS Health has entered into a definitive agreement to purchase Oak Street Health for $10.6 billion, a move that pushes CVS even closer toward owning the continuum of care delivery. Oak Street Health provides primary care in its 169 clinics, with 600 providers across 21 states, primarily in underserved areas with average incomes below 300% of the federal poverty level. Oak Street focuses on senior patients, of whom more than 50% have a housing, food, or isolation risk factor. The deal is expected to close later this year. 

CVS Chief Executive Officer Karen Lynch noted that value-based care is a priority and an impetus for the purchase, stating, “Enhancing our value-based offerings is core to our strategy as we continue to redefine how people access and experience care that is more affordable, convenient, and connected.”  

The announcement closely follows CVS’ announcement in September that it intended to purchase Signify Health for $8 billion. Signify offers analytics and technology to help a network of 10,000 clinicians provide in-home healthcare to 2.5 million patients across the United States. CVS executives shared that once the Signify and Oak Street deals are finalized, they hope to provide a more seamless care delivery process for the consumer. For example, a home-care patient whom Signify virtually determines needs additional care could be sent to Oak Street or a CVS clinic. 

CVS brings Oak Street size and capital and will likely allow Oak Street to accelerate the rate at which it is opening clinics. Oak Street brings CVS a non-traditional primary care substitute that delivers high-intensity care that can improve health and reduce total medical expenses in a high-cost Medicare Advantage population, a highly attractive differentiator for an insurer like CVS.  

Why It Matters 

The CVS-Oak Street deal underscores the continued expansion of giant retailers and for-profit entities across healthcare delivery settings and modes, including the increasingly popular at-home care setting. Their capabilities and reach also support care needs that span patient populations, including those with Medicare Advantage, Medicaid, and commercial insurance.  

Notably, primary care is a big piece of the picture as these large companies expand their footprint and consumer reach. The CVS-Oak Street move follows other significant primary care acquisitions by for-profit retail giants in recent years. Walgreens, CVS Pharmacy’s largest retail competitor, spent $5.2 billion in 2021 to own a 63% stake in primary care network VillageMD, which had 200 clinics nationwide. Walgreens intends to open at least 600 VillageMD locations in retail stores across the U.S. by 2025. Last year, Amazon purchased primary care provider One Medical in a transaction valued at $3.9 billion. One Medical has more than 750,000 members aligned to 188 offices across 29 markets. CVS had previously shown interest in One Medical before they accepted Amazon’s bid. In all of the above-mentioned cases, retailers agreed to make significant investments in primary care companies that had yet to turn a profit, highlighting a trend of large valuations among non-traditional primary care providers. 

Historically, primary care—which directly makes up only 10% of healthcare costs—has been a loss leader rather than a profit driver for traditional health systems. And while primary care has been on a slow journey of change, the recent level of investment will be a significant accelerator of disruption. The pace of change will vary based on local markets, but primary care as we know it will be changing dramatically.  

Consumer preferences for how they consume healthcare has also evolved, bringing a heightened need to focus on convenience, access, and cost. Retailers see an opportunity to leverage their geographic and virtual footprint to provide convenient access to lower cost sites of care. 

Additionally, the move toward value-based care depends on the interconnectedness of primary care with other care offerings. Preventable chronic diseases and their associated economic impact are the single biggest driver of the nation’s $4.1 trillion healthcare spend, according to the Centers for Disease Control and Prevention (CDC). In a traditional fee for service world, there is little financial gain from reducing total cost of care. But if primary care disruptors are able to make a significant dent in spend on preventable disease and capitalize on value-based care while also realizing value across the continuum in pharmacy, insurance, and retail products, their purchase price could be well worth it. However, scaling value-based care models will not be achieved without significant challenges. 



CVS’ Oak Street Health Acquisition Continues the Industry’s Provider Obsession

Wall Street Journal:

CVS Reaches $10.6 Billion Deal to Buy Clinic Owner Oak Street Health  

Modern Healthcare: 

CVS Health in Deal to Buy Oak Street Health for $10.6 Billion 

Fierce Healthcare: 

CVS Finally Makes Primary Care Play, Scooping up Oak Street Health in $10.6B Deal 

Editorial advisor: Roger Ray, MD, Chief Physician Executive.


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