CVS Health has announced it will acquire Oak Street Health, a US primary care provider for Medicare recipients. The deal, which is expected to close later this year, is reported to be worth $10.6 billion.
Why it's Notable:
CVS Health’s extensive reach in the US market provides a major opportunity to expand Oak Street Health. The primary care chain currently operates 169 clinics across 21 states. CVS is reportedly aiming to increase the number of primary care centres to 300 by 2026.
According to a CVS report, Oak Street’s practices are typically based in neighbourhoods where over half of the patients have a risk factor in housing, food or isolation. This deal will help expand access to affordable and convenient care, producing better health outcomes and improving the experience for at-risk patients.
According to CVS president and CEO, Karen S. Lynch, the combination of Oak Street Health’s network with the pharmacy giant’s reach, will allow for more frequent and more convenient communication between providers and patients, as well as contribute to enhancing the value-based offerings for CVS.
Industry Implications:
This deal comes amid rising competition between retail giants in the healthcare space, with major players including Amazon, Walgreens and Walmart all making moves into the primary care field over the last year. The competition between these major players is likely driving up the share price of primary care providers, with Oak Street Health set to receive $39 per share in the deal with CVS Health.
The acquisition of Oak Street Health is the most recent in a string of moves by CVS as it continues to grow its presence in healthcare. The company recently announced their intention to purchase Signify Healthy, a home health provider, for $8 billion. It invested $100 million in hybrid care provider Carbon Health, piloting its services in select locations. It also partnered with Amwell to roll out its virtual primary care offering. These recent moves by CVS reflect a core strategy to redefine how care is accessed and experienced, through the provision of affordable, convenient and connected care offerings.
The strategic shift towards primary care by major retail players likely reflects a growing interest in accelerating the adoption of value-based care over fee-for-service care. The investment by retail giants in this space has the potential to increase capacity and improve access to primary care for underserved populations, which should lead to a greater focus on patient health and keeping patients out of hospitals.