Report: CVS Closes in on $10.5B Oak Street Health Acquisition
CVS is getting closer to buying Oak Street Health, which provides in-person and virtual primary care for Medicare patients, further expanding its reach in the healthcare provider arena.
Editor's note: CVS confirmed on Feb. 8 that it will buy Oak Street Health for $10.6 billion, or $39 a share. Oak Street Health will become part of CVS Health's Health Care Delivery organization, and CEO Mike Pykosz will continue to lead the company. The deal is subject to customary closing conditions, including approval by a majority of Oak Street Health's stockholders.
CVS Health is nearing a deal to purchase Oak Street Health, a primary care provider for seniors that offers in-person and virtual care options, according to a report by The Wall Street Journal.
According to people familiar with the matter, the retail healthcare giant will acquire Oak Street Health for $10.5 billion, or about $39 a share, including debt. The deal may be announced this week.
Founded in 2012, Oak Street Health includes more than 160 centers across 21 states. It provides an array of primary care services to Medicare beneficiaries, including treatment for diabetes, osteoarthritis, and mental health conditions. The organization also provides telehealth-enabled care, offering phone and video visits and a 24/7 patient support line.
According to the company's most recent financial statement, Oak Street Health cared for 209,500 patients in the third quarter of fiscal year 2022. Its reported revenue totaled $545.7 million, up 40 percent year over year. But its net loss also increased, from $110 million in Q3 2021 to $130.4 million in Q3 2022.
According to MarketWatch, Oak Street Health's share price spiked by 30 percent Tuesday following reports of the expected acquisition. But in a statement posted to its website, the company said that its policy is not to comment on unusual market activity.
The acquisition of Oak Street Health would further expand CVS' healthcare footprint beyond providing pharmacy services. CVS has been focused on this expansion for years, with the addition of MinuteClinics and HealthHubs over the last decade. In 2018, CVS bought health insurance company Aetna, giving the company a foothold in the payer arena.
Last September, CVS made a significant move into care delivery, announcing plans to purchase home healthcare company Signify Health for approximately $8 billion. Signify Health includes a network of more than 10,000 clinicians that determine patients' clinical and social needs through home-based visits, connecting them to follow-up care and community-based resources. It also offers analytics solutions to help healthcare organizations establish and scale value-based payment programs.
"Signify Health will play a critical role in advancing our health care services strategy and gives us a platform to accelerate our growth in value-based care," said Karen S. Lynch, president and CEO of CVS Health, in the press release announcing the deal.
Oak Street Health, too, purports to provide value-based care with a focus on preventive and personalized services, including social activities. Additionally, the company leads Oak Street Health Medicare Partners, an accountable care organization (ACO).
CVS made its interest in primary care known last year when Lynch said in the Q2 earnings call that growing primary care offerings was a priority for the company.
She further noted, "We can't be in the primary care without M&A. We've been very clear about that."
CVS has also expanded virtual access to primary and mental healthcare. Last year, the organization launched CVS Health Virtual Primary Care, a digital care platform to provide healthcare consumers with an array of services, including primary care, on-demand care, chronic condition management, and mental health services.
The solution was made available to eligible Aetna members on Jan. 1, and eligible CVS Caremark members will be able to access it in the second quarter of 2023.
CVS is not the only retailer interested in primary care. Last year, Amazon made waves when it announced plans to buy virtual and in-person primary care organization One Medical for $3.9 billion in an all-cash transaction. The deal has yet to close, though it did receive approval from the Oregon Health Authority.