On May 24th, 2021, the news surfaced that CVS Health Corporation, the retail pharmacy giant, was set to acquire Oak Street Health, a network of primary care centers that cater to senior citizens. The deal was reportedly worth $13.75 billion, which was a significant statement for both parties. The healthcare sector was buzzing with the implications of this acquisition.
Oak Street Health operates in twenty-four markets, mostly in urban areas, and serves around 85,000 patients. The company provides primary care services and chronic disease management to seniors, and it operates on a value-based model, which means that the healthcare provider is rewarded based on the quality of care provided instead of the number of services offered. CVS, on the other hand, is a retail pharmacy that operates in nearly 10,000 stores across the United States. The company has been on a spree of vertical integration in the healthcare sector, acquiring insurance giant Aetna in 2018 and launching HealthHUBs, primary care centers in their stores.
The acquisition of Oak Street Health is a significant move for CVS as it positions the company to compete in the fast-growing and lucrative Medicare Advantage market. Medicare Advantage is a privately run health plan for seniors where Medicare pays private insurers to provide healthcare services. The plan is growing in popularity as it provides more extensive coverage than traditional Medicare and can offer additional services such as vision, dental, and prescription drug coverage. According to the Centers for Medicare & Medicaid Services (CMS), more than 26 million beneficiaries, or 42% of the Medicare population, were enrolled in Medicare Advantage in 2021.
CVS sees Oak Street Health as a valuable addition to its HealthHUBs. The HealthHUBs offer primary care services, health screenings, and chronic disease management, and they hope that the addition of Oak Street Health would help them expand their services to seniors. The acquisition could also create a closed-loop system where a patient could go to any CVS store for their healthcare needs, including pharmacy services, lab testing, and primary care.
Oak Street Health was also bullish about the deal and looked forward to the synergies between the two companies. The Oak Street Health CEO, Mike Pykosz, said that the partnership would help them “take the next step in revolutionizing care for seniors.” The company would have access to CVS’s resources and expertise in pharmacy services and digital health solutions.
Overall, the deal is crucial for both parties as they look to create a robust and integrated healthcare system for seniors. The acquisition would provide CVS with access to new markets and customers, and Oak Street Health would get the resources and expertise to expand their services. It remains to be seen how the deal would pan out, but the healthcare sector is certainly buzzing with the possibilities.
