CVS to acquire senior primary care company Oak Street Health for $10.6B

CVS Health will acquire primary care company Oak Street Health in a $10.6 billion deal.

The companies announced the agreement for CVS to buy Oak Street Health, which started in 2012 and offers primary care medical services to adults using Medicare or Medicare Advantage, or other health insurance plans. Oak Street Health has about 600 primary care physicians and clinicians in 169 centers in 21 states, while CVS Health’s workforce includes more than 40,000 physicians, pharmacists, nurses, and nurse practitioners.

"Combining Oak Street Health's platform with CVS Health's unmatched reach will create the premier value-based primary care solution," CVS Health President and CEO Karen S. Lynch said in the companies’ announcement. "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 companies touted Oak Street Health’s Canopy technology “which is fully integrated with Oak Street Health's operations and utilized when determining the appropriate type and level of care for each patient.” The announcement said that care will be enhanced by CVS Health's community, home, and digital offerings.

"This agreement with CVS Health will accelerate our ability to deliver on our mission and continue improving health outcomes, lowering medical costs, and providing a better patient experience while offering significant value to our shareholders," Oak Street Health CEO Mike Pykosz said in the announcement. "Together with CVS Health, we will have access to greater resources and capabilities to expand the reach of our platform, provide more opportunities for our teammates and, most importantly, make a meaningful difference in the lives of the patients we serve."

When the deal closes, Pykosz will continue to lead Oak Street Health, which will become part of CVS Health's recently formed Health Care Delivery organization.

The companies announced the deal on Feb. 8, the same day CVS announced its 2022 total revenues increased to $322.5 billion, up 10.4% from the year before. CVS generated $16.2 billion in cash flow from operations.

CVS announced it anticipated by 2026, Oak Street Health will have more than 300 centers, each with the potential to contribute $7 million of Oak Street Health adjusted earnings before interest, taxes, depreciation, and amortization at maturity, for more than $2 billion in revenues. “Additionally, CVS Health projects more than $500 million in synergy potential over time, enhancing CVS Health's long-term adjusted operating income growth,” according to CVS.

"Oak Street Health is a premier value-based primary care platform," CVS Health Chief Financial Officer Shawn M. Guertin said in the announcement. "We believe that in partnership with CVS Health, Oak Street Health can accelerate its growth and provide an attractive return to our shareholders over time.

Based in Woonsocket, Rhode Island, CVS maintains more than 1,100 MinuteClinic medical clinics and HealthHUB locations to with treatments for illnesses, chronic conditions, and mental health. In 2021 CVS’ leadership announced its intention to invest in primary care and last year the company leaders said they intended to acquire or take a stake in a primary care company by the end of 2022.