CVS Health acquires Oak Street Health for $10.6 billion

Photo courtesy of CVS Health

With the definitive agreement in place, CVS Health is now officially poised to acquire Oak Street Health for approximately $10.6 billion in cash.

Oak Street Health is a multi-pay senior-focused primary care company with a care model and technology platform that it describes as scalable.

The organizations said the acquisition will benefit patients’ health in the long term by reducing care costs and improving outcomes, especially for those in underserved communities. More than 50% of Oak Street Health patients have a housing, food, or isolation-related risk factor, they said.

Oak Street Health has about 600 primary care providers and 169 health centers in 21 states. Its proprietary technology solution, Canopy, is integrated with the company’s operations and is used to determine the appropriate type and level of care for each patient.

Mike Pikosh, CEO of Oak Street, said care will be enhanced through CVS Health’s community, home and digital offerings.

Following the closing of the deal, Pikosh will continue to lead Oak Street Health, which will become part of the newly formed CVS Health Health Care Delivery organization.

WHAT IMPACT

CVS Health expects to finance the deal, announced Wednesday, with existing resources and existing funds, and said it intends to maintain its current credit ratings.

The transaction has been approved by the board of directors of each of the respective companies and is subject to approval by a majority of Oak Street Health’s shareholders as well as regulatory approval.

By 2026, Oak Street Health will have more than 300 centers, each of which can contribute $7 million in adjusted EBITDA at maturity, which at the time is more than $2 billion of Oak Street Health’s embedded adjusted EBITDA, the companies said.

BIG TREND

It’s been a busy few weeks with CVS: In January, the company launched Virtual Primary Care, a virtual care offering focused primarily on primary care and mental health services.

With the launch, CVS is also expanding its virtual mental health services. It is planned that applicants aged 18 and over will have access to nationwide virtual mental health support from physicians, including licensed therapists and psychiatrists.

However, not everything went smoothly for the insurance company. It was recently reported that Cigna is suing CVS over the alleged hiring of former Cigna chief executive Amy Bricker. The lawsuit alleges that this violates Cigna’s non-compete agreement, with the company saying it would be “immediately and irreparably harmed” if Bricker’s hiring was allowed.

Last week, CVS Health said it was launching a new initiative, the Community Equity Alliance, in the hope that it would remove barriers to healthcare in underserved communities. The alliance is being formed to expand the healthcare workforce, improve links between healthcare providers and communities, and close disparities in heart and mental health outcomes.

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