CVS prioritizes value-based care in $10.6 billion Oak Street Health deal

The latest in a series of multibillion dollar deals from the country’s largest pharmacy retailers features CVS, which plans to spend $10.6 billion to buy value-based primary care clinic operator Oak Street Health.

The move comes five months after CVS executives said the company would spend $8 billion to buy Signify Health, a home care provider, and three months after Walgreens executives said the company would invest $3.5 billion in primary care clinic operator Summit Health-CityMD.

Analysts said the Oak Street deal helps CVS keep up with Walgreens and Amazon, both of which recently acquired primary care clinic operators; Walgreens bought VillageMD for $5.2 billion in 2021, and Amazon spent $3.9 billion to buy One Medical in 2022.

“CVS needs to respond to the market,” David Larsen, an analyst at financial services firm BTIG wrote in an analyst note. “It is clear that value-based care is becoming a dominant model in healthcare.”

Oak Street, which operates 169 clinics in 21 states, primarily treats patients on Medicare Advantage plans. During a Feb. 8 earnings call, CVS CEO Karen Lynch said that “Medicare Advantage remains a key strategic growth area for CVS Health.”

CVS covers more than 3.2 million people with Medicare Advantage plans through its Aetna insurance business. Payers with large Medicare populations need to have a “major presence in primary care” to control healthcare spend, Larsen said.

“The acquisition of Oak Street Health will broaden our value-based care platform into primary care and accelerate our long-term growth,” Lynch said in the earnings call. “Primary care drives patient engagement and positive clinical outcomes.”