CVS Health acquiring Oak Street Health for $10.6 billion

Photo courtesy of CVS Health

With a definitive agreement in place, CVS Health is now officially poised to acquire Oak Street Health in an all-cash transaction valued at around $10.6 billion.

Oak Street Health is a multi-payer, value-based primary care company focused on older adults, with a care model and technology platform it describes as scalable.

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

Oak Street Health employs about 600 primary care providers and has 169 medical centers across 21 states. Its signature technology solution is Canopy, which is integrated with the company's operations and utilized when determining the appropriate type and level of care for each patient. 

Mike Pykosz, Oak Street's CEO, said that care will be enhanced by CVS Health's community, home and digital offerings.

Following the close of the transaction, Pykosz will continue to lead Oak Street Health, which will become part of CVS Health's recently formed Health Care Delivery organization.

WHAT'S THE IMPACT

CVS Health expects to fund Wednesday's announced transaction through available resources and existing funds, and said it's committed to maintaining its current credit ratings.

The transaction was approved by the Board of Directors at each of the respective companies and is subject to approval by a majority of Oak Street Health's stockholders, as well as regulatory approval.

By 2026, Oak Street Health will have over 300 centers, each of which has the potential to contribute $7 million of its adjusted EBITDA at maturity, representing more than $2 billion of Oak Street Health embedded adjusted EBITDA at that time, the companies said.

THE LARGER TREND

It's been a busy few weeks with CVS, with the company launching Virtual Primary Care in January, a virtual care offering focused mainly on primary care and mental health services. 

Through the launch, CVS is also expanding its virtual mental health services. Enrollees 18 and older are slated to have access to nationwide virtual mental health support from clinicians including licensed therapists and psychiatrists.

Not everything has been smooth going for the insurer, however. Recently it was revealed that Cigna is suing CVS over the intended hire of former Cigna executive Amy Bricker. The lawsuit alleges this violates Cigna's noncompete agreement, with the company saying it would be "immediately and irreparably harmed" if Bricker's hire is allowed to continue.

Last week CVS Health said it was rolling out a new initiative, the Community Equity Alliance, in hopes it will address barriers to care in underserved communities. The Alliance is being established to expand the community health workforce, enhance connections between healthcare institutions and communities, and address disparities in heart health and mental health outcomes.

Twitter: @JELagasse
Email the writer: Jeff.Lagasse@himssmedia.com