CVS Nearing $10.5 Billion Deal for Primary-Care Provider Oak Street Health
The deal would expand the health insurer and pharmacy chain’s role in medical care
CVS Health Corp. CVS -0.61% is close to an agreement to acquire Oak Street Health Inc. OSH -2.48% for about $10.5 billion including debt, a deal that would rapidly expand the big healthcare company’s footprint of primary-care doctors with a large network of senior-focused clinics, according to people with knowledge of the matter.
The companies are discussing a price of about $39 a share, the people said. The deal, if it goes through, could be announced as soon as this week, they said. CVS is scheduled to report earnings on Wednesday.
The agreement would come on the heels of CVS’s $8 billion agreement to acquire home-care provider Signify Health Inc. SGFY -0.95% Together, the two acquisitions would push CVS, the parent of its namesake pharmacies as well as the huge Aetna health-insurance operation and a pharmacy-benefit manager, far deeper into the direct provision of healthcare.
CVS Chief Executive Karen Lynch had signaled that primary care and home-based care are key growth areas for the company.
Oak Street, which has more than 160 centers across 21 states, focuses on the care of patients enrolled in Medicare.
Bloomberg reported last month that CVS was exploring a deal for Oak Street Health.
CVS’s deal would be the latest in a series of moves by a range of players, including health insurers, to acquire clinics and doctors focused on primary care. Of special interest to the buyers are clinics that manage and treat patients with chronic health conditions such as diabetes, whose care can be costly if not managed closely.
Among those pushing into the space with recent deals include Walgreens Boots Alliance Inc. and Amazon.com Inc.
Companies with health-insurance units, particularly those that offer Medicare Advantage plans, the private version of the federal program, have been especially interested in acquiring the clinics. The combinations would help the companies shave costs by managing patients more closely and in particular, helping them avoid costly hospital visits.
Health insurer Humana Inc. is rapidly expanding its care footprint, while UnitedHealth Group Inc.’s Optum health-services arm has over many years assembled a sprawling network of surgery centers, doctor groups and other assets.
UnitedHealth, the parent of the biggest health insurer in the U.S., aims to soon add home-health company LHC Group Inc.
For CVS, the Oak Street acquisition would further the company’s long-term shift to broaden into businesses beyond retail pharmacy by adding doctors who can more fully manage patients’ care.
CVS, of Woonsocket, R.I., has already been revamping pharmacies and adding more health offerings to create centers it calls HealthHUBs, in addition to the MinuteClinics it maintains in many stores.
CVS’s Aetna has a growing Medicare Advantage business, which would likely tie in closely with the Oak Street clinics. Oak Street, founded in 2012 and based in Chicago, specializes in caring for patients under financial arrangements that are supposed to link payment to value, rather than each medical service a clinic provides.
Instead, under so-called value-based arrangements, doctors and clinics are often paid a set amount per patient. That setup is supposed to encourage the clinics to provide upfront preventive services and support that can reduce costs of care by helping the patient avoid hospital visits. Clinics can generally pocket some or all of the savings they generate.
Oak Street said at a recent conference that it cares for about 159,000 patients under the arrangements.