CVS reaches $10.6 billion deal to buy clinic owner Oak Street Health

February 9, 2023

CVS Health has agreed to acquire Oak Street Health for about $10.6 billion, including debt, in the latest sign of the growing tie-ups between health insurers and primary-care doctors, reports The Wall Street Journal.

The all-cash deal, for $39 a share, is expected to close in 2023, the companies said on Wednesday, February 8.

The acquisition would wide  CVS’s healthcare offeringsadding about 600 physicians and nurse practitioners and Oak Street’s network of 169 senior-focused clinics to the COVID-19 vaccinations, strep tests and other medical services that CVS already provides through its pharmacies.

It would also further the consolidation of firms that manage health benefits, pay for medical care, and provide the treatment.

Founded in 1963 as a retailer focused on beauty and health products, CVS has used acquisitions to become one of the biggest U.S. healthcare companies. In addition to its roughly 10,000 pharmacies, CVS, based in Woonsocket, Rhode Island, is the parent of large health-insurer Aetna and CVS Caremark, one of the biggest managers of drug benefits in America.

Last fall, it announced a deal to acquire home-care provider Signify Health for about $8 billion.

CVS Chief Executive Karen Lynch has said that adding primary-care doctors was a company priority. Acquiring physicians would help it to more closely manage and guide the care of patients, as well as bring down costs, she said. CVS also wants to push further into forms of healthcare payment that are supposed to reward value, rather than reimbursing for every service.

“We said that we wanted to make sure that the asset that we acquired in primary care had the right management team, the right tech, the right ability to scale—and we believe that this asset meets all those criteria,” Lynch said in an interview. Adding Oak Street “positions us, combined with Signify Health for that matter, on our journey for value-based care.”

The value-based setups—which often involve paying doctors set amounts to manage patients rather than fees for each visit or service—have advanced the furthest in the private version of Medicare, the plans offered by insurers and known as Medicare Advantage.

CVS executives, demonstrating in a call with analysts how the units would work together to expand the business, said a home-care patient could receive a checkup from a Signify doctor; who might determine that person needs more care and then direct them either to an Oak Street practice or to a CVS in-store clinic.

Under the setup, the executives said, patients also would have options to go to other, non-CVS clinics; while CVS services, doctors and others would be available to patients using insurers other than CVS’s Aetna.

Research contact: @WSJ