Less than a month after CVS Health acquired Oak Street Health, the primary care provider plans to expand into four more states.
The company plans to open value-based primary care centers in Little Rock, Arkansas; Des Moines and Davenport, Iowa; Kansas City, Kansas and Richmond, Virginia, beginning this summer.
Oak Street Health will operate centers in 25 states by the end of the year.
The provider also aims to open new centers in existing markets this year with additional centers planned for Arizona, Colorado, Georgia, Illinois, Indiana, Louisiana, New York, Ohio and Pennsylvania.
CVS finalized its $10.6 billion acquisition of the Medicare-focused primary care company in early May, picking up, at the time, about 169 medical centers in 21 states.
The acquisition significantly broadens CVS Health’s primary care footprint and the retail pharmacy giant said the deal will improve health outcomes and reduce costs for patients, particularly for those in underserved communities.
The two deals will help advance the health giant’s push into value-based care and mark its latest moves to get further into healthcare services.
Oak Street specializes in treating Medicare Advantage patients and its network of clinics is expected to grow to over 300 centers by 2026.
The provider says it developed an integrated care model that incorporates behavioral healthcare and social determinants support and patients can access care in-center, in-home and through telehealth appointments.
Oak Street Health says it has reduced patient hospital admissions by approximately 51% compared to Medicare benchmarks, and driven a 42% reduction in 30-day readmission rates and a 51% reduction in emergency department visits.
“One of the most critical ways we advance our mission to rebuild healthcare as it should be is by bringing our high-quality primary care and unmatched patient experience to more older adults across the country,” said Mike Pykosz, Oak Street Health’s CEO. “We look forward to meeting and caring for new deserving patients in Arkansas, Iowa, Kansas and Virginia, as well as the opportunity to create meaningful jobs for those passionate about improving health outcomes for patients and bridging health equity gaps in their communities.”
The CVS-Oak Street Health deal marks the latest example of vertical integration in healthcare. In addition to operating thousands of pharmacies and MinuteClinics, CVS also is the parent company of major health insurer Aetna and pharmacy benefit manager CVS Caremark.
After rumors of a possible deal first surfaced in early January, CVS Health announced on Wednesday that it has entered into a definitive agreement to acquire value-based primary care provider Oak Street Health for $10.6B. The Chicago-based company will join CVS’s recently formed Health Care Delivery organization, bringing with it roughly 600 physicians and nurse practitioners working at 169 senior-focused clinics in 21 states. This move is the latest by CVS to expand its care offerings, following its $100M investment last month in primary and urgent care provider Carbon Health, and its $8B acquisition of in-home evaluation company Signify in September.
The Gist: If this deal goes through, CVS will have the key pieces of the national primary care physician network it needs for a value-based care platform focused on Medicare Advantage—although how they will combine Oak Street’s clinics with retail-based HealthHUBs and other primary care assets remains unclear.
The fact that CVS is paying about a 50 percent share price premium shows how competitive the market for large physician organizations has become, driving up bidding prices such that only cash-rich payers, pharmacies, and retailers can afford them as they seek to emulate UnitedHealth Group’s Optum strategy.
Of note, the same day CVS announced the deal, Aetna competitor and erstwhile investor in Oak Street, Humana announced a five-year network partnership with Oak Street competitor ChenMed.
We’ll be watching for whose strategy proves most effective as we enter the next phase of the physician arms race between vertically-integrated payers, and the emphasis shifts from how many providers are employed to how they’re integrated and deployed.
CVS Health is close to a deal to acquire primary care provider Oak Street Health for around $10.5 billion, including debt, marking the latest move among major healthcare stakeholders in acquiring primary care companies, the Wall Street Journal reports.
According to people with knowledge of the matter who spoke to the Journal, the two companies are discussing a deal in which CVS would acquire Oak Street for a price of around $39 a share. If the deal goes through, it could be announced as soon as this week.
According to the Journal, “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.”
Oak Street has more than 160 centers across 21 states and focuses mainly on caring for patients enrolled in Medicare. The company, which is based in Chicago, was founded in 2012 and specializes in caring for patients under value-based care arrangements.
Aetna, which is owned by CVS, has a growing Medicare Advantage business that would likely tie in with Oak Street’s clinics, which care for about 159,000 patients under value-based arrangements, the Journal reports.
The move is the latest among major healthcare stakeholders acquiring primary care companies. In September 2022, CVS announced an $8 billion deal to acquire home healthcare company Signify Health.
Meanwhile, Amazon in July 2022 announced a $3.9 billion deal to acquire primary care company One Medical, Humana in September 2022 announced its intention to spend up to $550 million to purchase 20 CenterWell Senior Primary Care clinics, and Walgreens Boots Alliance in November 2022 announced a roughly $9 billion deal to acquire Summit Health.
On Monday, San Francisco-based Carbon Health—a virtual-first primary and urgent care company with 125 clinics across 13 states—announced a partnership with CVS Health, which includes a $100M investment, as well as plans to pilot its operating model in select CVS stores. The announcement came just days after Carbon reported its second round of layoffs in the past year, as it scales back on less profitable business segments to focus on expanding its primary care model.
The Gist: It’s been over a year since CVS CEO Karen Lynch said the company was moving with “speed and urgency” to construct a physician-staffed primary care model. Last fall it purchased in-home health evaluation company Signify Health for $8B, after rumors that it had been close to acquiring One Medical.
Between its convenient retail footprint, insurance arm, and Signify’s risk-assessment tools, a nationwide primary care physician network is the last puzzle piece CVS needs to field a comprehensive and formidable primary care strategy.
While it’s currently rumored to be evaluating a $10B acquisition of Oak Street Health, this partnership with Carbon Health is a better bet to deliver value quickly, as CVS should be able to more easily integrate and leverage Carbon’s retail health expertise across its growing care delivery platform.
The demise of Haven — a coalition of three big employers aiming to lower the cost of healthcare for their workers — was met with a surprising reaction from Jamie Dimon, CEO of JPMorgan Chase: “We want to do this again.”
A Dec. 6 report from Bloomberg details some of the aftermath of Haven’s end and also the origins of Morgan Health, the bank’s second go at lowering healthcare costs that was rolled out in spring 2021. While still in its early stages, one tenet of its strategy is a return to basics, including appointments between clinicians and patients that take at least 30 minutes if not an hour.
Haven was the healthcare partnership formed in 2018 by Amazon, JPMorgan Chase and Berkshire Hathaway with an aim to lower healthcare costs for their 1.2 million workers. It disbanded in 2021. As its end neared, Mr. Dimon set out to learn what had gone wrong.
When he asked the question of Bill Wulf, MD, CEO of Central Ohio Primary Care, the internist told the businessman the initiative had moved too slowly. A virtual care program drew in only 150 people in Ohio, for example, before it was scrapped.
Shortly after the debrief with Dr. Wulf, Mr. Dimon assigned a lieutenant to restart the work on lowering employer healthcare costs, this time focusing on JPMorgan Chase alone. That leader was Peter Scher, vice chairman with the bank, who had his doubts at first. “There are a lot of things we could be spending our time on,” he told Bloomberg. “I was perfectly prepared to go back to Jamie and the operating committee and say, ‘Listen, it was a good try.'”
Mr. Scher stuck with it and brought on Dan Mendelson, founder and former CEO of healthcare advisory group Avalere Health, to lay the groundwork for JPMorgan’s second healthcare attempt. Mr. Mendelson, who had been a skeptic of Haven, spent three months crafting a strategy and playbook that recognized where Haven had fallen short and avoided repeated mistakes. He signed on to lead the group, dubbed Morgan Health.
The group has made more headlines since its launch than its predecessor Haven, which premiered with much bravado but went nearly a year without releasing any news except for its name and a new website. In fall 2022, Morgan Health openedthree advanced primary care centers in Ohio for a total of five and formed a healthcare venture capital team targeting early- to later-stage healthcare companies with innovations in areas like genetic medicine, autoimmune diseases, cardiometabolic diseases and rare disorders. It also hired Cheryl Pegus, MD, Walmart’s executive vice president of health and wellness, as a managing director.
Morgan Health’s strategy is marked by what appears to be common sense and a return to basics, including the placement of clinics in office building atriums — “a full-service practice where employees can develop long-term relationships with primary-care providers, wellness coaches, mental health providers and care coordinators.”
All appointments are booked for at least 30 minutes with many going an hour, according to Bloomberg. Patients generally see the same practitioner for each visit to build long-term relationships. Clinicians’ payments are tied to goals like avoiding emergency room visits, providing cancer screenings and keeping high blood pressure in check. If it plays out as designed, JPMorgan says the investment in prevention and primary care will curb high-cost services and hospital stays, ultimately leading to meaningful savings.
The goal is to “identify high-risk patients and then bubble-wrap them,” Dr. Wulf told Ohio business leaders in an October meeting, Bloomberg reports. “How do we keep you out of the hospital?”
JPMorgan has opened five clinics in the area of Columbus, Ohio, which will also be open to other employers who want to sign on. The clinics and primary care centers are managed and staffed by Vera Whole Health and Central Ohio Primary Care. JPMorgan is seeking “like-minded” medical groups in markets like New York, Chicago and Dallas where it has hubs of workers, Bloomberg reports.
VillageMD, which is majority owned by Walgreens Boots Alliance, plans to shell out nearly $9 billion to pick up medical practice Summit Health, the parent company of urgent care clinic chain CityMD.
The deal, announced Monday morning, is valued at $8.9 billion and includes investments from Walgreens Boots Alliance and Cigna Corp’s healthcare unit Evernorth, which will also become a minority owner in VillageMD. Bloomberg first reported on a potential deal back in late October.
The deal will expand Walgreen’s reach into primary, specialty and urgent care. The transaction creates one of the largest independent provider groups in the U.S., the organizations said. Combined, VillageMD and Summit Health will operate more than 680 provider locations in 26 markets. The two companies will have 20,000 employees.
Walgreens said Monday it will invest $3.5 billion through an even mix of debt and equity to support the acquisition, which is expected to close in the first quarter of 2023. The company will remain the largest and consolidating shareholder of VillageMD with about 53% stake.
Walgreens also raised its fiscal year 2025 sales goal for its U.S. healthcare business to between $14.5 billion and $16 billion from $11 billion to $12 billion previously. That business segment is now expected to achieve positive adjusted EBITDA by the end of fiscal year 2023.
Last year, Walgreens invested $5.2 billion in VillageMD and said it planned to open at least 600 Village Medical at Walgreens primary-care practices across the country by 2025 and 1,000 by 2027.
The deal comes amid a frenzy of M&A activity in the past two years. Major retailers like CVS, Walgreens and Amazon are ramping up their focus on providing medical services to gain bigger footholds in the healthcare market.
Drugstore rival CVS Health won the bidding war for home health and technology services company Signify Health and plans to shell out $8 billion to acquire the company. Amazon also plans to buy primary care provider One Medical for $3.9 billion.
The M&A move signals that Walgreens wants to become a “dominant entity in the overall healthcare services ecosystem,” according to David Larsen, healthcare IT and digital health analyst at financial services firm BTIG.
“Walgreens Boots Alliance is graduating up from being a drug retail store to owning the life-cycle of members’ health,” he wrote in an analyst’s note. “We view this transaction as being a statement by the market that primary care continues to be one of the key drivers of healthcare long-term.”
The deal also will put additional pressure on CVS Health to break into the primary care business “sooner rather than later,” Larsen wrote.
“I think at the most strategic level, I think there continues to be recognition that an integrated, coordinated, connected model of care is one that will ultimately deliver the best results. You see this through Optum’s acquisition of Kelsey-Seybold Clinic and VillageMD’s acquisition of Summit Health,” Tim Barry, CEO and chair of VillageMD, said in an interview with Fierce Healthcare.
“If we’re going to ultimately stem the rising tide of this fee-for-service healthcare system, we need a better solution, and that solution needs to have doctors working with other doctors in a coordinated way and trying to solve the unique problems that these patients have and making sure that the right doctors are accessing the patient at the right time, and doing it all underneath the umbrella of a risk-based contract,” Barry said.
He added, “We think that this is going to continue to be where healthcare goes. And, we have to do it in a way that is integrated and value-oriented. Any organization focused on doing that, and doing that at size and scale, is going to continue, I think, to be the successful winners of our healthcare system.”
In 2019, Summit Medical Group, a physician-owned and governed multispecialty group, merged with CityMD, a leading urgent care company in New York City. The combined organization, Summit Health, has more than 370 locations in New Jersey, New York, Connecticut, Pennsylvania and Oregon.
VillageMD provides value-based primary care for patients at traditional free-standing practices, Village Medical at Walgreens practices, at home and via virtual visits. VillageMD and Village Medical have grown to 22 markets and are responsible for more than 1.6 million patients, according to the company.
Barry said the combination of VillageMD and Summit Health-CityMD will enable the organizations to scale up value-based care and build out integrated primary and specialty care services.
“If you look at the long history of Summit Health, it’s an organization that has done some very innovative things. The way that they deliver multispecialty care, it is truly integrated, it’s truly connected and they are known as the preeminent brand in their marketplace. They also have CityMD, which is one of the more unique and differentiated urgent care models out there in the market. They really are a best-of-breed organization,” he said.
“When I look at what we’ve been able to do at VillageMD, we built this incredible model of value-based primary care delivery. The idea of bringing these two organizations together to bring those best-of-breed capabilities under one umbrella was just so compelling. We will soon be able to offer a more comprehensive, integrated and connected model by also offering other specialty services to our patients, but all still done through a value or risk-based reimbursement structure.”
Barry is bullish on the combined capabilities of the two companies in the primary and specialty care markets.
“We’ll be delivering a consistent value-based model of integrated, multispecialty care in a way that delivers the best clinical results on the planet,” he said.
Jeff Alter, CEO of Summit Health-CityMD, said in a statement that the deal adds Summit Health’s expertise and geographic coverage to VillageMD’s proven value-based primary care approach.
The acquisition also expands Walgreens’ reach into providing medical care directly to patients. “This transaction accelerates growth opportunities through a strong market footprint and wide network of providers and patients across primary, specialty and urgent care,” Roz Brewer, CEO of Walgreens Boots Alliance, said in a statement.
With Cigna’s investment, the combined company will be able to tap into Evernorth’s health services capabilities to potentially lower healthcare costs, Barry said. Evernorth encompasses Cigna’s health services businesses including pharmacy benefit manager Express Scripts
“In order to be a risk-based provider or a value-based provider, you have to have contracts with a payer that allows you to work in this value or risk-based construct. We learned over the years that Cigna has been a really good partner to us on that journey,” Barry said.
“There are companies that [Cigna] has purchased over the years that have different specializations and capabilities that we believe ultimately will allow us to deliver better care to our patients,” he noted. “Evernorth has some capabilities tied to behavioral health, and they have some capabilities tied to the management of specialty pharmaceutical spend, which everyone knows those costs continue to be soaring. We both liked the idea of supporting an organization like ours that’s going to continue to grow and continues to be focused on risk and value.”
With the investment in VillageMD and Summit Health, Cigna gets a leg up in the primary care space as it looks to build out its Evernorth division.
“Our collaboration with VillageMD accelerates our efforts to improve the way care is accessed and delivered,” said Eric Palmer, CEO of Evernorth, in a statement. “Harnessing the breadth of Evernorth’s health services capabilities and connecting them with physicians who provide care in a value-based model like VillageMD, helps more people to get the right care at the right time—driving better health and value.”
Retailers and insurers are building out their primary care strategies in a bid to become the new front door for patients seeking healthcare services, especially seniors on highly profitable Medicare Advantage (MA) plans. In the graphic above, we examine the capabilities of three of the largest pharmacy chains—CVS Health, Walgreens, and Walmart—to deliver full-service primary care across in-person and virtual settings.
CVS pioneered the pivot to care provision in 2006 with its acquisition of MinuteClinic, which now has over 1,000 locations. The company has further expanded its concept of pairing retail and pharmacy services with primary care by opening over 100 HealthHUBs, which provide an expanded slate of care services. However, CVS lags competitors in the rollout of full-service primary care practices, with its proposed physician-led Super Clinics still stuck in the planning stages.
Walgreens, with its majority stake in VillageMD (on track for 200 co-branded practices by the end of the year) and the recent acquisition of Summit Health (which operates another 370 primary and urgent care clinics) has assembled the most impressive primary care footprint of the three companies.
Walmart, the largest by number of stores but also the newest to healthcare, has opened more than 25 Walmart Health Centers, a step up from earlier experimentation with in-store care clinics, offering more services and partnering with Epic Systems to integrate electronic health records.
CVS’s key advantage over its competitors comes from its payer business, having acquired Aetna in 2018, now the fourth-largest MA payer by membership. Walgreens and Walmart have both aligned themselves with UnitedHealth Group (UHG) to participate in MA, with Walmart having struck a ten-year partnership to steer UHG MA beneficiaries to Walmart Health Centers in Florida and Georgia.
While aligning with UHG expands the reach of these retail giants into MA risk, UHG, whose OptumHealth division is by far the largest employer of physicians nationwide, remains the healthcare juggernaut most poised to unseat incumbent providers as the home for consumers’ healthcare needs.
According to reporting from Bloomberg, primary care company VillageMD, which is majority-owned by Walgreens, is engaged in talks to merge with New Jersey-based Summit Health, a large medical group network and urgent care chain backed by private equity firm Warburg Pincus.
In 2019, Summit merged with CityMD, a New York City-based urgent care chain, and operates over 370 clinic locations based in and around New York City, as well as in central Oregon. The combined entity would be valued between $5B and $10B.
The Gist: Should this deal go through, it would epitomize recent trends in healthcare M&A:a well-established independent medical group using private equity funding to rapidly expand its operations before selling off to an industry giant.
If that industry giant ends up being VillageMD, Walgreens would finally have a physician practice with deep experience in managing risk, on which they can anchor their larger ambitions in care provision. And if the deal with Walgreens falls through, Summit, with its combination of mostly suburban value-based care practices and largely urban urgent care chains, is sure to attract plenty of other suitors, including any of the major national insurers.
While Amazon has been amassing a range of healthcare assets in recent years, including an online pharmacy, virtual and in-home care capabilities, and even diagnostics, this marks the e-commerce giant’s first significant push into bricks-and-mortar healthcare delivery.
One Medical, which went public in 2020, operates 182 medical offices in 25 markets, and acquired Medicare-focused primary care provider Iora Health last year. It offers an access-forward, concierge-lite model to employer clients and individual consumers, and more recently has pursued a partnership strategy with anchor health systems in the markets where it operates.
The Gist:Amazon’s pricey purchase of One Medical, for which it will pay a 77 percent premium over market value, is sure to set the healthcare punditocracy afire—even more than its earlier, ill-fated arrangement with JPMorgan Chase and Berkshire Hathaway.
Clearly, Amazon is shifting from a build-and-tinker to a buy-and-scale approach to its Amazon Care business, which has been slow off the mark since the company first started selling its own employee clinic services to other employers. With One Medical, Amazon gets thousands more employer relationships, a much larger physical footprint, and a buzzy brand in primary care.
But the deal is less “disruptive” than it might first appear. There is still a missing piece—namely, a risk model that lets Amazon profit from managing patients in the primary care setting. One Medical’s model is expensive—it has yet to turn a profit—and despite the acquisition of Iora’s population health platform, it has doubled down on creating linkages with high-cost health systems rather than truly investing in care management.
Primary care on its own is not an attractive growth business, even in a hybrid virtual/in-person model, even at Amazon’s scale. To truly disrupt healthcare, Amazon will need to wade into the risk business, either by partnering with a health plan or creating its own risk arrangements with employer clients.
That’s going to be hard, for all the same reasons that Haven was hard—entrenched payer relationships, slow-moving benefits managers, and a murky and conflicted broker channel. We’d love to be proven wrong, but this deal feels less like true innovation and more like a frothy story for slide decks and conference panels.
Amazon plans to acquire virtual and in-person primary care company One Medical, the online retailer said July 21.
In a cash deal valued at $3.9 billion, the aim is to combine One Medical’s technology and team with Amazon, it said in a news release. The goal of the acquisition, according to the two companies, is to offer more convenient and affordable healthcare in-person and virtually.
“The opportunity to transform healthcare and improve outcomes by combining One Medical’s human-centered and technology-powered model and exceptional team with Amazon’s customer obsession, history of invention and willingness to invest in the long-term is so exciting,” said Amir Dan Rubin, CEO of One Medical, in a company news release. “There is an immense opportunity to make the healthcare experience more accessible, affordable, and even enjoyable, for patients, providers and payers. We look forward to innovating and expanding access to quality healthcare services together.”
Amazon will acquire One Medical for $18 per share.
Completion of the transaction is subject to customary closing conditions, including approval by One Medical’s shareholders and regulatory approval.
If the acquisition is approved, Mr. Rubin will remain CEO of One Medical.
HENRY KOTULA 