Oak Street Health unveils expansion plans to open centers in 4 new states


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.

CVS folded the company into its newly created healthcare delivery arm. The company also recently finalized its $8 billion acquisition of home health and technology company Signify Health.

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.

Walmart to open 4 new health centers

Retail giant Walmart announced the 2024 opening of four new health centers in Oklahoma.

Oklahoma joins Missouri and Arizona as the third state Walmart Health will enter in 2024. 

The 5,570-square-foot centers will be located next to Walmart retail locations and will include primary care, labs, X-rays, EKG, behavioral health, dental, hearing and telehealth services, according to an April 26 Walmart news release.

The health centers will use the Epic EHR system. The new locations will be in the Oklahoma City area, according to the release.

What’s driving the bidding war for primary care practices?


Published in the April edition of Health Affairs Forefront, this piece unpacks why payers and other corporations have replaced health systems as the top bidders for primary care practices, driving up practice purchase prices from hundreds of dollars to tens of thousands of dollars per patient. While corporate players like UnitedHealth Group, Amazon, and Walgreens have spent an estimated $50B on primary care, it pales in comparison to the potential “$1T opportunity” in value-based care projected by McKinsey and Company.

The authors argue that this tantalizing opportunity exists because the Centers for Medicare and Medicaid Services (CMS) invited corporations to “re-insure” Medicare through capitated arrangements in Medicare Advantage (MA) and its Direct Contracting program.

While CMS intended to promote risk and value-based incentives to improve care quality and costs, the incentive structures baked into these programs have afforded payers record profits, despite neither improving patient outcomes nor reducing government healthcare spending.

The Gist: While the critiques of MA reimbursement structures in this piece are familiar, they are woven together into a convincing rebuke of the “unintended consequences” of CMS’s value-based care policy. 

Through poorly designing incentives, CMS paved a runway for corporate America to capture the lion’s share of the financial returns of value-based care, paying prices for primary care that health systems can’t match.

Meanwhile, despite skyrocketing valuations for primary care practices, primary care services remain underfunded and inadequately reimbursed, pushing primary care groups closer to payers with excess profits to invest.

Walgreens healthcare division boosts retail giant’s second-quarter earnings

Dive Brief:

  • Walgreens’ growing U.S. healthcare segment is continuing to bolster the retail health chain’s financial performance. The business, which includes value-based provider VillageMD, recorded $1.6 billion in sales in the second quarter, an increase of $1.1 billion from last year.
  • VillageMD sales were up 30%, including a boost from its recent acquisition of medical group Summit Health. Specialty pharmacy Shields Health Solutions grew sales 41%, while at-home care provider CareCentrix’s sales were up 25%.
  • Thanks in part to a jump in revenue in its healthcare segment, Walgreens’ results beat Wall Street expectations even as profit declined more than 20% amid lower COVID-19 vaccine volumes and test sales, higher salary costs, opioid litigation charges and costs associated with its $3.5 billion investment in its Summit acquisition.

Dive Insight:

Walgreens has been working to expand its business scope beyond pharmacies to more consumer-centric healthcare, and has acquired a number of companies to build out its growing U.S. healthcare division.

In its earnings results for the second quarter ended Feb. 28, the business reported gross profit of $32 million, as income from Shields and CareCentrix was offset by VillageMD expansion costs. VillageMD added 133 clinics compared to the second quarter last year.

In November, Walgreens agreed to acquire healthcare provider Summit through VillageMD. The almost $9 billion deal closed in January and included investments from Cigna’s health services division Evernorth.

“With the closing of VillageMD’s acquisition of Summit Health, [Walgreens] is now one of the largest players in primary care,” CEO Roz Brewer said in the company’s earnings release on Tuesday.

VillageMD also acquired a Connecticut-based medical group in March for an undisclosed amount. That group, called Starling Physicians, operates more than 30 primary care and multi-specialty practices across the state.

Starling “will contribute heavily to revenue and EBITDA growth in the second half of 2023,” said Walgreens CFO James Kehoe on a Tuesday morning call with investors. “Overall, the primary care business and the specialty care business is doing really, really well.”

Despite the recent deals, Walgreens is moving beyond its peak investment period in healthcare, management said on the call. VillageMD, for example, plans to concentrate growth and investments in specific markets where it can be “hyper-relevant” moving forward, according to Walgreens President John Standley.

Physician Arms Race


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 acquiring Oak Street Health for $10.5B

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 MedicalHumana 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.

Inside the current urgent care ‘boom’

Urgent care centers have become increasingly popular among patients in recent years. And while the facilities may be a more convenient care option than others, experts have voiced concerns about potential downsides, Nathaniel Meyersohn writes for CNN.

What is driving the urgent care ‘boom’?

Urgent care centers have been in the United States since the 1970s, but they were widely regarded as “docs in a box,” with slow growth in their early years. Then, during the COVID-19 pandemic, demand for tests and treatments drove an increase in patients at urgent care sites around the country. According to the Urgent Care Association (UCA), patient volume at urgent care centers has increased by 60% since 2019.

As patient volumes and demand increased, growth for new urgent care centers surged. Currently, there are a record 11,150 urgent care centers in the United States, with around 7% growth annually, UCA said. Notably, this figure excludes clinics inside retail stores and freestanding EDs.

According to estimates from IBISWorld, the urgent care market will reach roughly $48 billion in revenue in 2023, a 21% increase from 2019.

Urgent care has grown rapidly because of convenience, gaps in primary care, high costs of emergency room visits, and increased investment by health systems and private-equity groups,” Meyersohn writes.

Urgent care center growth also “highlights the crisis in the US primary care system,” Meyersohn writes, noting that the Association of American Medical Colleges said it expects a shortage of up to 55,000 primary care physicians in the next decade.

In addition, it can be difficult to book an immediate visit with a primary care provider. Urgent care sites have longer hours during the week and are open on weekends, making it easier to get an appointment. According to UCA, roughly 80% of the U.S. population is within a 10-minute drive of an urgent care center.

“There’s a need to keep up with society’s demand for quick turnaround, on-demand services that can’t be supported by underfunded primary care,” said Susan Kressly, a retired pediatrician and fellow at the American Academy of Pediatrics.

Meanwhile, health insurers and hospitals have also prioritized keeping people out of the ED. In the early 2000s, they started opening their own urgent care sites and implementing strategies to deter ED visits.

The passage of the Affordable Care Act also triggered an increase in urgent care providers, with millions of newly insured Americans accessing healthcare.

In addition, data from PitchBook suggests that private-equity and venture capital funds invested billions into deals for urgent care centers.

“If they can make it a more convenient option, there’s a lot of revenue here,” said Ateev Mehrotra, a professor of healthcare policy and medicine at Harvard Medical School who has researched urgent care clinics. “It’s not where the big bucks are in health care, but there’s a substantial number of patients.”

The increase in urgent care sites may present challenges

Many doctors, healthcare advocates, and researchers have voiced concerns at the increase in urgent care sites, noting that there are potential downsides.

“Frequent visits to urgent care sites may weaken established relationships with primary care doctors,” Meyersohn writes. “They can also lead to more fragmented care and increase overall health care spending, research shows.”

In addition, some experts have questioned the quality of care at urgent care centers, particularly how well they serve low-income communities.

In a 2018 study by Pew Charitable Trusts and CDC, researchers found that urgent care centers overprescribe antibiotics, especially those used to treat common colds, the flu, and bronchitis.

“It’s a reasonable solution for people with minor conditions that can’t wait for primary care providers,” said Vivian Ho, a health economist at Rice University. “When you need constant management of a chronic illness, you should not go there.”

Some doctors and researchers also expressed concern that patients are visiting urgent care centers instead of a primary care provider altogether.

“What you don’t want to see is people seeking a lot [of] care outside their pediatrician and decreasing their visits to their primary care provider,” said Rebecca Burns, the urgent care medical director at the Lurie Children’s Hospital of Chicago.

There are also concerns about the oversaturation of urgent care centers in higher-income areas that have more consumers with private health care and limited access in medically underserved areas,” Meyersohn writes.

A 2016 study from the University of California at San Francisco found that urgent care centers typically do not serve rural areas, areas that have a high concentration of low-income patients, or areas that have a low concentration of privately-insured patients.

According to the researchers, this “uneven distribution may potentially exacerbate health disparities.” 

Dollar General piloting mobile clinics at three locations


Budget retailer Dollar General announced this week that it’s partnering with mobile medical service provider DocGo to deliver routine primary care in mobile clinics outside three stores near its Goodlettsville, TN headquarters

The mobile clinics will accept public and select commercial insurance plans, as well as offer services for a flat fee. It’s the latest step in Dollar General’s tentative exploration of healthcare, which includes a partnership with Babylon Health to offer telehealth visits in several Missouri stores, and the DG Wellbeing initiative, which has placed basic health and wellness products in roughly 3,200 of its 19,000 stores nationwide. 

The Gist: With an unmatched footprint in rural areas (an estimated 75 percent of the US population lives within five miles of one of its stores) Dollar General has the capacity to transform rural healthcare access. 

Rather going head-to-head with other national retailers who are quickly expanding into healthcare delivery, Dollar General has so far taken a measured approach, aiming to develop workable services that improve rural healthcare access at the margins. 

Since it hired a chief medical officer in 2021, it has dabbled in small care delivery pilots like this one, but one of these pilots will need to succeed at scale for Dollar General to enter the ranks of serious retail disruptors.

CVS invests $100M in Carbon 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.

Inflation supercharging cost-sharing challenges in healthcare


After COVID fears and shutdowns led consumers to delay care early in the pandemic, persistently high inflation over the past year has further suppressed volumes.

As the graphic above illustrates, the average deductible for individual coverage has grown by over 140 percent since 2010, exposing consumers to an increasing portion of healthcare costs, and prompting economists to reevaluate the adage that healthcare is “recession-proof”. 

This year, that trend collided with an inflation spike that outpaced wage gains by two percent. Faced with diminished purchasing power, households are making budget tradeoffs which explicitly pit healthcare against other essential household needs. 

For some, this cost-cutting impulse even extends to preventative screenings—required to be covered without cost-sharing—when consumers’ financial concerns drive them to avoid healthcare altogether. 

While the latest inflation report suggests price increases are moderating, fears of a broader recession persist, making it critical for health systems and physicians to communicate with patients, encouraging them to continue to access preventive care, educating them about lower cost care options, and helping them prioritize treatment that should not be put off.