CVS Health said Wednesday that it will spend about $10.6 billion to buy Oak Street Health, which runs clinics that specialize in treating Medicare Advantage patients.
It essentially rewards doctors for keeping patients healthy instead of paying them for every service they perform. The idea is to help people stay on their regular medications, control chronic health problems such as diabetes, and avoid hospital stays and other expensive medical treatments. Oak Street CEO Michael Pykosz has said that a lot of costs stem from patients with chronic health issues who receive poor care and wind up with big medical problems.
Oak Street runs care centers mostly for lower-to-middle income people with Medicare Advantage plans. Those are privately run versions of the federal government's program for people aged 65 and older. Oak Street's revenue grew to $1.43 billion in 2021, and analysts expect that it topped $2 billion last year. But the company is spending heavily to open new clinics, and its losses have grown every year.
He added in a note Wednesday that the price CVS Health was willing to pay for Oak Street probably climbed due to a potential tightening of Medicare reimbursement and a competitive market that includes Amazon.com.
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