CVS’ $10.6B Deal to Buy Oak Street Health Solidifies Its Medtail Strategy

CVS Heath Corp. is expanding a health care network that now stretches from insurance and benefits providers, to your local pharmacy, to a thriving network of 169 clinics in MOBs providing care to nearly 160K people as of the end of last year.

The Woonsocket, RI-based company has agreed to acquire Oak Street Health for an enterprise value of $10.6B, CVS’ second major health care acquisition in the past two years, according to a report in Bloomberg.

Chicago-based Oak Street Health is a rapidly expanding its national network of 169 centers. The health care provider, which went public in 2020, is executing a strategy of “reinventing care” for Medicare patients with low incomes and chronic health problems.

CVS has said it wants to make health care more convenient and affordable for consumers. The company is expanding its reach to partner with doctors and eventually acquire primary care practices.

According to Bloomberg, CVS also was in talks late last year to buy another health care provider, Cano Health.

The pharmacy giant, which bought insurance company Aetna in 2018, agreed last year to acquire Signify Health. The deal for Signify as well as Oak Street are expected to close this year.

CVS is paying $39 a share in cash for Oak Street at an equity value of $9.47B. The company said the deal will be funded through available resources and existing financing capacity in order to maintain CVS’ current credit ratings, Bloomberg reported.

Shares of Oak Street have more than doubled in the past year. On Monday, as news of the CVS acquisition broke, shares of Oak Street rose 33%, giving the company a market value of $8.2B.

According to its website, Oak Street provides personalized service to its Medicare patients, essential managing everything associated with their health care needs.

Under a heading “Doctors Who Actually Listen,” the information reads: “Our doctors actually listen, in fact, there’s a note-taker on hand so your doctor can give you their full attention. You won’t feel rushed and they’ll make sure you understand everything.”

The Chicago-based network bills its Oak Street Health centers as ”more than a doctor’s office,” branding them as health care and community centers that are places where seniors can go “to socialize and enjoy feel-good activities, including craft-making, education and exercise classes.”