CVS it is set to buy Oak Street Health, a primary care provider targeting Medicare patients, for $10.6 billion. CVS already has the insurance company Aetna, a pharmacy benefits provider, and a home care provider.
Oak Street provides care to mostly older people through Medicare. Buying it is part of CVS’s quest to become a one-stop shop in health care, said John Palizza, a retired Walgreens executive and former lecturer at Rice.
“I think CVS is looking at that market and saying, ‘Well, if we can capture that at the primary care level, we will also probably capture much of it at the prescription level,” Palizza said. “And of course, seniors take a lot of prescriptions.”
Oak Street is also in what’s known as the value care business. Instead of providers being paid for every test and procedure they do, they’re paid a lump sum per month for the overall wellness of the patient.
“Instead of just saying, ‘Hey we’re gonna see you once a quarter and renew your prescription,’ it might be like, ‘Hey, please come in every single week for the next month and we’ll make sure your diabetes is under control,'” said Elizabeth Anderson, a managing director with Evercore ISI.
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It’s more time-consuming, but the idea is to prevent more serious conditions that would be a lot more expensive. Since CVS also has an insurance company, it can recycle those savings into other benefit plans like vision and dental at lower cost, Anderson said.
As of now, the deal is not done and still has to get past regulators.