CVS to buy Medicare-focused primary care operator Oak Street Health for $10.6 billion

CVS Health announced Wednesday it would buy Oak Street Health, expanding its healthcare services by adding hundreds of primary care clinics.

The deal is valued at about $10.6 billion including debt, or $39 per share, the drug store chain said.

Oak Street Health runs primary care centers 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.

It employs about 600 primary care providers and has 169 medical centers across 21 states, CVS said. The company plans to increase the number of Oak Street Health centers to more than 300 by 2026.

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Helping control costs

With its latest acquisition, CVS Health aims to capitalize on the federal government’s interest in cutting costs and improving the health of people in its Medicare program.

The government wants more people in value-based care arrangements, which focus on keeping patients healthy and any chronic problems like diabetes under control.

"This will accelerate our ability to deliver on our mission to rebuild healthcare as it should be," Oak Street Health tweeted Wednesday.

In addition to running nearly 10,000 drugstores nationwide, CVS Health also covers millions of people with Medicare Advantage plans through its Aetna arm. Big insurers like that need a major presence in primary care to help control costs, BTIG analyst David Larsen wrote before Wednesday's deal was announced.

What sets Oak Street Health apart, the CVS release says, is Canopy, Oak Street Health’s technology platform that helps determine "the appropriate type and level of care for each patient."

"That care will be enhanced by CVS Health’s community, home and digital offerings," the release continues.

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“This agreement with CVS Health will accelerate our ability to deliver on our mission and continue improving health outcomes, lowering medical costs, and providing a better patient experience while offering significant value to our shareholders,” Oak Street Health CEO Mike Pykosz said.

Pykosz previously said a lot of costs stem from people with chronic health problems who receive poor care and wind up with big medical problems.

“Solving that problem creates a massive, massive market opportunity for Oak Street Health,” Pykosz said in January at an annual conference hosted by JPMorgan.

Contributing: Associated Press

Natalie Neysa Alund covers trending and breaking news for USA TODAY. Reach her at nalund@usatoday.com and follow her on Twitter @nataliealund.

This article originally appeared on USA TODAY: CVS to buy Oak Street Health, primary care operator, for $10.6 billion