CVS Health is in the closing stages of a deal worth $10.5M for the primary care organziation Oak Street Health. According to the Wall Street Journal (WSJ) report, this includes debt as well.
According to the report, which quotes people who have information on the matter, there is an ongoing discussion between the companies regarding the per-share price of nearly $39. According to the same sources, the acquisition deal could be concluded and announced later this week if all hiccups are faced. CVS is to report the earnings in the coming days.
It was reported by MarketWatch that after the article was published in WSJ the shares of Oak Street Health rose over 35% on Monday. The company’s share’s closing price on Monday was $25.96 following a drop of 2.5% but the extended session saw a 21.3% rise to $35.50.
It was also reported that during the J.P. Morgan Healthcare Conference that took place in January, there was a buzz about CVS considering a $10M deal for the purchase of the primary care entity.
In the same week in January, CVS declared that it was in partnership with Carbon Health with an investment of $100M. The partnership would also allow the startup to launch its urgent care and primary care clinic model in CVS’s retail stores. The drugstore company’s expansion outside retail pharmacies began after its $69B acquisition of Aetna, a health insurance company, back in 2018.
Strategic steps have been taken by CVS Health to further develop its stronghold in healthcare through acquisitions. The company also plans to acquire Signify Health, a home health company, for almost $8B. Last year there were rumors that the company’s acquisition of Cano Health, another player in the primary care market, was also in motion. Regulatory filings revealed that at a point in time, there was also a bidding war between CVS and Amazon One Medical Acquisition Deal.
CVS’s focus to expand further in primary care is reflected by the large number of stores it operates around the country; 9,900. According to the CEO of CVS Karen Lynch, the company wants to improve its primary care services as well as home health and provider enablement. This was revealed in the company’s 2nd quarter earnings meeting in August.
According to the information provided at the J.P. Morgan Healthcare Conference, Oak Street Health operates in 21 states in the country and has 169 primary care clinics. The estimated 2022 revenue of the company will be up to $2.16B.
The company has precise targets for patients who are eligible for Medicare in underserved areas. Value-based care payment methods are used to keep costs under control while improving outcomes. Using their economic model the company earned a 100% quality score and also attained the greatest net savings from 53 DCEs (Direct Contracting Entities) in the GPDC Model (Global and Professional Direct Contracting) for the performance year 2021.
In 2022 however, the company has substantial losses and is projecting a $287.5M of EBIDTA loss.