CVS Health’s $10.6 billion acquisition of Oak Street Health plants another flag in the latest era of health insurance industry consolidation — one defined by insurers moving beyond managing medical and drug benefits, and into directly providing care to people in a primary care office or at home.
The financial benefits are immense for insurers that own those low-cost settings. Proactively managing patients’ health conditions and coordinating care could prevent some people from unnecessary, and costly, hospitalizations. When insurers can direct their members to clinics they own, they can also keep more of the premium dollars they collect. Instead of writing checks to outside doctors and facilities, they are writing checks to themselves — a profitable and controversial strategy that has been the cornerstone of UnitedHealth Group for the past decade.
CVS’ deal for Oak Street, first reported by the Wall Street Journal, also reinforces how desirable and lucrative the growing Medicare population has become — although CVS appears to be paying above top-dollar for a company that is losing hundreds of millions of dollars every year. Oak Street runs 169 clinics where doctors and nurses specifically treat older adults on Medicare and Medicare Advantage. Similarly, CVS is in the process of buying Signify Health, a vendor that sends clinicians to people’s homes for health evaluations. Those assessments are crucial to how Medicare Advantage insurers, like CVS’ Aetna, get paid from the government.
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