CVS Health is rolling out a new store format in several U.S. markets that includes Oak Street Health’s senior-focused health centers “side-by-side” a pharmacy, the healthcare company said.
What began as a pilot project in Houston last year is now beginning a national expansion, starting with three Chicago locations that are among about 25 Oak Street Health centers that will be alongside a CVS pharmacy in reformatted former drugstores by the end of 2024. The new format is being deployed this year in several other markets including New York City, Dallas-Fort Worth and Columbus, Ohio. Another 11 of the new formats with Oak Street health centers alongside a pharmacy will open in 2025.
The expansion comes a little more than a year after CVS acquired Oak Street Health for $10.6 billion in cash, adding a large network of doctor-staffed clinics primarily used by seniors. Aside from the new formats, Oak Street already has more than 200 standalone health centers in 25 states and is continuing to scale that model with 25 “stand-alone” Oak Street Health Centers planned for the rest of this year.
“By coupling these two powerful CVS Health assets, it advances the company’s strategy to deliver personalized health care experience in a more integrated way especially for senior patients with complex or chronic health conditions,” said Mike Pykosz, who co-founded Oak Street and ran the company for more than a decade before it sold to CVS. He is now executive vice president and president of health care delivery for CVS Health.
While the Oak Street health centers are open to Medicare patients who have access via their health insurance plans, the CVS pharmacies onsite are open to the public, CVS executives said.
CVS’ expansion comes at a time rivals are having troubles in the retail healthcare and primary care space. Walgreens has shuttered dozens of doctor-staffed clinics it opened with its partner VillageMD while Walmart has closed its 51 Walmart Health centers in five states. Last week, health insurer Humana announced that its healthcare services business, CenterWell, plans to lease and open senior-focused primary care centers at 23 former Walmart Health clinic locations in Florida, Georgia, Missouri and Texas.
By 2026, CVS said Oak Street Health “will have more than 300 centers, each of which has the potential to contribute $7 million of Oak Street Health Adjusted EBITDA at clinic maturity.”
Like Humana, CVS Health owns a health insurance company. Thus, CVS Health’s ownership of Aetna allows the company to offer incentives through its Medicare health plans to get seniors to use Oak Street Health centers.
The idea is to offer seniors an array of primary care services plus “behavioral health, social support and Medicare education” all in one locations. Oak Street centers, which accept an array of health insurance plans beyond Aetna’s, also include a community room where seniors can gather for social activities and events.
In an interview earlier this year, CVS Health chief executive officer Karen S. Lynch said the company’s four million Medicare Advantage members “can have access to our Oak Street clinics.”
“We have a captive audience with benefit designs that can support the physicians (in the clinics),” Lynch said. “We can drive patients to (the Oak Street health centers.)”
By having the pharmacy and the Oak Street centers “side-by-side,” CVS executives calls its healthcare delivery model an integrated “team-based approach” that allows seniors to pick up prescriptions in the same location and strengthens the communication among physicians, pharmacists and other medical and behavioral health providers.
“We are already seeing the benefits of our value-based model lowering the total cost of care for customers, clients, and patients,” Pykosz said. “We believe our evidence-based approach will build upon these results as we more fully integrate with our core businesses.”
