CVS is diving deep into primary care, hoping to make healthcare more accessible, cut costs, and keeping people healthy. It announced last week that it will spend about $10.6B on Oak Street Health, a company that provides primary healthcare to seniors enrolled in Medicare.
This investment is a sign of the growth of value-based care, an approach to medicine that is popular with “bill payers”, such as the US Government Medicare program.
What is value-based care?
Value-based care programs provide incentives based on the quality of care given to patients. This is part of a larger strategy to reform how the health care system operates. The goal is to provide:
- Better care for individuals
- Better health for populations
- Lower cost
Value-based care aims to reward doctors for keeping patients healthy by helping them stay on their medications and controlling chronic health problems, such as diabetes. The idea is to avoid hospitalization, ER visits and other expensive treatments by keeping people healthy.
“It is clear that value-based-care is becoming a dominant model in healthcare,” BTIG analyst David Larsen said in a recent research note.
Oak Street Health centers use a system of doctors, social workers, and other healthcare providers to help people learn to manage their own health.
CVS is becoming a dominant force in primary care because of its combination of retail stores, Minutes Clinics, its recent acquisition of Signify Health, a home healthcare company and now with Oak Street Health.
Oak Street CEO Michael Pykosz has said that a lot of healthcare costs come from patients with chronic health issues 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.
CVS Health CEO Karen Lynch told analysts Wednesday that she sees primary care as a key to improving patient health. She noted that although it represents only about 10% of health care spending nationally, the specialty holds “significant influence” over health care use.
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[…] past year, many retailers like CVS, Walmart, Walgreens have also expanded their primary care services significantly. […]