Oak Street Health has hit the ground running in the month since CVS Health added the primary care provider to its healthcare business division.
CVS Health got a coveted primary care asset to its portfolio when it finalized the $10.6 billion acquisition of Chicago-based Oak Street Health in May. And Oak Street gained access to its new parent company’s arsenal of resources that can advance its long-term strategy, CEO Mike Pykosz told Modern Healthcare.
Oak Street plans to grow its footprint into four new states this year while increasing its presence in existing markets, the provider announced Wednesday. At its current pace, Oak Street is on track to operate 300 clinics by 2026, but Pykosz said the company is taking care not to overextend itself.
Pykosz spoke with Modern Healthcare on Thursday about Oak Street’s expansion plans and how CVS Health supports its goals. The interview has been edited for length and clarity.
What do you hope to gain from your partnership with CVS Health?
We’re proud of what we’ve accomplished, but we need to bring Oak Street to more people.
There is no healthcare company in the ecosystem that has the breadth of CVS—whether that’s the retail footprint, the pharmacies, or the Aetna health plan business. We are excited to partner with all those parts of CVS to accelerate our ability to see more patients, open up more channels to care for those patients and do better coordination on patient care.
CVS also bought the largest home-based health risk assessment company, Signify. What we’ve heard when talking to Signify is that a meaningful portion of people they’re going to health -risk assess have chronic illnesses and need a doctor. What a great opportunity for us to become their largest provider of care.
More than 90% of Oak Street centers are located in underserved areas and treat patients with incomes below 300% of the federal poverty level. As your company expands, does it aim to continue serving this population?
The communities we’re going into in 2023 are similar to the communities we went into last year and all the way back to 2013 when we started. I expect that to continue.
We look at our addressable market being moderate-to-lower-income older adults, so blue-collar workers and down to those in some of the most challenging neighborhoods in big and mid-sized cities. When you look at our addressable market, it is 30 million Medicare beneficiaries. To care for those people, we would need 10,000 Oak Street centers.
You know what? CVS put up 10,000 stores, so it is possible.
Do you have projections now for patient visits and revenue in 2024?
We’re early enough in the process where we’re still learning what’s going to work and what’s not going to work. The first step is piloting ideas and understanding which are working. If every idea works, then you’re not thinking of enough ideas.
I would be very disappointed if we’re not growing faster and providing higher quality care in 2024 as part of CVS than we were outside of it. I’m optimistic we will be doing that.
What kind of controls are you putting in place to make sure Oak Street is not growing too fast?
It’s all about titrating up the number of centers. We put up 50 centers in 2021, and the centers are performing great. But we actually lowered the number of centers in 2022 and 2023 from that 50 because of the financial conditions in the market. We were originally planning on putting up 70 centers in 2022 and we had the infrastructure, but we ended up spreading those out over two years.
We’ve also focused on building the talent and leadership pipelines to let us expand. We have the only accredited value-based care fellowship in partnership with Northwestern University’s medical school through which doctors finish residency, do a fellowship at Northwestern medical school, get their MBA at night and work part-time at Oak Street. After they finish that, they become medical directors for us. We also have a nurse practitioner residency in partnership with the University of Michigan School of Nursing.
How many jobs will Oak Street create as it expands?
A mature center is going to have about 50 people, including doctors, nurse practitioners, nurses, medical assistants, social workers, receptionists, health coaches and others.
We try to hire as many people as possible from the communities we serve because we want to help these communities. We also think it drives better care because now you’re able to provide culturally competent medicine.
Are you facing challenges with staffing these new centers?
Hiring doctors and nurse practitioners is never easy. That was the case in 2013 when we opened, and that is the case today. That’s why we’ve done all those things around building the pipelines.
Then there’s hiring medical assistants, nurses, receptionists, community health workers and social workers. Every one of those roles has a bit of a micro-market around it and different levels of difficulty hiring. It’s definitely not as hard as it was the past couple years to hire non-credential or non-licensure jobs.
Is there talk of expanding into more specialties or types of care beyond primary care?
Yes and no. We do have some specialists today. We have a very robust behavioral health program that employs psychiatrists and social workers. While we can get same-day or next-day access to MRIs in Chicago, there is a three-month wait to see a psychiatrist. You’re not going to be able to manage your diabetes or other chronic conditions if you have a behavioral health concern that’s not addressed.
Our approach is not to buy a big multispecialty group. To be extreme, we’ll never have a hospital at Oak Street because there are more hospital beds in this country than we need. Same thing around imaging centers. That’s not what we’re going to try to do.
I hope we have 10,000 centers, but I doubt we will, so we need other people to step up and provide value-based care, too. It can be a huge solution to a lot of our broader societal problems.
Caroline Hudson contributed to this story.