CVS Health plans to acquire Oak Street Health in a $10.6 billion deal, which will likely close later this year.
When the deal closes, CVS will have strengthened its position as one of the largest healthcare organizations in the country and become another area where it competes with Optum, which it already beats on revenue. Optum had full year revenue of $182.8 billion in 2022 while CVS Health reported $322.5 billion. UnitedHealth Group, which owns Optum, reported $324.2 billion revenue.
Oak Street will bring CVS Health 600 employed primary care providers and 169 medical centers in 21 states. Oak Street also has a virtual care component and technology solution, Canopy, fully integrated with operations. The organization aims to keep expanding its physical footprint, aiming to have 300 centers by 2026 contributing $7 million each to Oak Street's adjusted EBITDA at maturity.
CVS Health now has more than 40,000 physicians, pharmacists, nurses and nurse practitioners in its network. Optum wins by physician volume; it has 60,000 physicians in 2,000 locations nationwide who serve more than 20 million patients annually, including 1.3 million Medicare patients. Optum has both primary care and specialty physicians, with clinics and 320-plus ambulatory surgery centers in its network.
Optum is also getting into the home health business with an acquisition of LHC Group, which is expected to close in early 2023 for around $5.4 billion. The company has a presence in 37 states and cares for more than 500,000 patients.
CVS Health isn't far behind on the home-based front either. The company is in the process of acquiring Signify Health, an in-home and virtual care platform. Signify has more than 10,000 licensed providers in its network and provides 1.9 million in-home evaluations. CVS announced plans to acquire Signify for $8 billion in September and the deal is expected to close in the first half of this year.
In addition, CVS has a robust pharmacy services segment with revenues increasing 10.6 percent in 2022, and its healthcare benefits segment, where revenues were up 11.2 percent to $91.4 billion. UnitedHealthcare, also owned by UnitedHealth Group, reported UnitedHealthcare' revenue was at $249.7 billion, up 12 percent.
When the transaction is finalized, Oak Street will be part of CVS Health's healthcare delivery organization serving a network of health plan partners and patients. Oak Street is already involved in value-based care, and 50 percent of patients have a housing, food or isolation risk factor.
Optum is also very focused on value-based care contracts. In January, Optum Health reported a 29 percent increase in revenue per customer served, driven by an increase in the number of patients in value-based agreements, among other factors. The company reported around 1 million patients were served in value-based care arrangements last year and Optum aims to bring in an additional 750,000 patients to value-based contracts this year.