CVS Health is doubling down on offering primary care, with plans to open 25 Oak Street Health clinics in its stores, including three in the Chicago area — a move that comes as competitors Walgreens and Walmart pull back on the idea.
CVS announced the plans Thursday, saying the Oak Street Health locations will be in CVS stores in 14 states, including Illinois. It plans to open another 11 in-store clinics next year. Oak Street Health provides primary care for people on Medicare, focusing on low- to moderate-income seniors in underserved communities.
Oak Street was founded in Chicago in 2012 and acquired by CVS in 2023 for $10.6 billion, as part of CVS’ strategy of becoming a health care destination.
The three new Chicago-area locations opened in July in the Belmont Cragin and West Lawn neighborhoods of Chicago, and Cicero, according to CVS. The Oak Street clinics are taking over much of what was the retail space in those stores, meaning those locations will have far fewer non-health care products for sale, said Mike Pykosz, co-founder of Oak Street and executive vice president and president of Health Care Delivery for CVS.
CVS leaders hope that by combining the clinics and the pharmacies, they’ll be able to draw more patients to Oak Street. Also, doctors and nurses and Oak Street will work directly with the CVS pharmacists on-site every day to better coordinate care and improve patients’ health, Pykosz said.
Pharmacists and providers at those locations are more easily able to work together on issues such as medication management, medication adherence and even drug affordability, said Jyoti Mann, a pharmacist and pharmacy district leader at CVS in Chicago.
“It helps to kind of have a one-stop-shop especially with our older patients,” Mann said.
Oak Street aims to keep patients healthier by focusing on preventive care, and it makes money through a model known as value-based care. Under that model, it contracts with insurers offering Medicare Advantage plans, and those plans pay Oak Street a certain amount of money to care for each patient, rather than paying Oak Street per medical service. If Oak Street can keep a patient healthy, leading to lower medical costs, Oak Street gets to keep the difference between what the insurer paid versus what a patient’s care actually cost.
“When you think of quality of care and patient outcomes for older adults, there’s a lot of opportunity to improve outcomes, lower costs, etc.,” Pykosz said. “We invest a lot more upfront in patient care and by keeping patients healthy and out of the hospital we obviously improve outcomes and lower costs.”
Before CVS acquired Oak Street in 2023, Oak Street was losing money. But Pykosz said that Oak Street’s older, individual clinics are profitable, showing that it just takes time for the clinics to make money.
CVS will continue to operate its many MinuteClinics inside its stores, as well. The MinuteClinics are more focused on patients of all ages with more urgent or short-term health care needs, while Oak Street will provide primary care to older patients.
The CVS announcement follows years of challenges for its competitors, as they tried to integrate primary care into their businesses.
North suburban-based Walgreens invested billions of dollars in Chicago-based VillageMD, which provides primary care. At one point, Walgreens said it planned to attach Village Medical clinics to 1,000 of its stores by 2027.
But Walgreens has struggled with that plan. Walgreens CEO Timothy Wentworth said in March that Walgreens had recorded a $5.8 billion impairment charge related to VillageMD, and that VillageMD would be closing 160 clinics. Manmohan Mahajan, Walgreens executive vice president and Global chief financial officer, said at the time that VillageMD was seeing slower-than-expected growth in the numbers of patients per provider and changes in Medicare reimbursement models.
Wentworth told The Wall Street Journal in June that Walgreens planned to reduce its stake in VillageMD and would no longer be the company’s majority owner.
Walgreens has also, generally, been working to cut costs in recent years, including $1 billion this year. Wentworth said in June that Walgreens planned to close “a significant portion” of its underperforming stores over the next three years.
Similarly, Walmart announced in April that it was closing its Walmart Health centers, saying in a news release it was “not a sustainable business model for us.” Walmart blamed challenges related to reimbursements by insurers and rising operating costs.
Pykosz, however, said CVS’ expansion of Oak Street clinics is different, partly because CVS is already a health care-focused company. CVS owns health insurer Aetna as well as CVS Caremark, a pharmacy benefit manager. Pharmacy benefit managers work with insurers, negotiating with drug companies to buy medications on their behalf. “No one has the assets that we do,” Pykosz said.
Those business lines can help each other, he said. For example, Aetna can identify patients on Medicare Advantage who need higher quality primary care, and introduce those patients to Oak Street, he said.
“CVS is taking something that’s proven and enhancing it rather than trying something new,” Pykosz said.
Oak Street has more than 200 primary care centers across the country, including 33 in Illinois.
