Why CVS Health is Digging in on Primary Care as Other Retailers Back Off

The company has its eyes set on expansion despite the space proving to be a challenge for disruptors.

As other retailers exit or reconfigure the approach in primary care, CVS Health is choosing to double down.

The company announced it plans to open 25 Oak Street Health clinics alongside their stores in 14 states by the end of 2024, signaling a renewed commitment to their primary care offering.

The first three locations are in Chicago, where Oak Street was founded in 2012 and later acquired by CVS Health in 2023 for $10.6 billion. The other openings will come in markets like New York City, Dallas-Fort Worth, Columbus, Ohio, according to a Forbes report.

By offering Oak Street’s services next to its retail and pharmacy sites, CVS Health is banking on guiding more patients to its primary care business.

“Coupling these two powerful CVS Health assets 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,” Mike Pykosz, co-founder of Oak Street and executive vice president and president of health care delivery for CVS Health, said in a statement.

“We are already seeing the benefits of Oak Street Health’s value-based model lowering the total cost of care for patients. We believe our evidence-based approach will build upon these results as we more fully integrate with our core businesses.”

CVS Health’s investment in Oak Street clinics comes at a time when competitors have struggled to scale in primary care.

Most notably, Walmart and Walgreens recently announced plans to either completely retreat from the business or scale back significantly. Walmart said it was selling its MeMD virtual care business to telehealth startup Fabric, which followed its move to shut down all 51 of its health centers and virtual care offerings half a decade after launching.

Walgreens, meanwhile, said it was cutting its stake in VillageMD to no longer be majority owner. Earlier this year, the retailer stated it would close 160 VillageMD clinics after reporting nearly $6 billion in net loss for the second quarter.

The advantage CVS Health has over other competitors is its insurance arm, Aetna, which enables the company to offer Medicare and Medicare Advantage members benefits to utilize Oak Street clinics.

Oak Street also has more than 200 standalone centers in 25 states and is planning to add more to the network.

To continue investing in Oak Street, CVS Health may be on the lookout for additional funding. In May, Bloomberg News reported that the company was searching for a private equity partner to lessen the financial burden.