CVS is exploring a $10 billion-plus acquisition of Oak Street Health

CVS Health Corp. is exploring an acquisition of Oak Street Health Inc., which runs primary care centers for Medicare recipients, according to people familiar with the matter.

The potential deal would value Oak Street at more than $10 billion, including debt, said the people, who asked to not be identified because the matter isn’t public. Talks between the companies are ongoing and could end without an agreement, the people said.

Oak Street, with a market value of about $5.5 billion, rose as much as 32% in afterhours trading.

Representatives for CVS and Chicagobased Oak Street declined to comment.

CVS, a major drugstore operator, has been expanding more directly into health care via acquisitions, agreeing last year to buy Signify Health Inc., a deal that should close in the first half of 2023.

The Woonsocket, Rhode Island-based company also held talks last year to buy health-care provider Cano Health Inc., Bloomberg News reported. CVS, which bought the insurer Aetna in 2018, has said it wants to make health care more convenient and affordable for consumers and has said it plans to partner with doctors or potentially acquire primary care practices.

Oak Street, which went public in 2020, aims to reinvent care for Medicare patients with low incomes and chronic health problems. The company says its high-touch approach — frequent checkups, preventive screenings and meetings with social workers — can reduce patients’ medical costs.

It contracts with insurance companies that offer Medicare health plans, allowing it to pocket some of those savings in exchange for assuming the financial risk of caring for patients.

Oak Street had 169 centers across the U.S. providing care for more than 159,000 patients at the end of last year, according to a company filing. Private equity firms General Atlantic and Newlight Partners collectively own roughly 39% of the company, data compiled by Bloomberg shows.