Retail medicine getting a boost with Oak Street Health

CVS Health Corp. is bringing its new primary care clinics to the Pittsburgh area, part of a larger industry trend that has sometimes been a bumpy ride.

CVS’s Oak Street Health centers will open in Wilkinsburg and Crafton-Ingram in August, followed by a third clinic in Homestead in the fall, a company spokeswoman said. The Wilkinsburg clinic on Penn Avenue will replace a CVS drugstore that closed in 2023.

Oak Street has 15 clinics in Pennsylvania, mostly in the eastern part of the state. The clinics also have the backing of AARP, the senior services organization and health insurer, which has recommended them for primary care.

The clinics are typically about 10,000 square feet and focus on preventive medical care for older adults living in neighborhoods that are sometimes impoverished and have poor access to health care. Wilkinsburg and Homestead have poverty rates that exceed Pittsburgh’s rate of 20% while Crafton’s poverty rate is 10%, according to Census figures.

“Oak Street Health’s model is different and we benefit when we keep our patients healthy,” spokeswoman Sofiya Affey said in a prepared statement. “This allows us to focus on and invest in preventative care, which improves the outcomes for our patients.”

In addition to primary medical care, Oak Street offers behavioral health, social support and Medicare education classes in a community room where seniors can socialize and participate in various activities. Bingo and arts and crafts are among the activities that will be offered and patients will also have computer and internet access.

Oak Street, which Woonsocket, Rhode Island-based CVS acquired in 2023 for $10.6 billion, operates 205 centers in 25 states, with plans to open 50 to 60 more clinics this year. Oak Street’s services complement CVS’ mail order and brick-and-mortar pharmacies, and also its Aetna Medicare Advantage plans, the for-profit version of the federal government’s program for the elderly and disabled.

Although Medicare Advantage plans have long been a revenue generator for health insurers, the boom may be slowing with recent government cuts in reimbursement rates. CVS’ revenue of $88.4 billion for the first three months of this year was up 3.7% from a year ago, but adjusted operating income fell 32.3% to $2.9 billion when compared to 2023, partly due to weakness in the

company’s Health Services segment, according to the company.

CVS, Amazon Inc. and Walgreens Boots Alliance Inc., see primary care as a complementary revenue source, dovetailing with pharmacy and other business lines. But getting the mix right has not always been easy, with Amazon being the exception.

Amazon acquired PillPack in 2018 and turned it into Amazon Pharmacy two years later, before buying a controlling interest in One Medical for $3.9 billion in 2023, which operates 240 primary care offices, with plans to add more by the end of the year.

Talk about integration: Amazon’s Prime members are eligible for a discounted membership in One Medical.

But Walgreens has had a tougher road in clinical care.

In 2021, the drug store giant announced that it was acquiring VillageMD primary care clinics for $5.2 billion, but in April said it was closing 160 clinics in a cost-cutting move. That followed the earlier closure of 140 other clinics or about half the number of the original VillageMD

centers.

Neither Amazon nor Walgreens have a physical clinic presence in Pennsylvania.

Unlike Amazon, CVS and Walgreens, Walmart said in April that it was getting out of the primary care business by closing all 51 of its clinics and shutting down its telehealth services within 90 days. The company cited rising operating costs and low reimbursement for the decision.