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CVS Health’s Acquisition of Oak Street Health Reconfirms Market Viability of Private Equity Investment in Value-Based Payment Models for Primary Care

Published online by Cambridge University Press:  28 June 2023

Andrew Grant
Andrew Grant*
Affiliation:
Boston University, Boston, MA, USA
*
Email: [email protected]
Rights & Permissions [Opens in a new window]

Abstract

For over a decade and for the foreseeable future, federal agencies have made efforts to promote value-based care through various incentive schemes, such as the recent “Regulatory Sprint to Coordinated Care.” Federal incentive schemes and other “macro tailwinds” have brought in private equity investors, especially in the context of primary care for Medicare beneficiaries. Oak Street Health and its private equity backers were pioneers in this space, applying buy-and-build strategies to create “next-generation” primary care networks “that focus largely or entirely on Medicare Advantage enrollees.” Although Oak Street Health persuasively established a workable “playbook” for private equity investment in value-based care, and forecasts have been favorable, the ultimate market viability of this value-based playbook hinges on whether or not private equity investors can locate corporate buyers. The market viability of such a strategy has now been reconfirmed by the acquisition of Oak Street Health by CVS Health (“CVS”), announced February 8, 2023, and closed May 2, 2023, especially given that the incentives and the efficiencies associated with this deal are likely to be applicable to large-scale vertically integrated “payvider” corporations more generally. This Recent Transaction Comment examines CVS’s acquisition of Oak Street Health to consider what factors might lead vertically integrated health care corporations to acquire value-based primary care networks in the future, and what knock on effects such acquisitions might have on future private equity buyouts in health care.

Keywords

Oak Street Healthvalue-based carevertical integrationprivate equityprimary carepayvider
Type
Recent case developments
Information
American Journal of Law & Medicine , Volume 49 , Issue 1 , March 2023 , pp. 120 - 127
Copyright
© 2023 The Author(s)

Background

Value-Based Payment Models

In the years since the 2010 passage of the Affordable Care Act, the Centers for Medicare and Medicaid Services (“CMS”) have spearheaded numerous initiatives to shift the United States health care system away from the traditional fee-for-service (“FFS”) payment model, and toward policies focused on “systematically reducing spending or improving quality.”Footnote 1 Policies intended to “transform U.S. health care from a system that incentivizes volume to one that rewards value” have in general been referred to as “value-based payment models,” “value-based purchasing,” and “value-based care.”Footnote 2

Aside from its quality of care component, the shift to value-based care is in large part motivated by the need to put Medicare and Medicaid dollars to the their best possible use, similar to health care fraud and abuse legislation such as the Stark law (“Stark”) and the anti-kickback statute (“AKS”).Footnote 3 For example, in 2021, it was predicted that the Medicare Trust Fund would be insolvent sometime between 2024 and 2026, and as of early 2023 these predictions have been extended out to 2028.Footnote 4 Much like the health care fraud and abuse laws as they were first enacted, value-based payment models seek to disincentivize business models that “contribute appreciably to the cost of Medicare and Medicaid program” or that otherwise present “a real threat to the [Medicare] program’s long-term solvency.”Footnote 5

Although some experts have commented that the transition to value-based payment models “has slowed in recent years,”Footnote 6 the Department of Health and Human Services (“HHS”) continues to roll out new initiatives to promote this transition, such as the 2018-2021 “Regulatory Sprint to Coordinated Care.”Footnote 7 Amid the 2018 roll out of that initiative, the CMS as well as the HHS’s Office of the Inspector General (“HHS-OIG”) issued Requests for Information regarding the possibility of establishing a Stark exception and AKS safe harbor for health care providers operating under certain value-based payment models.Footnote 8 The CMS and the HHS-OIG subsequently issued two Final Rules on the matter—made effective in 2021—which “introduce an entirely new framework for structuring permissible arrangements and affiliations between and among health care providers and payors” and which are “designed to play a central role toward innovating care coordination and health care payment models for years to come.”Footnote 9

Thus, protection from health care fraud and abuse laws has been offered up as a carrot to further encourage providers to shift away from FFS payment models, and towards value-based payment models.Footnote 10 Importantly, these protections reach pre-existing value-based enterprises including accountable care organizations (“ACOs”),Footnote 11 which are already benefiting from previous federal incentive schemes.Footnote 12 Accumulating incentives of this sort have led analysts like Bain & Company to predict that value-based care “will capture 15%–20% market share from traditional FFS providers in primary care by 2030, creating strong macro tailwinds and supporting further investment in the space.”Footnote 13 Although “progress has been uneven until now,” health care investors have taken increasing interest in value-based care due to federal initiatives like the 2018-2021 Regulatory Sprint to Coordinated Care as well as the broadcasted goals of federal agencies, such as the CMS’s stated goal “for all traditional Medicare beneficiaries to be in a care relationship with accountability for quality and total cost of care by 2030.”Footnote 14

Private Equity Investment

Due to federal initiatives to accelerate the transition to value-based care, “the adoption of value-based payment models has steadily grown over the past decade”—especially the adoption of risk-bearing capitated reimbursement models in the context of Medicare Advantage plans.Footnote 15 Private equity firms have entered this market by investing in “networks of primary care clinics that focus largely or entirely on serving [Medicare Advantage] enrollees.”Footnote 16 This is a value-based variation of the buy-and-build approach typical to private equity investment in the health sector, being that the health care industry’s “fragmented market segments and changing technolog[ies]” give ample space for private equity investors “to scoop up smaller companies, [and] to scale up” an initial platform company through sequential add-ons.Footnote 17

One upside for private equity investors is that “next-generation primary care models”Footnote 18 of this sort can be profitable under full risk-bearing or substantially risk-bearing capitation contracts if the primary care network “operates efficiently, manages patients with chronic conditions well, and is able to report adequate quality metrics and extensively code patients’ comorbidities to drive higher risk-adjusted payments.”Footnote 19 This approach has been referred to as “the playbook of Oak Street Health”Footnote 20 because that company was an early pioneer in this space, having launched about a decade ago under private equity ownership.Footnote 21 Even aside from the prospect of the CMS “lean[ing] further into”Footnote 22 value-based payment models, “Medicare Advantage will continue to attract investment as the fundamentals of an aging population, rising enrollment, and large profit pools remain strong.”Footnote 23 As such, Bain & Company “expect to see continued investment in risk-bearing models across specialties beyond primary care and in segments beyond Medicare.”Footnote 24

Of course, the continued momentum of value-based care—and consequently, the continued market viability of private equity investment in value-based care—hinges on the federal government’s continued confidence that such activities truly do reduce spending or improve quality in the health sector, whether in aggregate or within specific sub-markets.Footnote 25 Health care commentators have had mixed reactions to private equity’s involvement in value-based care due to differing expectations regarding the ultimate outcomes associated with the “flood of fast-moving private capital”Footnote 26 brought in by private equity, which experts believe “aggressively amplifies” responses to financial incentives.Footnote 27 That is, aggressive amplification of well-aligned incentives “may well be favorable,”Footnote 28 while amplification of misaligned incentives “may simply funnel money to private investors while raising system costs.”Footnote 29

Under a flawless scheme of value-based care, private equity firms “should be expected to encourage investments and operational changes that support better health outcomes and lower costs, even if acting purely out of financial self-interest.”Footnote 30 But rational market actors should be expected to exploit “short-term arbitrage gains” where available, and if regulators are slow to adjust value-based pricing so as to close regulatory openings for arbitrage, such openings can become long term and “can bleed the system and weaken incentives to generate efficiency gains.”Footnote 31 However, despite such concerns, the existing public research literature on physician practice consolidation by private equity is “limited to industry reports, academic opinion pieces, and largely descriptive studies within single specialties.”Footnote 32 The few studies that purport to “address these gaps” typically focus on hospital-based physicians or specialty physician practices operating “within a largely fee-for-service delivery system” without squarely addressing the “separate mechanisms that are used by private equity firms to target . . . primary care practices operating under value-based payment arrangements.”Footnote 33

Moreover, conversations about the alignment or misalignment of financial incentives in the context of value-based payment models cannot focus solely on private equity firms because the activities of such firms and their affiliated private equity funds are always carried out in pursuit of an eventual sale.Footnote 34 The full set of financial incentives motivating private equity firms necessarily includes the market incentives given by prospective corporate buyers, and it appears that the likeliest corporate buyers of value-based primary care networks are vertically integrated “payviders” such as CVS.Footnote 35 This Recent Transaction Comment examines CVS’s acquisition of Oak Street Health to consider what factors might lead vertically integrated health care corporations to acquire value-based primary care networks in the future, and what knock on effects such acquisitions might have on future private equity buyouts in health care.

CVS Health’s acquisition of oak street health

Oak Street Health

The value-based primary care startup Oak Street Health was founded in 2012, opened its first clinic in 2013, and went public in 2020.Footnote 36 Private equity funds affiliated with the firms General Atlantic, LLC, and Newlight Partners, LP, were early investors in Oak Street Health.Footnote 37 Through their affiliate funds, General Atlantic and Newlight Partners were the “Lead Sponsors” for Oak Street’s initial public offering and retained a controlling stake immediately afterwards.Footnote 38 Specifically, the two private equity firms collectively held circa 52.4% to 52.9% of outstanding shares after Oak Street Health went public.Footnote 39 In addition, as a “controlled company” at listing, Oak Street’s prospectus disclosed the company’s intention to make use of exemptions from corporate governance practices that would otherwise be required, such as maintaining a majority of independent directors on its Board.Footnote 40

It appears that the main goal behind Oak Street’s $328 million offering was to secure financing, and the company’s CEO Mike Pykosz commented, “We want to continue to bring in more resources into the company so we can continue to execute our mission.”Footnote 41 At pricing, the estimated market value of Oak Street Health was roughly $5 billion, and the first day of market trading saw share prices rise from $21 to $43.47.Footnote 42 Although Oak Street’s initial public offering was likely driven by financing considerations, its newfound status as a public company came with disclosure requirements that heightened the visibility of its practices, especially relative to privately held value-based primary care networks such as Iora Health.Footnote 43

Heightened visibility is likely one reason why Oak Street Health is so frequently alluded to as a model of private equity investment in value-based primary care.Footnote 44 In its final prospectus, Oak Street Health reported that as of March 31, 2020, it had contracts with twenty-three Medicare Advantage payors and that 49% of its Q1 capitated revenues arose from its relationship with Humana.Footnote 45 The company reported steady historical growth in the number of patients for whom Oak Street Health’s services were paid on a capitated basis rather than FFS, increasing from circa 12,000 patients in 2016 up to about 55,000 patients by the end of Q1 in 2020.Footnote 46

Oak Street’s annual report for 2022 points to further increases, as the company ended 2020 with 64,500 patients on capitation contracts, ended 2021 with 114,500 patients on capitation contracts, and ended 2022 with 159,000 patients on capitation contracts.Footnote 47 Oak Street’s number of clinics and the number of states it services saw rapid scaling in the time between its public listing and its 2022 annual report, rising from 54 centers across 8 states in Q1 2020, to 169 centers across 21 states by end-of-year 2022.Footnote 48 Finally, both Medicare and Medicare Advantage remain absolutely essential to Oak Street’s business model: “revenues from Medicare accounted for 98%, 98% and 96% of our revenues for each of the years ended December 31, 2022, 2021 and 2020, respectively.”Footnote 49

CVS Health’s Acquisition

On February 8, 2023, Oak Street Health and CVS issued a joint press release announcing that the two companies had “entered into a definitive agreement” in which CVS would acquire Oak Street Health “in an all-cash transaction at $39 per share, representing an enterprise value of approximately $10.6 billion.”Footnote 50 General Atlantic, Newlight Partners, and certain members of the Board of Oak Street Health, “which collectively own approximately 45% of the common stock,” agreed to vote in favor of the deal.Footnote 51 According to Bloomberg Law, General Atlantic “[was] poised for a more than $3 billion windfall . . . with a more than 25% stake.”Footnote 52 Thereafter, CVS entered a term loan agreement on May 1, 2023, to borrow $5 billion to cover roughly half of the purchase price. Footnote 53 The deal closed on May 2, 2023.Footnote 54

The Oak Street deal is CVS’s largest since its 2018 acquisition of the health insurer Aetna for $68 billion.Footnote 55 CVS executives foreshadowed their interest in a primary care acquisition on a mid-2022 earnings call, following CVS’s announced acquisition of value-based home care platform Signify Health for $8 billion.Footnote 56 Acquiring Oak Street Health and Signify Health in short succession amounts to a $20 billion gallop into Medicare driven value-based care, and in the context of CVS’s previous acquisition of Aetna, reflects CVS’s ambitions to become a large-scale vertically integrated “payvider” similar to the model set by UnitedHealth Group’s expansion into health care via Optum.Footnote 57

Specifically, a “payvider” is what results when a payer or health insurer enters into a vertical merger or joint venture with a health care provider, and the term has gained traction as “giant corporations such as Amazon, CVS, Walgreens, and Walmart have aimed to disrupt health care and large payers, such as Aetna and Humana, are moving into the primary care space.”Footnote 58 One reason that vertical integration is appealing to businesses is because successful antitrust challenge is highly unlikely,Footnote 59 and here, CVS’s acquisition of Oak Street Health did not receive a second look under Hart-Scott-Rodino pre-merger review.Footnote 60 The “payvider” approach has gained traction recently, especially in primary care, because such entities are better able to control costs and are well-positioned to benefit from the transition to value-based care.Footnote 61

“Payvider”-style arrangements are not new, given that “examples go back at least to the 1980s when insurers like Aetna, Cigna, and Humana employed physicians as part of their HMO offerings,” although “most insurers eventually divested their physician practices.”Footnote 62 Even while such arrangements saw a period of decline, exceptions such as Kaiser Permanente in California “championed the model with great success for decades.”Footnote 63 More recently, however, “payvider” arrangements have proliferated again in the Medicare context, including joint ventures between providers and payors such as Banner Health and Aetna, or Agilon and Humana.Footnote 64 The “payvider” label has particular salience in the context of vertical integration between primary care platforms and Medicare Advantage plans; as far back as 2013, “about 17% of Medicare Advantage plans were integrated with providers.”Footnote 65

Importantly, “acquisition of primary care practices by insurers has significant potential to shift incentives towards reducing healthcare spending” because lower spending on health care by insurers decreases marginal costs, which “can increase profit margins holding premiums fixed[,] or result in greater customer volume for the insurer (and savings to customers) if some of the reduced spending is passed through in the form of lower premiums.”Footnote 66 Vertically integrated “payviders” may have a uniquely powerful incentive to reduce premiums “because integration makes gaining additional enrollees (e.g., by lowering premiums) more profitable: each additional enrollee brings both an insurer-level and a provider-level profit margin, whereas without integration the insurer gains only the insurer-level profit margin.”Footnote 67

If the prospect of greater gains per head in capitation contracts truly leads “payviders” to redirect savings from reduced health care spending to the lowering of insurance premiums as a method of enrollee recruitment, then vertical integration would readily comport with value-based initiatives because “payviders” would reduce spending while simultaneously receiving greater benefit from federal incentive schemes.Footnote 68 Direct vertical integration brings the added benefit of reducing the transaction costs brought about by “the challenge of writing complex, complete contracts that reliably define quality of care and allow for measurement of quality in a way that is transparent and that both providers and insurers agree is appropriate.”Footnote 69

As previously discussed, there are also purely demographic reasons to expect value-based care to succeed: “Medicare Advantage will continue to attract investment as the fundamentals of an aging population, rising enrollment, and large profit pools remain strong.”Footnote 70 A month and a half after the Oak Street deal was announced, CVS CEO Karen Lynch publicly characterized these trends as representing an oncoming “tsunami” of Medicare enrollment.Footnote 71 Moreover, CVS’s sharp focus on preventive care—emphasizing “early detection of chronic conditions” and “integrating health care technology in the home”—reflects intentions to leverage the at-home health care offerings of Signify Health to yield improved outcomes on capitated contracts.Footnote 72 In another contemporaneous talk, Lynch described CVS’s focus on Medicare Advantage as follows: “That’s the largest population, has the highest cost, has the most chronic conditions. We feel like we can have a huge impact on improving overall health outcomes in that population.”Footnote 73

Finally, perhaps the greatest testament to the continuing interest of CVS and similar large-scale vertically integrated “payviders” in purchasing value-based primary care networks built up by private equity is the rapid pace of dealmaking in this area.Footnote 74 CVS considered buying value-based primary care Cano Health shortly before deciding on Oak Street,Footnote 75 whereas Amazon, UnitedHealth Group, and Option Care Health all considered extending an offer to Signify Health before CVS became its final buyer.Footnote 76 Similarly, Amazon’s 2023 announcement that it will acquire One Medical—which very recently acquired Iora Health, a value-based primary care network extremely similar to Oak Street HealthFootnote 77—demonstrates Amazon’s earnest interest in breaking into the market, even if Amazon is not yet a firmly established player in health care.Footnote 78 While demographic fundamentals and federal incentives undergird favorable forecasts as to the future of value-based care, the particular example of CVS’s acquisition of Oak Street Health serves to reconfirm the market viability of private equity investment in value-based payment models of primary care, especially in the context of the rapid pace of dealmaking among other “payviders” and aspiring “payviders.”

References

1 Rachel M. Werner et al., Leonard davis Inst. of Health Econ., The Future of Value-Based Payment: A Road Map to 2030, 1 (2021); see RAND Health Care, Value-Based Payment and Health Care System Preparedness and Resilience (2021); see also Wendy Gerdhart et al., Deloitte Center for Health Solutions, The Road to Value-Based Care: Your Mileage May Vary, 2, 14 (2015).

2 Werner et al., supra note 1, at 2; RAND Health Care, supra note 1; Gerdhart et al., supra note 1, at 2.

3 See Corbin Santo, Note, Walking a Tightrope: Regulating Medicare Fraud and Abuse and the Transition to Value-Based Payment, 64 Case W. Rsrv. L. Rev. 1377, 1386, 1389 (2014) (citing legislative history).

4 See Werner et al., supra note 1, at 3 (noting “the impending insolvency of the Medicare trust fund” as one motivator for value-based policies); see also Rebecca Pifer, Medicare Insolvency Still Expected by 2026, Unchanged by COVID-19, Trustees Say, Healthcare Dive (Sep. 1, 2021) (indicating that, as of 2021, “the trustees . . . expect[ed] the fund to run dry by 2026—the same estimate as 2018, 2019 and 2020’s reports due to policy inaction from Washington”); see also Press Release, White House Briefing Room, The President’s Budget: Extending Medicare Solvency by 25 Years or More, Strengthening Medicare, and Lowering Health Care Costs (Mar. 7, 2023) (indicating “the most recent Medicare Trustees Report projected that the HI Trust Fund would be insolvent in 2028”).

5 Santo, supra note 3, at 1386, 1389 (citing legislative history).

6 Werner et al., supra note 1, at 2.

7 See Jeff Overley, HHS Watchdog Mulls Kickback Leeway for Coordinated Care, Law360, (Aug. 24, 2018); see also Press Release, Ctr. for Medicare & Medicaid Serv., CMS Seeks Public Input on Reducing the Regulatory Burdens of the Stark Law (June 20, 2018), https://www.cms.gov/newsroom/press-releases/cms-seeks-public-input-reducing-regulatory-burdens-stark-law [https://perma.cc/EWW9-S4CE].

8 See generally Off. of the Inspector Gen. to the Dep’t of Health and Hum. Serv., Fact Sheet on Notice of Proposed Rulemaking OIG-0936-AA10-P (October 2019); see also Ctr. for Medicare and Medicaid Serv., supra note 7.

9 Limo T. Cherian et al., K&L Gates, Value-Based Safe Harbors and Exceptions to the Anti-Kickback Statute and Stark Law 1 (2021).

10 Id.

11 See generally Daniel Patten & John Wesley Williamson, Stark, AKS and the Regulatory Sprint to Coordinated Care, Holland & Knight (Jan. 6, 2021), https://www.hklaw.com/en/insights/publications/2021/01/stark-aks-and-the-regulatory-sprint-to-coordinated-care [https://perma.cc/2SXM-9DXP]. (“Existing structures that meet all of the requirements of the definition could qualify as a [value-based enterprise] such as integrated delivery systems, accountable care organizations, or comparable entities.”)

12 See, e.g., Press Release, Ctr. for Medicare & Medicaid Serv., HHS Announces New Incentives for Providers to Work Together Through Accountable Care Organizations (Oct. 20, 2011), https://www.cms.gov/newsroom/press-releases/hhs-announces-new-incentives-providers-work-together-through-accountable-care-organizations [PERMA CC] (“The two initiatives launched today . . . will help providers form Accountable Care Organizations and reflect the significant input provided by stakeholders as well as lessons learned by innovators in care coordination in the private sector.”)

13 Bain& Company, Global Healthcare Private Equity and M&A Report 2023, 45 (2023) [hereinafter Bain Report 2023].

14 Id. at 40–41.

15 Bain & Company, Global Healthcare Private Equity and M&A Report 2022, 65 (2022) [hereinafter Bain Report 2022].

16 The Medicare Payment Advisory Comm’n, Rep. to the Congress: Medicare and the Health Care Delivery Sys. 104 (2021) [hereinafter medPAC Report].

17 Eileen Applebaum & Rosemary Batt, Private Equity Buyouts in Healthcare: Who Wins, Who Loses? 14 (Ctr. for Econ. and Pol’y Rsch., Working Paper No. 118, 2020), https://www.cepr.net/wp-content/uploads/2020/03/WP_118-Appelbaum-and-Batt.pdf [https://perma.cc/4J66-32VK].

18 Bain Report 2022, supra note 15, at 65.

19 Erin Fuse Brown et al., USC-Brookings Schaeffer Initiative for Health Policy, Private Equity Investment as a Divining Rod for Market Failure: Policy Responses to Harmful Physician Practice Acquisitions 15 (2021) [hereinafter Divining Rod].

20 Bain Report 2022, supra note 15, at 65; see also Divining Rod, supra note 22, at 15, n.71 (flagging Oak Street Health as “[an] example of [the] model” discussed in-text as “a new playbook”).

21 Brian W. Powers et al., Private Equity and Health Care Delivery Value-Based Payment as a Guardrail?, 326 J. of the Am. Med. Ass’n 907, 907 (2021).

22 Bain Report 2023, supra note 13, at 40–41.

23 Bain Report 2022, supra note 13, at 73.

24 Bain Report 2023, supra note 13, at 76.

25 See Sherry Glied & Thomas D’Aunno, Efficiency and Arbitrage in Health Services Innovation, J. of the Am. Med. Ass’n Health F. at 2 (2022) (“Regulators, payers, and researchers should take more of their cues from capital markets. Tracking the flows of private money into health care services can help identify both pain points and pricing errors. Documenting and disseminating that information is an essential first step toward policies turning arbitrage opportunities into efficiencies.”); see also Powers et al., supra note 21, at 908 (“Closely and continually monitoring the effects of private equity investment under value-based payment arrangements . . . may act as a crucible . . . exposing faults that can be exploited without benefiting patients. In this case, payers [including CMS] will need to respond to modify rules and structures.”)

26 Glied & D’Aunno, supra note 25, at 2.

27 Powers et al., supra note 21, at 907.

28 Id.

29 Glied & D’Aunno, supra note 25, at 1.

30 Powers et al., supra note 21, at 907.

31 Glied & D’Aunno, supra note 25, at 2.

32 Yashaswini Singh et al., Association of Private Equity Acquisition of Physician Practices with Changes in Health Care Spending and Utilization, J. of the Am. Med. Ass’n Health F. at 2 (2022).

33 Id. at 2, 8.

34 MedPAC Report, supra note 16 at 77 (“Once a new investment fund has been set up, the [private equity] firm that manages the fund buys and sells companies with the goal of improving their operational and financial performance, increasing their value, and later selling them for a profit.”).

35 Id.; see generally Press Release, CVS Health, CVS Health Completes Acquisition of Oak Street Health (May 2, 2023) [hereinafter May Press Release] https://www.cvshealth.com/news/company-news/cvs-health-completes-acquisition-of-oak-street-health.html [https://perma.cc/W4QY-YXSQ]; see generally Press Release, CVS Health, CVS Health to Acquire Oak Street Health (Feb. 8, 2023) [hereinafter February Press Release] https://www.cvshealth.com/news/company-news/cvs-health-to-acquire-oakstreet-health.html [https://perma.cc/NKV3-4QJH]; see also Aaron Gregg, CVS Would Add Primary Care to its Health Empire with $10.6 Billion Deal, Wash. Post (Feb. 8, 2023); see also Becker’s Healthcare, It’s Time for Payvider Adoption and Growth, Becker’s Hosp. Rev., (June 16, 2021); see, e.g., Christopher J. Donovan, Payvider: The Blurring of the Lines Between Payer and Provider in Digital Health Deals, Foley and Lardner (Oct. 20, 2021), https://www.foley.com/en/insights/publications/2021/10/payvider-blurring-lines-digital-health-deals [https://perma.cc/KWM3-27LU].

36 See Powers et al., supra note 21, at 907; see also MedPAC Report, supra note 16 at 104.

37 See Powers et al., supra note 21, at 907 (“Founded in 2012, Oak Street raised more than $500 million in private equity investment from General Atlantic, Newlight Partners, and other investors.”). But see Michelle F. Davis, General Atlantic Set for $3 Billion Win on CVS-Oak Street Deal, Bloomberg Law, (Feb. 9, 2023) (reporting that, according to individuals “familiar with the matter . . . asking not to be identified because the details aren’t public[,]” General Atlantic “first backed Oak Street in 2015 . . . invest[ing] $60 million in its series B funding round”).

38 Oak Street Health, Inc., Prospectus (Form 424B4), at 14, 58-59 (Aug. 7, 2020).

39 Id. at 58.

40 Id. at 59.

41 Tina Reed, Oak Street Health Goes Public with $328M Offering, Fierce Healthcare, (Aug. 8, 2020).

42 Shannon Muchmore, Shares in Oak Street Health Soar 90% in Market Debut, Healthcare Dive (Aug. 7, 2020).

43 See MedPAC Report, supra note 16, at 104.

44 See, e.g., Bain Report 2023, supra note 13, at 76; Bain Report 2022, supra note 15, at 65; MedPAC Report, supra note 16 at 104; Powers et al., supra note 21, at 907; Divining Rod, supra note 17 at 15, n.71.

45 See Oak Street Health, Inc., Prospectus (Form 424B4), at 124 (Aug. 7, 2020).

46 Id. at 84.

47 See Oak Street Health, Inc., Annual Report (Form 10-K), at 78 (February 2, 2023).

48 Id. at 73; see also Oak Street Health, Inc., Prospectus (Form 424B4), at 111 (Aug. 7, 2020).

49 Oak Street Health, Inc., Annual Report (Form 10-K), at 36 (February 2, 2023).

50 February Press Release, supra note 35, at 1; see also Oak Street Health, Inc., Proxy Soliciting Materials (Form DFAN14A), at 1–7 (Feb. 8, 2023) (providing the press release regarding CVS’s acquisition and labeling it “a joint press release issued by CVS Health and Oak Street Health on February 8, 2023”).

51 February Press Release, supra note 35, at 1.

52 Davis, supra note 37.

53 May Press Release, supra note 35, at 1–2.

54 Id. at 1–2.

55 Michelle F. Davis, CVS Widens Reach with $10.6 Billion Deal for Oak Street, Bloomberg Law, (Feb. 8, 2023) (“The deal is Chief Executive Officer Karen Lynch’s largest since CVS purchased insurer Aetna for $68 billion in 2018.”)

56 See Paige Minemyer, How Signify Health Fits Into CVS’s Healthcare Strategy, Fierce Healthcare, (Sep. 6, 2022); see also Heather Landi, Signify Health Raises $564M in its IPO Driven by Investor Interest in Home Care, Value-Based Models, Fierce Healthcare, (Feb. 11, 2021).

57 See Heather Landi, With Oak Street Health Deal, CVS Pushes Healthcare Ambitions as Investment in Value-Based Care Heats Up, Fierce Healthcare, (Feb. 9, 2021); see also Gregg, supra note 35; see also Blake Madden, CVS, Oak Street Health, and the Great Payor Vertical Integration War, Workweek (Sep. 9, 2022) https://workweek.com/2023/02/09/cvs-oak-street-health-payor-vertical-integration/ [PERMA CC].

58 Richard Fu, Can Providers Become Payers? It Can Work If Health Systems Keep These Points in Mind, Managed Healthcare Executive (Jan. 27, 2023), https://www.managedhealthcareexecutive.com/view/can-providers-become-payers-it-can-work-if-health-systems-keep-these-points-in-mind [https://perma.cc/2AKX-K2J9]; see also Becker’s, supra note 35 (discussing “payvider” joint ventures such as that between Aetna and Banner Health); see, e.g., Bain Report 2023, supra note 13, at 52 (noting $1.2 billion joint venture involving Humana, focused on value-based primary care group CenterWell).

59 See Steven C. Salop, Invigorating Vertical Merger Enforcement, 127 Yale L.J. 1962, 1963 (2018) (“Chicago School economics and laissez-faire ideology have intentionally targeted vertical merger enforcement. This assault has been largely successful. Enforcement has been infrequent, and remedies have been limited.”).

60 See Rebecca Pifer, CVS-Oak Street Deal Clears Regulatory Hurdle as Antitrust Waiting Period Expires, Healthcare Dive (Sep. 1, 2021).

61 See Harshith Ramesh, 6 Trends That Shaped the Healthcare Industry in 2022, MedCity News (Mar. 10, 2023), https://medcitynews.com/2023/03/6-trends-that-shaped-the-healthcare-industry-in-2022/; see also Heather Landi, Goldman Sachs Forecasts Positive Outlook for Insurers in 2022, Buoyed by Shift to Value-Based Care, Fierce Healthcare, (Dec. 21, 2021).

62 Cory Capps et al., Bates White Economic Consulting, Stacking the Blocks: Vertical Integration and Antitrust in the Healthcare Industry 7 (2021).

63 Fu, supra note 58; see also id. at 10.

64 See Divining Rod, supra note 17, at 15, n.72 (“A second strategy is to form joint ventures with provider groups or insurers in this market . . . [for example,] Humana and agilon health have a partnership in which agilon provides primary care for Humana’s Medicare Advantage enrollees.”); see also Becker’s, supra note 35 (“For example, Phoenix-based Banner Health and CVS Health business Aetna have been working together on value-based care models for years, forming a joint venture health plan in 2016. In February 2021, the Banner|Aetna plan announced a long-term agreement to extend its joint venture relationship.”)

65 See Divining Rod, supra note 17, at 15; see also Erin C. Fuse Brown & Jaime S. King, The Double-Edged Sword of Health Care Integration: Consolidation and Cost Control 92 Indiana L.J. 55, 68 (2016).

66 Cory Capps et al., supra note 62 at 7.

67 Id. at 8–9.

68 Id. at 7–9; see also Werner et al., supra note 1, at 1 (indicating that value-based care initiatives are primarily concerned with “systematically reducing spending or improving quality”).

69 Cory Capps et al., supra note 62, at 8.

70 Bain Report 2022, supra note 15, at 73.

71 Giles Bruce, CVS CEO: Technology, Value-Based Care Can Solve Coming Medicare ‘Tsunami’, Becker’s Hospital Review (Apr. 26, 2023).

72 Alexa Mikhail, CEO of CVS Warns There’s a Medicare ‘Tsunami’ Heading for the U.S., Fortune (Apr. 26, 2023).

73 Giles Bruce, With Signify and Oak Street, CVS has ‘Premier’ Assets to Support Value-Based Care, CEO Says, Becker’s Hospital Review (Mar. 10, 2023).

74 See, e.g., Heather Landi, Cano Health Shares Plummet After Reports CVS Walked Away From Potential Acquisition, Fierce Healthcare, (Oct. 18, 2022); see also Bain Report 2023, supra note 13, at 41, 45; see also Bain Report 2022, supra note 15, at 27.

75 See Landi, supra note 74 (discussing CVS’s contemplation of a Cano Health acquisition). But see Heather Landi, Cano Health Separates Chairman, CEO Roles as Former Directors Push for Leadership Overhaul, Fierce Healthcare, (Apr. 17, 2023) (detailing internal strife at Cano Health, which may have contributed to CVS’s decision to walk away from a Cano Health acquisition).

76 Bain Report 2023, supra note 13, at 45.

77 Id. at 41 (noting Amazon’s acquisition of One Medical); see also Bain Report 2022, supra note 15, at 27 (noting One Medical’s acquisition of Iora Health); see also MedPAC Report, supra note 16, at 104 (noting similar nature of Iora Health and Oak Street Health).

78 See, e.g., Caroline O’Donovan, Amazon Care is Dead, but the Tech Giant’s Health-Care Ambitions Live On, Wash. Post, (Sep. 4, 2022).