Deliberations are preliminary, the structure could change and there’s no guarantee a deal will be reached, the people said.
A representative for Woonsocket, Rhode Island-based CVS declined to comment.
Clinics like the ones operated by Oak Street focus on serving seniors in privately managed Medicare plans. The new clinics tend to lose money for a few years while they recruit patients. A joint-venture could help house some of the losses related to investing in them and take them off CVS’ balance sheet, the people added.
There have been examples of healthcare companies pursuing similar strategies. Humana Inc. and Welsh Carson Anderson & Stowe teamed up in 2020 and 2022 to develop primary care clinics.
That joint venture was structured where Humana could buy back its interest over a period of time, while providing Welsh Carson a guaranteed return. CVS is considering a similar deal, the people said.
The Medicare Advantage business has driven growth at health insurance companies for years, but the boom may be coming to an end.
The Biden administration started tightening payments to the plans with rates that took effect this year. It also made changes to how it reimburses for patient diagnoses to crack down on perceived abuses. That all means risk-based primary care providers could end up getting paid less than anticipated. Seniors are also returning to clinics and hospitals after deferring elective procedures during the COVID-19 pandemic.
The combination has hit the stock prices of once high-flying insurers, including CVS. As of Dec. 31, CVS operated more than 200 primary care clinics across 25 states, according to its most recent annual report. It has opened 31 new Oak Street locations since acquiring the company.
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