Why Oak Street’s Planned $250 Million IPO Is Important News for Senior Living Providers

In the midst of the ongoing Covid-19 crisis, I imagine that few senior living executives paid much attention to recent news that Oak Street Health filed for an initial public offering (IPO). But, senior living leaders should consider the role that Oak Street and similar businesses could play in driving more affordable, better care for their residents — including during future infectious disease outbreaks.

Some executives are already thinking along these lines, including Mark Shaver, SVP – Business Strategy & Health Systems Initiatives at Toledo, Ohio-based real estate investment trust Welltower (NYSE: WELL). Oak Street is among the companies that could be valuable partners in delivering health and wellness services to older adults in lower-acuity senior living settings, driving customer satisfaction while increasing length of stay, he said during the recent Senior Housing News Active Adult Virtual Summit.

Cloch Management CEO Brian Cloch is another senior living leader who is an evangelist for Oak Street; in fact, he has forged a groundbreaking partnership to bring Oak Street into the assisted living realm. And there are hints in Oak Street’s S-1 filing that senior living could play a larger role for the company going forward.


To understand the implications for senior living, it’s necessary to understand Oak Street’s basic model.

The Chicago-based company was founded in 2012, with a mission to create a new, value-based primary care delivery framework. Today, Oak Street has 54 centers in 13 markets across 8 states. Those centers are often located in high-density urban and suburban areas, according to the company’s S-1

Oak Street locations have a “retail-like feel,” are staffed with interdisciplinary care teams led by a physician or nurse practitioner, and are supported by a purpose-built technology platform. The company’s goal is to deliver whole-person, coordinated care in a variety of ways, including through in-person visits, telehealth, remote monitoring and in-home services. Payment is typically handled through partnerships that Oak Street forges with Medicare Advantage and other payers; the value proposition to patients who are enrolled in these plans is that they get more comprehensive and personal care at an affordable price point, while the payers expect to see their beneficiaries achieve better outcomes at lower total costs, as Oak Street is able to prevent expensive episodes such as hospitalizations.


So far, this model appears to be proving out. Compared to a Medicare fee-for-service benchmark, Oak Street has reduced hospitalizations and emergency room visits by 51% for its patient population, while also cutting the 30-day hospital readmission rate by 42%, according to the S-1. 

Oak Street’s profitability is tied to its ability to reduce costs to health plans. In Q1 2020, the company posted $200 million in revenues, which was a 72% year-over-year increase. Margins are also healthy across its centers, and in Q1 were particularly robust — 20% — at its locations serving more than 2,000 at-risk patients.

The rise of Oak Street coincides with related trends in senior living. One is a shift to wellness-focused operations that aim for preventative and coordinated care, to reduce hospitalizations and increase length of stay — while also appealing to the rising market of aging baby boomers who desire a wellness-driven lifestyle. Another trend is the rise of Medicare Advantage within senior living, as new benefits dovetail with services commonly offered by providers.

Having on-site primary care in senior living has emerged as a critical consideration in nurturing resident wellness and in having the ability to start a Medicare Advantage plan or partner with existing MA insurers. 

And, senior living developers and operators are eyeing the huge coming demand for senior living at a middle-market price point. Medicare Advantage has a potential role to play in this effort, as well, by providing an insurance payment mechanism for certain care services that residents traditionally have paid for out of pocket.

Given all these considerations, partnering with Oak Street or a similar primary care provider has emerged as a potential strategy for senior living. Welltower is on the leading edge of this play, notably in bringing together some of its recently acquired Clover communities with Geisinger Health’s 65 Forward program. The 65 Forward model is similar in many respects to Oak Street, with amenitized health centers that offer team-based care with a Medicare Advantage payment backbone. Shaver also namechecked Iora as another, similar startup that holds promise.

Oak Street has already established a beachhead in assisted living. I interviewed Cloch and Oak Street Senior Vice President of Care Services Grace Chen at NIC back in March; both were excited about how Oak Street’s care model was functioning in an assisted living environment, while noting that the effort was still in its infancy.

Just days after that interview, the nation started shutting down in response to the Covid-19 pandemic. Having the services of Oak Street’s care team bolstered the coronavirus response at the four Illinois buildings involved in the initiative, Pathway to Living Director Enhanced Wellness Laurie Geschrey told me at the time. Chicago-based Pathway to Living manages the communities.

Cloch confirms that the partnership has continued to prove its worth during the pandemic, noting that the teams are collecting data to demonstrate the positive outcomes achieved. That said, he is also quick to note that the partnership involves hard work and demands close alignment among the senior living provider, Oak Street and the payer — in this case, an entity called MoreCare. Systemic impediments also could stand in the way of scaling up partnerships between senior living providers and value-based care organizations, with one being regulations governing beneficiary enrollment in value-based care insurance plans. The Centers for Medicare & Medicaid Services (CMS) ought to make it easier for these insurers to enroll members in senior living communities, Cloch believes.

Despite these obstacles, signs point to Oak Street’s increasing interest in senior living communities. Covid-19 forced Oak Street to halt many of its “central marketing efforts,” such as community-based outreach events, according to the S-1. The company turned to senior living as an alternative.

“However, we have used this pause in our traditional marketing efforts to reassess and realign our marketing strategy to focus on other growth channels,” the S-1 states. “For example, we are engaging community partners, such as senior living facilities and faith-based organizations, through an account management model to gain referrals of older adults who could benefit from our services and care model.”

So, assuming the $250 million IPO goes through as planned, Oak Street will soon be an even more well-capitalized company with its eye on senior living partnerships. At the same time, senior living providers will need to show consumers that their communities are safe, and are already taking steps to strengthen their health care expertise and infrastructure to back up those claims.

The incentives appear to be aligned for senior living companies and the new breed of senior health care provider, exemplified by Oak Street, to team up — and the race is already on to be among the first senior living players to forge these ties, refine the operating and financial models, and reap the potential rewards.

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