Why CVS’ $10.6 Billion Oak Street Deal Creates Urgency for New Senior Living Models

The big health care headline in the last week was CVS’ purchase of Oak Street Health for about $10.6 billion.

Also last week, Humana announced a five-year agreement with ChenMed — a company similar to Oak Street — to provide “senior-focused concierge care” to Humana’s Medicare Advantage members.

Senior living providers have observed the reinvention of primary care for older adults over the last several years, as Oak Street, ChenMed and a slew of other companies such as Cano Health and CareMax have rapidly secured scale and capital. The CVS and Humana news again highlights the need for senior living providers to adapt as health care delivery for older adults evolves.


“This trend has implications on senior living given that providers, insurers and payviders are all proactively seeking ways to deliver better clinical outcomes at a lower cost of care,” Solera Senior Living Founder and CEO Adam Kaplan told me, in light of the CVS/Oak Street deal.

In this week’s exclusive, members-only SHN+ Update, I analyze the news and offer key takeaways, including:

  • How trends in senior living dovetail with the rise of primary care groups like Oak Street
  • The potential for a “hub-and-spoke” senior living model enabled by next-generation primary care for older adults
  • The imperative for senior living providers to realize fair financial upside for their contributions to value-based care

Complementary trends

The Oak Street model revolves around more than 160 operational medical centers, many of them conveniently located in existing retail infrastructure. At these centers, older adults interact with a care team that is meant to drive quality outcomes and consumer satisfaction while reducing overall costs, including by spending more time with each patient, coordinating care more rigorously, and offering more comprehensive services including behavioral health and home-based support. Care is informed by Oak Street’s technology platform called Canopy. And Oak Street has relationships with an array of health insurers, participates in value-based frameworks such as accountable care organizations (ACOs), and seeks to assume full financial risk for its patients.


CVS is “a far bigger, far better capitalized organization that can accelerate the center openings” for Oak Street going forward, Cowen Analyst Gary Taylor told The Wall Street Journal. CVS also can leverage its 1,100 MinuteClinics in retail locations to “add additional capacity” for Oak Street, CVS CEO Karen Lynch said on the company’s Q4 2022 earnings call. She also said that CVS expects to improve retention of its Aetna Medicare Advantage members through the “improved outcomes and experience” offered by Oak Street.

Given these basic elements of the Oak Street model and rationale behind the CVS deal, consider how the growth of Oak Street and similar companies corresponds to various trends in senior living.

First, more senior living providers have entered the Medicare Advantage space in recent years, including by launching their own MA plans. This has been driven by several factors, including the expansion of supplemental benefits that enable plans to be more tailored to the specific needs of senior living residents.

Meanwhile, senior living communities have increasingly been built as part of urban and suburban mixed-use projects, putting them in close proximity to retail, including CVS and Walgreens outposts.

Another senior living trend is a recognition of the huge need and opportunity to serve the middle market, and a recognition that having less clinical staff on provider payrolls might be necessary to achieve this goal. New health care partnerships therefore are of interest to senior living providers.

Then there is the rise of active adult rental communities, which bring together younger residents who are interested in maintaining their health and wellness. To meet this desire and extend length of stay, more active adult owners and operators are interested in partnerships to provide some sort of health care offering for residents.

Finally, consumer expectations are rising. More senior living providers have realized that family members and residents no longer will accept being responsible for juggling appointments with multiple providers and being the liaisons between these providers and senior living staff, being their own care quarterbacks despite paying rent and fees to live in a senior living community.

A ‘hub-and-spoke’ model

Given how these senior living trends dovetail with the rise of primary care groups such as Oak Street, potential new models are emerging. Solera’s Kaplan describes one possibility as a “hub-and-spoke” concept.

The foundations for this model stem from the ways in which senior living communities can answer the needs of companies such as Oak Street. As Kaplan put it:

“Senior living providers already serve a captive audience of seniors with multiple chronic conditions in purpose-built, well-located properties. As reported last week, 50% of Oak Street’s patients have either a housing, food or isolation risk factor. Senior living is already playing a vital, yet underappreciated, role in mitigating these risk factors as our on-site teams manage social determinants of health for an at-risk population, 24-7.”

Industry veteran and Innovative Health Principal Brian Cloch made a similar point.

“These value-based primary care clinics are great sources of volume for senior living or skilled nursing,” he told me, saying that “any risk-taking entity” needs to find places for certain patient/members to keep them healthy, happy and out of the hospital.

Particularly as the patient populations of an Oak Street Health age, such “places” could be senior living communities.

Cloch has been on the leading edge of this approach, forging a partnership with Oak Street that involved clinicians coming into a few senior living communities in Illinois. This was a “wildly successful program” in terms of reducing hospitalizations and achieving other desired outcomes, he told me.

However, Oak Street has transitioned out of those buildings, and a similar model now is in place with HarmonyCares. While not wanting to speak for Oak Street, Cloch said that he perceived one challenge being scalability. That is, creating new clinics is a more easily replicable and economical approach to growth for a company like Oak Street, versus providing on-site services within senior living.

Kaplan proposes that senior living communities themselves could be locations for primary care centers operated by Oak Street or similar companies.

“Ultimately, senior living real estate could be repositioned to deploy a hub-and-spoke model by serving not only its residents but seniors that live within close proximity of the community,” he said.

I think that leasing space to Oak Street in a senior living community could make sense, especially as Oak Street and similar organizations target more involvement in the Program of All-Inclusive Care for the Elderly (PACE). Oak Street’s executives identified this as a goal during the company’s Q3 2022 earnings call.

As laid out by the Centers for Medicare & Medicaid Services (CMS), dedicated PACE Centers have to include many spaces and amenities that are fundamental to senior living communities: “Suitable space and equipment to provide primary medical care and suitable space for treatment, restorative therapies, therapeutic recreation, socialization, dining and personal care. Examples include, but aren’t limited to, food and nutritional supplement storage, meal preparation and serving and participant laundry.”

Even if Oak Street clinics are not located within senior living communities, accessing Oak Street-style primary care is increasingly easy for residents. It could be as simple as walking across the street, as senior living continues to make inroads in mixed-use developments and similar locations.

Cloch and Kaplan are not alone in envisioning alignment between senior living and next-gen primary care providers. The hub-and-spoke model is not so different from what Atria CEO John Moore described as a “do-it-yourself” approach to independent living, with residents tapping into health care services paid for through Medicare Advantage benefits. (Note that Atria has a development partnership with Related Cos., which is an investor in CareMax.) And Welltower (NYSE: WELL) has been facilitating these type of arrangements, including the effort to connect residents of Clover communities with the primary care clinics run by Geisinger Health.

The “hub-and-spoke” or “do-it-yourself” model could prove adaptable to various consumer demographics, as well. Luxury communities like those of Solera or Atria’s Coterie brand can tout the convenience of concierge-style care. And if more health care services are covered by Medicare Advantage benefits, that should free up financial resources to help mid-market consumers access senior living. Cloch sees particular potential in the integration of PACE with entities like Oak Street, which he believes would increase access to high-quality care, including assistance with social determinants of health, to older adults in lower income brackets.

Realizing financial upside

If the hub-and-spoke model plays out as Kaplan envisions, senior living providers will be essential to driving the success of value-based care.

“Not only does this model have significant cost benefits for Medicare, by keeping residents out of a hospital, but this process yields improvements in health outcomes through improving access to specialized medical care,” he said. “ … It’s not outside the realm of possibility that senior living providers and their preferred partners will ultimately be best positioned to deliver the best outcomes for seniors at the lowest cost to our health care system.”

But this possibility raises the inevitable question about whether senior living providers will receive fair financial upside for the cost savings that they are driving for the whole system.

I believe this question is increasingly pressing in light of the CVS deal and the most recent Humana announcement related to ChenMed. Massive corporations with enormous influence over health care payment and delivery are gaining control of how an increasing number of older adults receive their primary care. Companies such as CVS will be the 800-pound gorillas at the table in any efforts to create a hub-and-spoke model or other partnerships between senior living communities and entities such as Oak Street.

It has never been easy for senior living providers to get their fair share of the financial pie in value-based care, and this will only become harder if they are negotiating with companies as powerful as CVS or Humana.

One concern is that senior living providers may be too willing to settle for benefits such as longer length of stay, while massive insurance companies realize the bigger gains from lowering overall health care costs. Senior living leaders such as Juniper Communities CEO Lynne Katzmann have been warning of this possibility for years, as they have made a case for why senior living providers should consider launching their own MA plans while also investing in the data capabilities needed to prove the value that they are contributing to the overall health care system.

Kaplan believes that partnering with next-gen primary care providers can be a viable first step.

“My recommendation is that we get in the game and demonstrate our value by aligning with high-quality, tech-enabled primary care providers with sophisticated processes/protocols and data analytics capabilities,” he said. “This will enable us to build our case that we provide value to the health care ecosystem in the way of cost savings and improved health outcomes.”

And Kaplan also notes that there are “different types of structures and models out there.”

One such model involves primary care companies like Pine Park Health that are specifically dedicating themselves to serving senior living communities. And there are other potential primary care partners for senior living providers as well, including the organization that Cloch is working with, HarmonyCares.

Kaplan thinks it might take years for the shift to value-based care to redefine the senior living model and for providers to capture a fair share of financial upside. This might be the case, but I think providers must position themselves strategically today if they hope to capture greater rewards as they take on greater financial risk in value-based frameworks — this means carefully choosing who to align with as they “get in the game,” being cognizant of the vast sums of managed care dollars at play, capturing and understanding the right data, and not being too content with increasing length of stay or other more immediate benefits.

If providers are savvy about how they “get in the game,” I share Kaplan’s hopefulness about the eventual outcomes.

“In time, I am optimistic that senior living will play an integral role and will be fairly compensated for reducing cost on the system,” he said.

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