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CVS Health wants to find a private equity partner to back new Oak Street Health clinics, Bloomberg reports, citing sources familiar with the matter.

Why it matters: The move comes barely a year after CVS shelled out $10.6 billion to buy Oak Street.

Zoom in: CVS has reached out to several private equity firms about a potential joint venture for the Medicare Advantage-focused care provider.

CVS is weighing a model similar to the primary care JV that Humana and Welsh, Carson, Anderson & Stowe struck in 2020.

That JV — known as CenterWell — was structured so Humana could buy back its interest over time while giving WCAS a return.

Zoom out: In its Q1 earnings call this month, CVS cited a $400 million reduction in its health care services guidance, partly attributable to utilization pressure at Oak Street.

Base payments to MA plans will be cut by an average of 0.16% next year, indicating more pressure on the sector as the Biden administration works to make MA payments more accurate.

What they're saying: "Given the startup costs and initial negative margins, not to mention CVS' current elevated leverage, finding a partner to help offset some of the dilution would be financially advantageous," writes Leerink analyst Michael Cherny in a note.

More details around the JV are needed to assess its potential success, including the "ramping of cohort profitability and how it factors into CVS' enterprise Medicare offerings," he adds.

💭 Our thought bubble: Increased federal oversight of consolidation in health care, combined with new financial pressure on MA, could mean tough sledding for a potential Oak Street JV.

CVS reportedly seeks PE partner for Oak Street Health growth

The move comes barely a year after CVS shelled out $10.6 billion to buy Oak Street.

Illustration of a health plus-shaped price tag with dollar signs printed on it.

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CVS Health wants to find a private equity partner to back new <a class="gtmContentClick" data-vars-link-text="Oak Street Health" data-vars-click-url="https://www.axios.com/2023/02/09/cvs-bets-big-primary-care" data-vars-content-id="76f64fc7-f986-4e4f-8f1d-169de871f64e" data-vars-headline="CVS reportedly seeks PE partner for Oak Street Health growth" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://www.axios.com/2023/02/09/cvs-bets-big-primary-care" target="_self">Oak Street Health</a> clinics, <a class="gtmContentClick" data-vars-link-text="Bloomberg reports" data-vars-click-url="https://www.bloomberg.com/news/articles/2024-05-23/cvs-is-said-to-seek-investor-to-back-new-oak-street-clinics" data-vars-content-id="76f64fc7-f986-4e4f-8f1d-169de871f64e" data-vars-headline="CVS reportedly seeks PE partner for Oak Street Health growth" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://www.bloomberg.com/news/articles/2024-05-23/cvs-is-said-to-seek-investor-to-back-new-oak-street-clinics" target="_blank">Bloomberg reports</a>, citing sources familiar with the matter.Why it matters: The move comes <a class="gtmContentClick" data-vars-link-text="barely a year" data-vars-click-url="https://www.axios.com/pro/health-tech-deals/2023/02/07/cvs-closes-in-on-oak-street-health" data-vars-content-id="76f64fc7-f986-4e4f-8f1d-169de871f64e" data-vars-headline="CVS reportedly seeks PE partner for Oak Street Health growth" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://www.axios.com/pro/health-tech-deals/2023/02/07/cvs-closes-in-on-oak-street-health" target="_self">barely a year</a> after CVS shelled out $10.6 billion to buy Oak Street.

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CVS reportedly seeks PE partner for Oak Street Health growth

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