The encyclopedia · Strategy & Leadership · Strategic decision · 2023–2025

CVS spent $10.6B on Oak Street Health — then wrote off $5.7B two years later

CVS paid $10.6 billion for Oak Street Health to own primary care. Two years later, rising costs forced a $5.7 billion impairment — half the purchase price gone.

CVS Health · Oak Street Health · 2025-10

What happened

In February 2023, CVS Health announced it would acquire Oak Street Health, a chain of primary care clinics focused on Medicare patients, for $10.6 billion in cash. The purchase was the centerpiece of CVS's healthcare transformation strategy — the pharmacy giant wanted to own the doctor's office, not just the prescription. CVS already owned Aetna (insurance) and Caremark (pharmacy benefits); Oak Street would give it the primary care clinics where patients actually received treatment. CEO Karen Lynch described the deal as a step toward 'the future of healthcare.'

The acquisition closed in May 2023. Almost immediately, costs rose faster than expected. Oak Street's senior-care clinics required heavy investment in staff, technology, and facilities. Patient acquisition costs were high, reimbursement rates from Medicare Advantage plans tightened, and the clinics struggled to reach the patient volumes needed for profitability. By early 2025, CVS was slowing the planned expansion and reviewing which clinics were viable.

On October 29, 2025, CVS reported a $5.7 billion goodwill impairment charge on its healthcare delivery assets, driven primarily by the Oak Street Health acquisition. CFO Brian Newman said CVS had decided to close 16 underperforming Oak Street clinics where it 'did not see a reasonable path to sustainable margins.' The company also reduced the number of new clinics it planned to open in 2026 and beyond. The impairment pushed CVS to a net loss of nearly $4 billion in the third quarter.

Despite the write-down, CVS raised its full-year 2025 adjusted earnings guidance. The core pharmacy and insurance businesses remained profitable — Aetna's medical loss ratio improved to 92.8% — but the primary care bet had cost $5.7 billion in two years. More than half the purchase price had evaporated, and the promise of integrated care (pharmacy + insurance + clinic) remained unproven.

Why it happened

CVS paid a premium for Oak Street at the peak of the primary care acquisition wave — the $10.6B price reflected expectations of rapid clinic expansion that proved too expensive to execute.
Medicare Advantage reimbursement tightened after the deal closed, squeezing margins on Oak Street's core patients. Rising medical costs across the industry hit the clinic network hard.
Patient acquisition was higher than modeled. Oak Street needed to fill new clinics quickly to reach breakeven, but signing up Medicare patients proved slower and more expensive than planned
By the time CVS realized the model was not working, the capital was committed. The $5.7B impairment showed the integrated strategy was slower than promised.

What it cost$5.7B impairment; 16 clinics closed; ~$4B net losscostly

The lesson

Vertical integration in healthcare sounds inevitable on a slide deck. In practice, buying clinics does not make them profitable — and the impairment hits faster than the synergies.

Sources

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CVS spent $10.6B on Oak Street Health — then wrote off $5.7B two years later

What happened

Why it happened

The lesson

Sources

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