CVS Health Adjusts Primary Care Footprint Amid Financial and Regulatory Pressures

CVS Health recently announced the closure of 16 Oak Street Health primary care locations focused on older adults, attributing the decision to elevated medical costs, changes in CMS risk adjustment models, and evolving payer dynamics.

Despite these closures, CVS will continue operating 230 Oak Street Health centers across 27 states. Oak Street Health was acquired by Aetna, a CVS subsidiary, for approximately $10.6 billion in May 2023, highlighting CVS's ongoing investment in integrated healthcare services.

This move follows other financial challenges faced by CVS, including the Chapter 11 bankruptcy filing of its subsidiary Omnicare, which provides pharmacy services to long-term care facilities, and significant penalties of around $949 million. Additionally, leadership changes and speculation about restructuring within CVS's pharmacy and insurance divisions underscore a period of strategic reevaluation.

Market experts interpret these closures as part of a broader 'rightsizing' strategy amid pressure from reduced Medicare Advantage star ratings, where Aetna saw a decline in member enrollment in higher-rated plans from 88% in 2025 to 81% for 2026. CVS's ongoing $2 billion cost-cutting initiative reflects efforts to revitalize Aetna and optimize the company’s vertically integrated model, leveraging its pharmacy benefit management and insurance units alongside its retail presence.

The challenges faced by CVS mirror wider industry trends as retail pharmacies adjust post-COVID-19. The primary care shortage in the U.S., projected to reach over 87,000 full-time physicians by 2037, complicates efforts to deliver sustainable, profitable primary care through retail settings. CVS, Walgreens, and other retailers are refining their healthcare participation strategies based on lessons learned, seeking effective roles within the healthcare delivery ecosystem.

Overall, CVS's adaptation illustrates the complexities of integrating primary care services within a retail and insurance framework amidst regulatory pressures and evolving payer environments. The company appears focused on long-term optimization rather than short-term expansion in this vertical, signaling ongoing transformation in the intersection of pharmacy, primary care, and insurance markets.