Value-Based Care and Risk

Mike Pykosz and Geoff Price came from management consulting and private equity; Griffin Myers was an emergency physician with an MBA. In 2012 in Chicago they noticed that older, poorer Americans in urban neighbourhoods were some of the most expensive patients in Medicare, not because they received too much primary care but because they received too little. Their chronic conditions went unmanaged until they reached the emergency room. Oak Street Health would build its own centres in those neighbourhoods, employ physicians on salary with panels of roughly 400–600 patients instead of the 2,000 or more typical in fee-for-service practice, and add care managers, behavioural health staff, social workers, free transport and community rooms. It would be paid not per visit but by capitation: Medicare Advantage plans, Humana first and largest, would pass Oak Street a share of the premium for each member, and Oak Street would bear nearly all of that member's medical costs.

Oak Street went public in August 2020 at $21 a share. Its revenue reached $2.16 billion in 2022, about 98% of it capitated, while it lost about $510 million that year as it opened centres faster than older ones matured. In February 2023 CVS Health agreed to buy it for $39 a share, about $10.6 billion including debt. A very different value-based company shows the other outcome. agilon health, formed by the private-equity firm Clayton, Dubilier & Rice in 2016 and listed in April 2021, took full-risk Medicare Advantage contracts on behalf of independent physician groups it did not own. Its market value peaked at about $17 billion (computed from share price, reported). In 2025 its medical margin was negative $57 million, against positive $205 million in 2024, it lost about $391 million, exited markets covering about 84,000 members, and its chief executive left; the shares fell more than 95% before a reverse split in 2026. Inside CVS, Oak Street's goodwill was impaired, with Signify Health's, by about $5.7 billion in 2025, and 16 centres were slated to close. This chapter explains how risk contracts work, where their margin comes from, and why so many of the companies that bet on them failed.