- Oak Street Health, a network of value-based primary care centers for adults on Medicare, missed Wall Street expectations on earnings for the first quarter but beat on revenue with a topline of $296.7 million, representing 47% growth from the same time last year.
- In quarterly results released aftermarket Monday, the Chicago-based provider reported a net loss of $64 million, compared to a loss of $15.4 million in the first quarter of 2020, due in part to significant growth in operational expenses, including higher medical claims expenses and cost of care in the quarter.
- Despite the mixed results, Oak Street is forecasting another year of strong growth in 2021, expecting to operate at least 117 centers by the end of 2021, a 36% increase in the size of the network, and bring in at least $1.3 billion in full-year revenue, representing 47% growth over 2020's topline.
The coronavirus pandemic has spurred Oak Street to steady expansion, even as it threatened the day-to-day operations of many other providers. The company went public in August amid rising interest in primary care networks on Wall Street, and accelerated by the influx of new capital, Oak Street aggressively expanded into new territories throughout 2020.
In its IPO paperwork filed with the Securities and Exchange Commission in July, Oak Street said COVID-19 was a source of uncertainty as it could hit Oak Street's high-risk senior population hard, but has also increased consumer focus on health and well-being that's driven demand.
Oak Street focuses on Medicare patients — an increasingly lucrative space as the population ages — but provides services to patients with a variety of insurance options. The company, which serves as a middleman between payers, providers and patients, offers many medical, behavioral and social health services ranging the gamut from in-person or telehealth physician visits to fitness classes to senior education classes.
Oak Street's IPO priced at $21 a share, but rocketed 90% in its first day of market trading in early August, raising the operator about $350 million. Since then, its stock has grown almost 170% to Monday's close, placing its market cap at over $12.5 billion.
However, its stock dipped about 3% in morning trading Tuesday following the first quarter results. Analysts have noted that despite the growth, Oak Street's value-based model is largely untested at scale, isn't yet profitable and will likely need high levels of investment in the near future to reach the market share and revenue to support its high valuation.
But the company is banking that demand will continue in 2021 and beyond, as its senior patient pool expands and the shift to value-based care continues. In the quarter, Oak Street's capitated revenue totaled $291.2 million, up 48% year over year, and the company had about 75,500 risk-based patients, representing 69% of its total patients.
Oak Street also sees federal programs incentivizing value-based care as key priorities, especially the CMS Direct Contracting program, a voluntary risk-sharing model aimed at lowering costs and improving care for beneficiaries in Medicare fee-for-service.
"We are encouraged by our early traction with the CMS Direct Contracting program as we enrolled approximately 6,500 participants for the April 1st launch," CEO Mike Pykosz said in a statement, noting the company is "optimistic about the opportunity this program represents."
Oak Street opened seven new centers in the quarter and expanded into four new markets. As of March 31, Oak Street operated 86 clinics across 20 markets in 13 states.
Correction: In a previous version of this article, Oak Street's full-year revenue outlook was incorrect. The chain expects to bring in at least $1.3 billion in 2021.