A few weeks ago, CVS bought Oak Street Health for $9.5B. Yup, that’s billion with a capital B. This adds to the ever growing list of health tech acquisitions by larger companies trying to get a piece of the provider side of healthcare. However, Oak Street stands out because it isn’t strictly a provider side play but an interesting combination of a unique care and revenue model combined with an integrated tech stack.

The Oak Street model isn’t revolutionary by any means. The company operates on a capitation framework with the payors that it partners with. We’ve seen this before with many other provider groups but they key ingredients Oak Street had were customized technology in the form of their own EMR, a well-structured care team where the providers were employed by Oak Street, and lots of time (11 years in the making). On top of this, they were focused mostly on the Medicare and Medicare Advantage market and could tailor their care to that specific age group.

Instead of a fee-for-service model where they would have to focus on volume of care, a capitation framework incentivized them to ensure that downstream costs of their patients (ED visits and hospitalizations) were kept to a minimum. In plain terms, this means that they have to take good care of their patients and prevent bad things from happening (which sounds like the kind of thing a doctor’s office should probably do in the first place).

Given that Oak Street did so well, it begs the question of whether owning the full provider stack is important to bend the cost curve and “make it” as a health tech company. Other companies, such as Pearl Health, are choosing to forgo owning the provider side and are instead focused on bringing analytics and data to primary care providers. The th