CVS Appoints New President for Oak Street Health Amid Industry Challenges

CVS Health has named Creagh Milford as the new president of Oak Street Health, its value-based medical group for seniors, effective immediately. This leadership change comes as the healthcare giant navigates challenges in the Medicare Advantage market and seeks to integrate Oak Street more closely with its other divisions.

Leadership Transition at Oak Street Health

Creagh Milford, previously serving as President of Retail Health at CVS, takes over from Brian Clem, who has led Oak Street Health since 2019. Clem, who remained in his role through CVS's $10.6 billion acquisition of Oak Street in 2023, is stepping down to spend more time with his family, according to a CVS spokesperson.

Milford, an internal medicine physician by training, joined CVS in 2021 to oversee the company's virtual care portfolio. He will maintain his position as interim president of retail health for the near future, highlighting CVS's strategy to align its various healthcare delivery assets.

Oak Street's Growth and Challenges

Since its acquisition, CVS has heavily invested in Oak Street Health, working to integrate the business with its other divisions. This integration includes directing members of CVS's Aetna health insurance products to Oak Street facilities for care. The strategy has shown some success, with Oak Street reporting a more than one-third year-over-year increase in total at-risk members during the first quarter.

However, Oak Street faces challenges similar to other value-based care businesses, particularly in the Medicare Advantage sector. CFO Tom Cowhey noted in a recent earnings call, "While very immature, we have seen some signs of pressure in first quarter medical cost trends at Oak Street Health, which we will continue to monitor closely over the next several months as they continue to develop."

Industry-Wide Pressures in Medicare Advantage

The appointment comes amid broader industry challenges, particularly in the Medicare Advantage market. Seniors, especially those enrolled in privatized Medicare Advantage plans, are utilizing more medical services. However, reimbursement rates from the federal government have not kept pace with this increased utilization. If this trend continues, it could potentially impact CVS's operating income for 2025.

This disconnect between healthcare utilization and reimbursement rates presents a significant challenge for value-based care models like Oak Street Health, which specialize in managing healthcare for Medicare patients. As the industry grapples with these pressures, Milford's leadership will be crucial in navigating Oak Street Health through this complex landscape.