Mike Pykosz, CEO of Oak Street Health, said the company is leaning into a hybrid approach to care.
"We do telehealth on one end of the spectrum and we do visits in the home for our sickest patients on the other end of the spectrum,” Pykosz said. “While most of our visits are in person, we do employ a range and that range is important.”
Oak Street Health, which offers primary care for Medicare-aged patients, was founded in Chicago ten years ago. In 2020, the company went public and last fall it acquired RubiconMD, a startup providing telehealth specialty consultations to primary care doctors for $130 million in cash.
Pykosz chatted with Digital Health Business & Technology about the company’s plans to grow as Amazon and other large tech companies enter primary care, what it learned from its recent partnership with retail giant Walmart and more.
The interview is edited for length and clarity.
Throughout digital health, there’s been a flurry of high-profile merger and acquisition activity. Would you take anything off the table if presented with opportunities?
I don't think you ever want to take any off the table because the market has evolved very quickly over the last couple of years and will continue to evolve. If you had told me three years ago, we were going to buy Rubicon, I would’ve said ‘Oh, interesting.’ It wasn't necessarily part of some strategic plan. I don't think it is an active or proactive part of our strategy right now to go roll up a bunch of capabilities or participate in M&A. It’s something we'll consider over time if the right opportunities pop up.
Your partnership with Walmart serves a slightly different population than many of your clinics. What does the future look like with that partnership?
In the immediate term, I don't think a younger, non-Medicare population is going to be a focus for us. It's very important for Walmart that any primary care provider serves their customers and team members. It’s a great experience and it works but I don’t think it’s a massive transformative opportunity. We absolutely feel like for the older adult side, our model works with the health outcomes and savings we’re driving, so we do feel like that’s a massive, transformative opportunity. A lot of the reason we did the pilot partnership was to see if we could drive more growth patients by being inside the Walmart, just because people are going to Walmart and shopping already. I think that is still a little bit TBD. We haven't seen the massive difference in growth we hoped for.
You acquired Rubicon last year. How is that going and how do you see it integrating into your existing model?
If you take a step back and look at how primary care is delivered, it makes no sense. You’d never from a blank sheet of paper, design the primary care system the way it works today. It's just it's evolved that way based on the fee for service model and differences in reimbursement between primary care, specialists, imaging, and procedures, etc. Primary care really is under resourced, overworked and that becomes a feeder for the downstream parts of the health system that make more money. I think that is one of the root causes of why we have such a problem with cost and quality in this country.
Now with Rubicon, I'm the specialist. If you think about how primary care and specialists interact, oftentimes, the primary care doctors just don't have enough time with the patient. What do we have to do in the healthcare system when you want a second opinion? You have to make a referral to someone who does another visit. Then they do a physical exam, they take more labs, they do a bunch of testing again. And it takes two to three months to schedule that second opinion visit. It costs a bunch of money for the patient. There are a lot of steps. And then there's another set of challenges with getting the results of that second opinion communicated back, right. So, that's just how healthcare works. But if you think about what you really want, it’s just to get that second opinion. Rubicon allows you to get that second opinion. Instead of waiting months, we wait hours. We don’t need to redo the physical exam, the testing or imaging.
Oak Street has spent a lot of time developing its own technology stack, such as its proprietary EHR. What’s behind that strategy? Why build your own and how important is that for the company’s growth?
We didn't start out as a tech company. What we found as we evolved is that the solutions we could find off-the-shelf or commercially available weren't actually meeting the needs of our model. I think the fundamental challenge is most healthcare is kind of undifferentiated fee-for-service driven primary care. The kind of technology and software being built for the EMRs aren't actually serving the needs of our business. They're not serving the needs of our patients either. We don't want to create a situation where you are changing the way we practice, changing the way we care for patients, because we're trying to align with what technology is available. We want the technology to drive what we believe is the right model of care.
What’s the roadmap in terms of selling some of that IP or finding alternate revenue streams from technology?
Do I think we can leverage our technology and our data stack more broadly? Yes, I think that's actually a big focus of ours because it works really well and it takes investment to get there. The more you can leverage the resources you have, the more you can drive a better return. Everybody says ‘Well, how do you do that?’ You do that by putting up more centers, by acquisitions, by packaging the technology and selling it. For us, part of the answer will be building more centers because we know they work. We'll keep doing that. But as you look through three to five years out into the future, I think we'll have to figure that out.
With the technology, the more components you have the more powerful technology becomes. The biggest reason we acquired Rubicon is we wanted to integrate it into our tech stack. We’re close to the end of the first phase of that journey.