Oak Street Health goes public with $328M offering

Green van that says "Oak Street Health"
Oak Street Health is a tech-enabled, value-based care primary care start-up specifically targets Medicare-eligible patients, particularly those in underserved communities launched in 2012. Officials announced last month it planned to go public under the symbol “OSH” on the New York Stock Exchange. (Oak Street Health).

Oak Street Health officially went public on Thursday with a $328 million initial public offering.

The tech-enabled, value-based care primary care start-up specifically targets Medicare-eligible patients, particularly those in underserved communities. Officials announced last month it planned to go public under the symbol “OSH” on the New York Stock Exchange.

Photo of man in suit
Mike Pykosz is the CEO of Oak Street Health.
(Oak Street Health)

Its 15.6 million shares began trading at $21 on Thursday morning, a price higher than the $15 to $17 price range it said it planned to seek in initial filing with the Securities and Exchange Commission. It's share price jumped to $40 by the end of the day.

Backers include Humana, as well as General Atlantic and Newlight Partners.

Oak Street has 54 centers in 13 markets across eight states serving 85,000 patients with about 65% of those patients are under capitation agreements. The company has 2,300 employees including 250 primary care providers.

Oak Street CEO Mike Pykosz, 38, told Fierce Healthcare in an interview that the company saw going public as an important step for growth, even as COVID-19 has created a turbulent financial environment for physician practices. 

RELATED: Oak Street Health files to go public

"We want to continue to bring in more resources into the company so we can continue to execute our mission and we felt this prior to COVID," he said. "But I think COVID just reaffirmed in our minds the impact we can make and how we can bring our care model to more people in more geographies and really help transform their care." 

In its filing, officials said the Medicare-eligible population "represents the highest proportion of healthcare spending in the United States." Officials said they believe they are chasing a market of $325 billion based on an addressable market of Medicare eligibles of 27 million patients with an average annual revenue of $12,000 per member. 

However, the company has yet to be profitable and reported it has a history of losses, with an accumulated deficit of $369.4 million.

"Our economic model is all about investing in our patients' care and investing in our communities," Pykosz said. "So when you're growing at the rate we are and you're making those investments, it can lead to operating loss. But when we look at the economic potential of the model, we really try to look at 'What are our more mature centers doing? What is the care model and the impact on the patients who have been with us longer?' to get a sense of where we're going."

Pykosz said the company is playing the long game.

"If we wanted to be profitable tomorrow, we could just shut down all of our new centers. If it's all about patients and fixed operating costs. But one: that wouldn't be executing on our mission most importantly of bringing those centers to new markets in neighborhoods where patients really need our care," he said.

The company also has a great deal of confidence that its board and its team will be able over time to create a profitable organization through value-based care, he said.

RELATED: Oak Street's patients are most at risk from COVID-19. Here's how its business is changing

J.P. Morgan, Goldman Sachs & Co. LLC, Morgan Stanley, William Blair and Piper Sandler were acting as joint book running managers for the offering. Baird and Truist Securities, formerly known as SunTrust Robinson Humphrey, were acting as co-managers for the offering.

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