CVS Health Steps Up to Bolster Oak Street as Cost Pressures Mount

CVS Health’s CVS health care delivery asset, Oak Street Health, began to show signs of pressure in medical cost trends in the earlier months of 2025. In the second quarter, Oak Street posted a higher medical benefit ratio (MBR), mainly due to factors like persistently elevated medical costs, membership mix, and more robust benefits and supplemental benefit offerings provided by plans to their members. While this pressured the results of the healthcare delivery business, they were partially offset by another quarter of solid performance in Signify Health, driven by continued strong in-home assessment volumes.

Total at-risk membership at Oak Street went up 31% from the same period last year. CVS also reduced its full-year adjusted operating income forecast by approximately $200 million in the Health Services segment, now expecting at least $7.34 billion, due to the higher MBR.

For the company, value-based care remains an essential component of its Medicare Advantage strategy, helping deliver enhanced clinical outcomes, better patient experiences, and lower overall costs of care. CVS is acting promptly to address the market dynamics and strengthen this business, ensuring that seniors continue to benefit from this industry-leading model.

The company has put together a strong leadership team, bringing in new members with extensive experience in value-based care and population health management. Secondly, CVS is assessing its technology stack and operations to provide a leading clinical solution from a technology perspective, with the goal of driving better medical cost management. Lastly, the company is planning to take a measured approach to Oak Street center expansion while prioritizing patient growth within those centers.

Updates From CVS’ Competitors

The Cigna Group’s CI subsidiary, Evernorth Health Services, has announced a $3.5 billion investment in the specialty pharmacy management company, Shields Health Solutions. The investment is in the form of preferred stock and is not expected to have a material impact on The Cigna Group's previously issued 2025 adjusted earnings per share (EPS) guidance of at least $29.60. Evernorth's investment coincides with Shields' establishment as a private, standalone company upon its acquisition by private equity firm Sycamore Partners.

Elevance Health ELV recently announced new strategic, individual value-based care partnerships with Vori Health and HOPCo, in addition to the company’s existing partnership with TailorCare, to further advance the quality of care and help optimize patient health outcomes for eligible individuals living with musculoskeletal conditions. These partnerships expand the company’s musculoskeletal care program to provide personalized, coordinated care.

CVS Stock Performance, Valuation and Estimates

In the past year, CVS Health shares have rallied 29.4% against the industry’s 18.8% fall.

CVS Health is trading at a forward 12-month price/sales (P/S) of 0.23X, lower than the industry average of 0.39X. The stock has a Value Score of A.

Here’s how analyst estimates for the company’s 2025 and 2026 are currently trending.

CVS currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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