Primary-care startup Oak Street Health surged in its stock market debut. Here's how its CEO plans to keep growing its senior care business, which still isn't profitable.

  • On Thursday, primary care startup Oak Street Health went public on the New York Stock Exchange under the ticker "OSH."
  • The company priced its shares at $21 before open, above the originally set range. Shares started trading at $42.50, more than double the set price, and closed up 90% at $40.
  • Oak Street Health cofounder and CEO Mike Pykosz told Business Insider that the decision to amend the share price prior to open came from robust investor interest during the 5-day long fully virtual roadshow, which regularly ran from 6 a.m. until 5 p.m.
  • The business ran a loss in 2019 according to its S-1 filing, but Pykosz said that Oak Street's long-term growth plan remains the same: it will continue to open in-person clinics in underserved communities to provide high-quality care to seniors. 
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Primary care startup Oak Street Health just went public in the latest show of confidence for the red-hot industry.

The stock surged in its first day of trading. Oak Street sold shares to investors at $21. The stock started trading at $42.50, and closed up 90% at $40. 

At the close Thursday, Oak Street Health was valued at $9.5 billion, based on the more than 238 million outstanding shares outlined in its S-1 filing. It trades on the New York Stock Exchange under the ticker "OSH."

Oak Street saw robust investor interest, cofounder and CEO Mike Pykosz told Business Insider. The road show leading up to Thursday's public debut was an entirely virtual, 5-day marathon of Zoom meetings with institutional investors that he said would last from 6 a.m. until 5 p.m. some days.

Pykosz was among the investors that made millions Thursday, with his stake in the company worth more than $377 million at closing. Oak Street Health, however, has yet to turn a profit and saw losses deepen as it grew. From 2018 to 2019, losses widened from $79.5 million to $107.9 million. Through the first quarter of 2020, Oak Street's net loss was $15 million.

Oak Street made $201.8 million in revenue in the first quarter of 2020, up from the $117 million it brought in between January and March 2019. For the full year 2019, Oak Street's revenue was $556.6 million, up from $317.9 million in 2018.

Scaling this type of primary care model can be difficult, as other companies like One Medical have shown. But Pykosz said he believes Oak Street's economic model can grow more efficiently by opening more clinics and serving more patients.

"We will continue to identify cities and neighborhoods within cities that need quality care that we can offer and expand that," he said. "There's a huge amount of places where we can transform healthcare."

Oak Street currently has 260 primary care doctors in its 54 centers managing the health of 85,000 patients. Pykosz said it opened a clinic in Dallas, Texas, "a few days ago," and has plans to open one in Jackson, Mississippi, relatively soon. The goal, Pykocsz said, is to keep seniors in those areas healthier and save money.

To provide care to its patients, which Pykosz said are typically low-to-middle-income older Americans, Oak Street works closely with health insurance providers like Humana. 

Humana is the second-largest seller of Medicare Advantage plans behind UnitedHealth Group, and accounts for about half of Oak Street's revenue. As of the first-quarter 2020, 49% of its capitated revenue came from Humana, while 12% came from health insurer WellCare and 11% came from Cigna HealthSpring, Cigna's Medicare business.

Capitated revenue is the term Oak Street uses to describe the lump sum payments it gets from health insurers to care for their members. It accounts for the vast majority of Oak Street's revenue.

Pykosz said Oak Street now has partnerships with about 20 insurers, including both national and local providers. 

Although this segment of the population is at high risk of developing severe complications from COVID-19, Pykosz said that Oak Street has resumed in-person appointments for nearly 70% of its patients. It will continue to use virtual visits for patients and doctors that prefer them, he said the benefits of in-person appointments will continue even after the pandemic subsides.

"The segmentation of primary care is a trend we are seeing play out," Pykosz said. "It's not one size fits all. We generate better outcomes and experience for our model group, but it wouldn't work for a healthy 35-year-old."

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