Harvard Case - Oak Street Health
"Oak Street Health" Harvard business case study is written by Robert Chess, Julie Makinen. It deals with the challenges in the field of Strategy. The case study is 17 page(s) long and it was first published on : Jan 9, 2023
At Fern Fort University, we recommend Oak Street Health pursue a strategic growth strategy focused on expanding its geographic reach through strategic acquisitions, leveraging technology and analytics, and strengthening its value proposition to attract a wider patient base. This strategy will enable Oak Street Health to capitalize on the growing demand for value-based care and achieve sustainable competitive advantage in the primary care market.
2. Background
Oak Street Health is a rapidly growing healthcare provider focused on delivering high-quality, value-based primary care to Medicare-eligible patients. The company operates a network of primary care centers in underserved communities, offering a comprehensive range of services, including chronic disease management, medication management, and social support. Oak Street Health's mission is to improve the health and well-being of its patients while reducing overall healthcare costs.
The case study highlights the company's success in building a strong brand and attracting a loyal patient base. However, it also underscores the challenges Oak Street Health faces in scaling its operations and competing in a rapidly evolving healthcare landscape.
3. Analysis of the Case Study
SWOT Analysis:
Strengths:
- Strong Value Proposition: Oak Street Health's focus on value-based care, personalized attention, and community engagement resonates with Medicare-eligible patients.
- Experienced Leadership: The company boasts a strong leadership team with expertise in healthcare, operations, and finance.
- Technology and Analytics: Oak Street Health leverages technology and analytics to improve patient care, optimize operations, and gain insights into patient needs.
- Strong Brand Reputation: The company has built a positive brand reputation for its commitment to quality care and patient satisfaction.
Weaknesses:
- Limited Geographic Reach: Oak Street Health's current presence is concentrated in a few states, limiting its market reach.
- Dependence on Medicare Revenue: Oak Street Health's revenue stream is heavily reliant on Medicare payments, making it vulnerable to changes in government policy.
- Competition from Traditional Healthcare Providers: Oak Street Health faces competition from traditional healthcare providers who are increasingly adopting value-based care models.
Opportunities:
- Growing Demand for Value-Based Care: The shift towards value-based care presents significant growth opportunities for Oak Street Health.
- Expanding Medicare Population: The aging population and increasing number of Medicare-eligible individuals create a large potential market.
- Technological Advancements: Advancements in healthcare technology, such as telehealth and remote patient monitoring, can enhance Oak Street Health's service offerings.
Threats:
- Government Regulations: Changes in Medicare reimbursement policies could negatively impact Oak Street Health's financial performance.
- Economic Downturn: A recession could lead to reduced healthcare spending and impact patient demand.
- Competition from New Entrants: New entrants, such as technology-enabled healthcare providers, could disrupt the primary care market.
Porter's Five Forces Analysis:
- Threat of New Entrants: Moderate. Barriers to entry in the primary care market are relatively low, but Oak Street Health's established brand and network of centers create some barriers.
- Bargaining Power of Buyers: Low. Medicare-eligible patients have limited bargaining power due to their reliance on government-funded healthcare.
- Bargaining Power of Suppliers: Moderate. Oak Street Health's dependence on healthcare professionals and pharmaceutical companies gives these suppliers some bargaining power.
- Threat of Substitute Products: Moderate. Alternative care models, such as telehealth and virtual care, pose a potential threat to Oak Street Health's business.
- Rivalry Among Existing Competitors: High. The primary care market is highly competitive, with traditional healthcare providers and new entrants vying for market share.
Value Chain Analysis:
Oak Street Health's value chain consists of the following primary activities:
- Inbound Logistics: Acquiring medical supplies, equipment, and technology.
- Operations: Providing primary care services, managing patient records, and coordinating care.
- Outbound Logistics: Scheduling appointments, communicating with patients, and providing post-care support.
- Marketing and Sales: Attracting new patients, building brand awareness, and managing patient relationships.
- Service: Delivering high-quality primary care services, addressing patient concerns, and ensuring patient satisfaction.
Business Model Innovation:
Oak Street Health's business model is based on the following key elements:
- Value-Based Care: Focusing on delivering high-quality care while reducing overall healthcare costs.
- Patient-Centered Approach: Emphasizing personalized care, community engagement, and social support.
- Technology-Enabled Operations: Leveraging technology and analytics to improve patient care, optimize operations, and gain insights into patient needs.
4. Recommendations
- Expand Geographic Reach through Strategic Acquisitions: Oak Street Health should pursue a targeted acquisition strategy to expand its geographic footprint into new markets with high concentrations of Medicare-eligible patients. This will allow the company to quickly scale its operations and capture a larger market share.
- Leverage Technology and Analytics: Oak Street Health should continue to invest in technology and analytics to enhance its service offerings, improve patient care, and gain a competitive advantage. This includes exploring new technologies such as telehealth, remote patient monitoring, and artificial intelligence (AI).
- Strengthen Value Proposition: Oak Street Health should further differentiate its value proposition by expanding its service offerings, tailoring its services to specific patient needs, and building stronger relationships with patients. This could include offering additional services such as mental health care, dental care, and social support programs.
- Develop a Strong Corporate Social Responsibility (CSR) Strategy: Oak Street Health should develop a comprehensive CSR strategy that aligns with its mission and values. This could include initiatives to improve access to healthcare in underserved communities, promote health equity, and reduce environmental impact.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core Competencies and Consistency with Mission: The recommendations align with Oak Street Health's core competencies in providing high-quality, value-based primary care and its mission to improve the health and well-being of its patients.
- External Customers and Internal Clients: The recommendations are designed to meet the needs of Oak Street Health's external customers (Medicare-eligible patients) and internal clients (healthcare professionals).
- Competitors: The recommendations are aimed at differentiating Oak Street Health from its competitors and gaining a competitive advantage in the primary care market.
- Attractiveness: The recommendations are expected to generate positive returns on investment (ROI) and contribute to Oak Street Health's long-term growth and profitability.
6. Conclusion
Oak Street Health is well-positioned to capitalize on the growing demand for value-based care. By pursuing a strategic growth strategy focused on expanding its geographic reach, leveraging technology and analytics, and strengthening its value proposition, Oak Street Health can achieve sustainable competitive advantage in the primary care market and fulfill its mission to improve the health and well-being of its patients.
7. Discussion
Alternatives:
- Organic Growth: Oak Street Health could focus on organic growth by opening new centers in existing markets. However, this approach would be slower and more resource-intensive than acquisitions.
- Joint Ventures: Oak Street Health could form joint ventures with other healthcare providers to expand its reach and access new markets. However, this approach would require careful partner selection and management.
Risks and Key Assumptions:
- Regulatory Changes: Changes in Medicare reimbursement policies could negatively impact Oak Street Health's financial performance.
- Competition: New entrants and existing competitors could disrupt the primary care market.
- Economic Downturn: A recession could lead to reduced healthcare spending and impact patient demand.
8. Next Steps
- Develop a Strategic Acquisition Plan: Identify potential acquisition targets, assess their financial performance and market position, and develop a detailed acquisition strategy.
- Invest in Technology and Analytics: Allocate resources for technology and analytics initiatives, including telehealth, remote patient monitoring, and AI.
- Enhance Value Proposition: Conduct market research to identify patient needs and develop new service offerings.
- Develop a CSR Strategy: Define CSR goals, identify relevant initiatives, and implement a plan to measure and report on CSR performance.
By taking these steps, Oak Street Health can position itself for continued success in the evolving healthcare landscape.
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Case Description
This case describes the founding and evolution of Oak Street Health, a primary care provider operating in the "value-based" health care space, focused on Medicare patients in the United States. This case introduces students to value-based health care in the United States, in which providers assume full risk for the overall cost of patient care under a system of capitated payments, and contrasts it with traditional fee-for-service health care. Oak Street Health was focused on a resource-intensive model of primary care clinics in more than 20 states, primarily serving low-income seniors. The company had grown rapidly since 2013 and had an IPO in 2020. However, the company was facing increasing competition from large players as health care groups like CVS became more vertically integrated and tech companies like Amazon expressed interest in the industry. This poses strategic questions for Oak Street on how fast to continue growing and what next steps to take, and how to deal with competition while driving toward profitability in a challenging macroeconomic environment.
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