throbber
Case: 1:22-cv-00149 Document #: 1 Filed: 01/10/22 Page 1 of 30 PageID #:1
`
`UNITED STATES DISTRICT COURT
`NORTHERN DISTRICT OF ILLINOIS
`
`
`REGINALD T. ALLISON, Individually and
`on Behalf of All Others Similarly Situated,
`
`
`Case No.
`
`
`
`Plaintiff,
`
`
`v.
`
`OAK STREET HEALTH, INC., MICHAEL
`PYKOSZ, and TIMOTHY COOK,
`
`
`Defendants.
`
`
`
`
`
`
`CLASS ACTION COMPLAINT
`FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS
`
`

`

`Case: 1:22-cv-00149 Document #: 1 Filed: 01/10/22 Page 2 of 30 PageID #:2
`
`
`
`Plaintiff Reginald T. Allison (“Plaintiff”), individually and on behalf of all others similarly
`
`situated, by and through his attorneys, alleges the following upon information and belief, except
`
`as to those allegations concerning Plaintiff, which are alleged upon personal knowledge. Plaintiff’s
`
`information and belief is based upon, among other things, his counsel’s investigation, which
`
`includes without limitation: (a) review and analysis of regulatory filings made by Oak Street
`
`Health, Inc. (“Oak Street” or the “Company”) with the United States (“U.S.”) Securities and
`
`Exchange Commission (“SEC”); (b) review and analysis of press releases and media reports issued
`
`by and disseminated by Oak Street; and (c) review of other publicly available information
`
`concerning Oak Street.
`
`NATURE OF THE ACTION AND OVERVIEW
`
`1.
`
`This is a class action on behalf of persons and entities that purchased or otherwise
`
`acquired Oak Street securities between August 6 2020, and November 8, 2021, inclusive (the
`
`“Class Period”). Plaintiff pursues claims against the Defendants under the Securities Exchange
`
`Act of 1934 (the “Exchange Act”).
`
`2.
`
`Oak Street purportedly operates primary care centers within the United States. Oak
`
`Street claims that it “engages Medicare eligible patients through the use of an innovative
`
`community outreach approach.” The Company claims it contracts with health plans to generate
`
`medical costs savings and realize a return on its investment in primary care. As of December 31,
`
`2020, the Oak Street claims to have operated 79 centers in 16 markets across 11 states, which
`
`provided care for approximately 97,000 patients.
`
`3.
`
`On November 8, 2021, Oak Street filed its third quarter quarterly report with the
`
`SEC on Form 10-Q for the quarter ended September 30, 2021. Therein, the Company, in relevant
`
`part, disclosed that on November 1, 2021 the Company received a civil investigative demand
`
`(“CID”) from the United States Department of Justice (“DOJ”). According to the CID, the DOJ
`
`
`
`

`

`Case: 1:22-cv-00149 Document #: 1 Filed: 01/10/22 Page 3 of 30 PageID #:3
`
`
`
`was is investigating whether the Company violated the False Claims Act. The CID also requests
`
`documents and information related to the Oak Street’s relationships with “third-party marketing
`
`agents” and Oak Street’s “provision of free transportation to federal health care beneficiaries.”
`
`4.
`
`On this news, the Company’s share price fell $9.75, or more than 20%, to close at
`
`$37.14 per share on November 9, 2021, on unusually heavy trading volume.
`
`5.
`
`Throughout the Class Period, Defendants made materially false and/or misleading
`
`statements, as well as failed to disclose material adverse facts about the Company’s business,
`
`operations, and prospects. Specifically, Defendants failed to disclose to investors: (1) that Oak
`
`Street maintained relationships with third-party marketing agents likely to provoke law
`
`enforcement scrutiny; (2) that Oak Street was providing free transportation to federal health care
`
`beneficiaries in a manner that would provoke law enforcement scrutiny; (3) that these activities
`
`may be violations of the False Claims Act; (4) that, as such, Oak Street was at heightened risk of
`
`investigation by the DOJ and/or other federal law enforcement agencies; (5) that, as a result, Oak
`
`Street was subject to adverse impacts related to defense and settlement costs and diversion of
`
`management resources; and (6) that, as a result of the foregoing, Defendants’ positive statements
`
`about the Company’s business, operations, and prospects were materially misleading and/or lacked
`
`a reasonable basis.
`
`6.
`
`As a result of Defendants’ wrongful acts and omissions, and the precipitous decline
`
`in the market value of the Company’s securities, Plaintiff and other Class members have suffered
`
`significant losses and damages.
`
`JURISDICTION AND VENUE
`
`7.
`
`The claims asserted herein arise under Sections 10(b) and 20(a) of the Exchange
`
`Act (15 U.S.C. §§ 78j(b) and 78t(a)) and Rule 10b-5 promulgated thereunder by the SEC (17
`
`C.F.R. § 240.10b-5).
`
`
`
`

`

`Case: 1:22-cv-00149 Document #: 1 Filed: 01/10/22 Page 4 of 30 PageID #:4
`
`
`
`8.
`
`This Court has jurisdiction over the subject matter of this action pursuant to 28
`
`U.S.C. § 1331 and Section 27 of the Exchange Act (15 U.S.C. § 78aa).
`
`9.
`
`Venue is proper in this Judicial District pursuant to 28 U.S.C. § 1391(b) and Section
`
`27 of the Exchange Act (15 U.S.C. § 78aa(c)). Substantial acts in furtherance of the alleged fraud
`
`or the effects of the fraud have occurred in this Judicial District. Many of the acts charged herein,
`
`including the dissemination of materially false and/or misleading information, occurred in
`
`substantial part in this Judicial District. In addition, the Company’s principal executive offices are
`
`in this District.
`
`10.
`
`In connection with the acts, transactions, and conduct alleged herein, Defendants
`
`directly and indirectly used the means and instrumentalities of interstate commerce, including the
`
`United States mail, interstate telephone communications, and the facilities of a national securities
`
`exchange.
`
`PARTIES
`
`11.
`
`Plaintiff Reginald T. Allison, as set forth in the accompanying certification,
`
`incorporated by reference herein, purchased Oak Street securities during the Class Period, and
`
`suffered damages as a result of the federal securities law violations and false and/or misleading
`
`statements and/or material omissions alleged herein.
`
`12.
`
`Defendant Oak Street is incorporated under the laws of Delaware with its principal
`
`executive offices located in Chicago, Illinois. Oak Street’s common stock trades on the New York
`
`Stock Exchange (“NYSE”) under the symbol “OSH.”
`
`13.
`
`Defendant Michael Pykosz (“Pykosz”) was the Company’s Chief Executive Officer
`
`(“CEO”) at all relevant times.
`
`14.
`
`Defendant Timothy Cook (“Cook”) was the Company’s Chief Financial Officer
`
`(“CFO”) at all relevant times.
`
`
`
`

`

`Case: 1:22-cv-00149 Document #: 1 Filed: 01/10/22 Page 5 of 30 PageID #:5
`
`
`
`15.
`
`Defendants Pykosz and Cook (collectively the “Individual Defendants”), because
`
`of their positions with the Company, possessed the power and authority to control the contents of
`
`the Company’s reports to the SEC, press releases and presentations to securities analysts, money
`
`and portfolio managers and institutional investors, i.e., the market. The Individual Defendants
`
`were provided with copies of the Company’s reports and press releases alleged herein to be
`
`misleading prior to, or shortly after, their issuance and had the ability and opportunity to prevent
`
`their issuance or cause them to be corrected. Because of their positions and access to material non-
`
`public information available to them, the Individual Defendants knew that the adverse facts
`
`specified herein had not been disclosed to, and were being concealed from, the public, and that the
`
`positive representations which were being made were then materially false and/or misleading. The
`
`Individual Defendants are liable for the false statements pleaded herein.
`
`SUBSTANTIVE ALLEGATIONS
`
`Background
`
`16.
`
`Oak Street purportedly operates primary care centers within the United States. Oak
`
`Street claims that it “engages Medicare eligible patients through the use of an innovative
`
`community outreach approach.” The Company claims it contracts with health plans to generate
`
`medical costs savings and realize a return on its investment in primary care. As of December 31,
`
`2020, the Oak Street claims to have operated 79 centers in 16 markets across 11 states, which
`
`provided care for approximately 97,000 patients.
`
`Materially False and Misleading
`Statements Issued During the Class Period
`
`The Class Period begins on August 6, 2020, the day the Company’s stock began
`
`17.
`
`trading on the public market. The previous day, August 5, 2020, Oak Street filed an amendment
`
`
`
`

`

`Case: 1:22-cv-00149 Document #: 1 Filed: 01/10/22 Page 6 of 30 PageID #:6
`
`
`
`to its common stock registration statement (the “Amendment”). Therein, under a section titled
`
`“Our Competitive Advantages,” Oak Street stated:
`
`Organic, Community-Based Marketing and Patient Recruitment
`
`We employ a multichannel marketing strategy that goes directly to our target
`customer. We fundamentally control our own destiny and can scale the number of
`centers on our platform rapidly and fill them with any interested patients we attract.
`
`18.
`
`In the Amendment, under a section titled “Key Factors Affecting Our
`
`Performance,” the Company stated:
`
`We utilize a proactive strategy to drive growth to our centers. We employ a
`grassroots approach to patient engagement led by our Outreach team and
`supplemented by more traditional marketing, including television, digital and social
`media, print, mail and telemarketing. We leverage our Outreach Team to ensure we
`are connecting with Medicare-eligible patients across a number of channels to make
`them aware of their healthcare choices and the services we offer. These efforts have
`historically included hosting events within our centers and participating in
`community events. Each of our centers has a community room; a space designated
`and available for our patients’ use whenever the center is open. We also utilize this
`space to provide fitness and health education classes to our patients and often open-
`up events to any older adults in the community regardless of their affiliation with
`Oak Street Health. In 2019, we hosted approximately 18,700 local events in the
`communities surrounding our centers. At the present time, we are leveraging our
`community centers as extra waiting room space as needed which allows easier
`social distancing for patients or their companions. We are continuing to leverage
`our community-based marketing approach with less focus on in-person interactions
`and more focus on working with our community partners to identify older adults
`who need our services. It is our belief that the enhanced awareness of the
`importance of managing chronic illnesses as well as patient varied preferences on
`preferred method to interact with providers will continue to drive demand for Oak
`Street Health amongst older adults. The ultimate effect of our marketing efforts is
`increased awareness of Oak Street Health and additional patients choosing us as
`their primary care provider, regardless of whether that patient is covered under MA
`or traditional Medicare. We believe that our outreach efforts also help to grow our
`payor partners’ membership base as we grow our own patient base and help educate
`patients about their choices on Medicare, further aligning our model with that of
`healthcare payers.
`
`19. With Respect to the False Claims Act, Oak Street did not claim it was involved in
`
`any wrongdoing, but the Amendment stated:
`
`
`
`

`

`Case: 1:22-cv-00149 Document #: 1 Filed: 01/10/22 Page 7 of 30 PageID #:7
`
`
`
`We also may be subject to lawsuits under the False Claims Act (the “FCA”) and
`comparable state
`laws for submitting allegedly fraudulent or otherwise
`inappropriate bills for services to the Medicare and Medicaid programs. These
`lawsuits, which may be initiated by government authorities as well as private party
`relators, can involve significant monetary damages, fines, attorney fees and the
`award of bounties to private plaintiffs who successfully bring these suits, as well as
`to the government programs. In recent years, government oversight and law
`enforcement have become increasingly active and aggressive in investigating and
`taking legal action against potential fraud and abuse.
`
`20.
`
`On September 16, 2020, Oak Street published a press release titled “Oak Street
`
`Health Reports Second Quarter 2020 Financial Results.” Therein, Oak Street, in relevant part,
`
`stated:
`
`Oak Street Health, Inc. (NYSE: OSH) (the “Company”), a network of value-based,
`primary care centers for adults on Medicare, today reported financial results for its
`second quarter ended June 30, 2020.
`
`“We were pleased with our second quarter financial results, which highlighted both
`our strong organic revenue growth and the resiliency of our model despite the
`impact from the COVID-19 pandemic. I credit our team members, all of whom
`acted swiftly to implement adjustments to our operations while maintaining our
`commitment to exceptional patient care,” said Mike Pykosz, Chief Executive
`Officer of Oak Street Health. “Looking forward, we expect the proceeds from our
`recently completed initial public offering to help us execute on our vision of
`extending our value-based care platform to Medicare beneficiaries across the
`country.”
`
`Second Quarter 2020 Financial Highlights
`
` Total revenue was $214.4 million, up 69% year over year
` The Company cared for approximately 57,500 at-risk patients, representing
`67% of its total patients
` Loss from operations was ($24.4) million, compared to ($18.4) million in
`the second quarter 2019
` Platform contribution was $19.4 million, up 81% year over year
` Net loss was ($26.8) million, compared to ($20.3) million in the second
`quarter 2019
` Adjusted EBITDA was ($17.6) million, compared to ($16.0) million in the
`second quarter 2019
` As of June 30, 2020, the company operated 54 centers, compared to 44
`centers at June 30, 2019
`
`
`
`
`
`

`

`Case: 1:22-cv-00149 Document #: 1 Filed: 01/10/22 Page 8 of 30 PageID #:8
`
`
`
`“Since the end of the second quarter, we have executed several strategic initiatives,”
`commented Tim Cook, Chief Financial Officer of Oak Street Health. “First, on
`August 6, our successful initial public offering raised $351.7 million in net
`proceeds. Second, on September 1, we announced a strategic collaboration with
`Walmart to bring Oak Street Health centers to three Walmart locations in the
`Dallas-Fort Worth area later this year. Lastly, although COVID-19 caused us to
`temporarily pause new center openings during the second quarter, we are pleased
`to report that we have opened 12 new centers in the last six weeks alone, expanding
`our total footprint to 66 centers.”
`
`(Footnotes omitted.)
`
`21.
`
`On September 16, 2020, Oak Street filed its Quarterly Report with the SEC on Form
`
`10-Q for the quarterly period ended June 30, 2020. The Company’s 10-Q was signed by Defendant
`
`Cook and reaffirmed the Company’s financial results previously announced the same day.
`
`22.
`
`The Company’s Form 10-Q contained certifications pursuant to the Sarbanes-
`
`Oxley Act of 2002 (“SOX”), signed by Defendants Pykosz and Cook, who certified:
`
`1. I have reviewed this Quarterly Report on Form 10-Q of Oak Street Health, Inc.;
`
`2. Based on my knowledge, this report does not contain any untrue statement of a
`material fact or omit to state a material fact necessary to make the statements
`made, in light of the circumstances under which such statements were made,
`not misleading with respect to the period covered by this report;
`
`
`3. Based on my knowledge, the financial statements, and other financial
`information included in this report, fairly present in all material respects the
`financial condition, results of operations and cash flows of the registrant as of,
`and for, the periods presented in this report;
`
`
`4. The registrant’s other certifying officer and I are responsible for establishing
`and maintaining disclosure controls and procedures (as defined in Exchange
`Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
`
`a) Designed such disclosure controls and procedures, or caused such
`disclosure controls and procedures
`to be designed under our
`supervision, to ensure that material information relating to the
`registrant, including its consolidated subsidiaries, is made known to us
`by others within those entities, particularly during the period in which
`this report is being prepared;
`
`
`
`
`
`
`

`

`Case: 1:22-cv-00149 Document #: 1 Filed: 01/10/22 Page 9 of 30 PageID #:9
`
`b) Evaluated the effectiveness of the registrant’s disclosure controls and
`procedures and presented in this report our conclusions about the
`effectiveness of the disclosure controls and procedures, as of the end of
`the period covered by this report based on such evaluation; and
`
`c) Disclosed in this report any change in the registrant’s internal control
`over financial reporting that occurred during the registrant’s most recent
`fiscal quarter (the registrant’s fourth fiscal quarter in the case of an
`annual report) that has materially affected, or is reasonably likely to
`materially affect, the registrant’s internal control over financial
`reporting; and
`
`
`5. The registrant’s other certifying officer and I have disclosed, based on our most
`recent evaluation of internal control over financial reporting, to the registrant’s
`auditors and the audit committee of the registrant’s board of directors (or
`persons performing the equivalent functions):
`
`a) All significant deficiencies and material weaknesses in the design or
`operation of internal control over financial reporting which are
`reasonably likely to adversely affect the registrant’s ability to record,
`process, summarize and report financial information; and
`
`
`
`b) Any fraud, whether or not material, that involves management or other
`employees who have a significant role in the registrant’s internal control
`over financial reporting.
`
`
`
`
`
`23.
`
`On November 9, 2020, Oak Street published a press release titled “Oak Street
`
`Health Reports Third Quarter 2020 Financial Results.” Therein, Oak Street, in relevant part, stated:
`
`Oak Street Health (NYSE: OSH) (the “Company”), a network of value-based,
`primary care centers for adults on Medicare, today reported financial results for its
`third quarter ended September 30, 2020.
`
`“Our strong third quarter results were highlighted by 38% growth in at-risk patients,
`57% revenue growth, and the resumption of new center openings, as we opened 13
`centers during the quarter amidst continued uncertainty related to the COVID-19
`pandemic,” said Mike Pykosz, Chief Executive Officer of Oak Street Health.
`“Since the end of the third quarter, we have opened four additional standalone
`centers, including our first locations in New York City and Mississippi, as well as
`the first of three Walmart pilot locations in Texas. Looking ahead, we continue to
`be excited by the ample opportunity to drive continued de novo expansion across
`both new and existing markets, as well as the complementary growth opportunities
`presented by our Walmart collaboration and CMS’ Direct Contracting program.”
`
`Third Quarter 2020 Financial Highlights
`
`
`
`

`

`Case: 1:22-cv-00149 Document #: 1 Filed: 01/10/22 Page 10 of 30 PageID #:10
`
`
`
`
`
` Total revenue was $217.9 million, up 57% year over year
` Capitated revenue totaled $211.8 million, up 59% year over year
` The Company cared for approximately 59,500 at-risk patients, representing
`66% of its total patients
` Loss from operations was ($55.3) million, compared to ($31.6) million in
`the third quarter of 2019
` Platform contribution was $20.1 million, up 387% year over year
` Net loss was ($59.2) million, compared to ($33.4) million in the third
`quarter of 2019
` Adjusted EBITDA was ($22.8) million, compared to ($28.1) million in the
`third quarter 2019
` As of September 30, 2020, the Company operated 67 centers, compared to
`46 centers as of September 30, 2019
`
`
`(Footnotes omitted.)
`
`24.
`
`On November 10, 2020, Oak Street filed its Quarterly Report with the SEC on Form
`
`10-Q for the quarterly period ended September 30, 2020. The Company’s Form 10-Q was signed
`
`by Defendant Cook, and reaffirmed the Company’s financial results previously announced on
`
`November 9, 2020. The Form 10-Q contained certifications pursuant to SOX, signed by
`
`Defendants Pykosz and Cook, substantially similar to the certifications described in ¶ 22, supra.
`
`With respect to marketing, the 10-Q, in relevant part, stated:
`
`We grow our patient base through our own internal sales and marketing efforts,
`which drives most of our new patient growth, as well as assignments from our MA
`plan partners. We grew our patient base from approximately 80,000 patients as of
`December 31, 2019 to approximately 86,500 as of June 30, 2020. Our growth
`during this period was more modest than we would have anticipated due to the
`measures we took to limit our outreach and marketing activities in response to the
`COVID-19 pandemic (see — Impact of COVID-19 on our Business).
`
`25.
`
`On March 9, 2021, Oak Street published a press release titled “Oak Street Health
`
`Reports Fourth Quarter 2020 Financial Results.” Therein, Oak Street, in relevant part, stated:
`
`Oak Street Health, Inc. (NYSE: OSH) (the “Company”), a network of value-based,
`primary care centers for adults on Medicare, today reported financial results for its
`fourth quarter ended December 31, 2020.
`
`
`
`
`

`

`Case: 1:22-cv-00149 Document #: 1 Filed: 01/10/22 Page 11 of 30 PageID #:11
`
`“We are incredibly proud of the impact the Oak Street team made on our patients
`and communities in 2020 and the accompanied operational and financial results,
`and we could not be more excited to continue our performance in 2021 and
`beyond,” said Mike Pykosz, Chief Executive Officer of Oak Street Health. “In
`2020, we delivered record revenue of $883 million, representing growth of 59%,
`despite significant challenges related to the COVID-19 pandemic. We opened a
`record 28 new centers during the year, including 12 in the fourth quarter, allowing
`us to bring our outstanding quality of care and patient experience to thousands of
`new older adults. In addition to our rapid growth, we continued to innovate our care
`model to meet our patients’ needs during the pandemic, including deploying
`telehealth capabilities, mobilizing and providing last mile food delivery, offering
`free COVID-19 testing, and now operating clinics to vaccinate our patients and
`communities. In what has been the most challenging year in the history of Oak
`Street Health, our results underscore the power of our model, the ingenuity and
`agility of our tenacious team, and our commitment to rebuild healthcare as it should
`be.”
`
`Mr. Pykosz continued, “Our prospects for 2021 are equally appealing. Our center
`cohort performance continues to improve over time, with newer vintages ramping
`faster than the already strong center ramps from our earlier vintages. Based on our
`continued and consistent strong unit economics in 2020, we will accelerate our pace
`of new centers even further in 2021, with a goal of opening 38-42 additional
`centers, an increase from the expectations of 25-30 that we communicated
`following our initial public offering. As our communities continue to reopen, there
`is a tremendous opportunity to re-energize our community outreach model, which
`we believe positions us well to deliver a strong year of patient growth. While 2020
`was a remarkable year, we are enthusiastic about all that we intend to accomplish
`in 2021, further enhancing our leading position in the value-based, primary care
`market.”
`
`Fourth Quarter 2020 Financial Highlights
`
`
` Total revenue was $248.7 million, up 43% year over year.
` The Company cared for approximately 64,500 risk-based patients,
`representing 66% of its total patients.
` Loss from operations1 was $(90.7) million, compared to $(44.0) million in
`the fourth quarter of 2019.
` Platform contribution2 was $12.1 million, up 397% year over year.
` Net loss1 was $(90.7) million, compared to $(45.9) million in the fourth
`quarter of 2019.
` Adjusted EBITDA3 was $(43.5) million, compared to $(36.2) million in the
`fourth quarter of 2019.
` As of December 31, 2020, the Company operated 79 centers4, compared to
`51 centers as of December 31, 2019.
`
`
`(Footnotes omitted.)
`
`
`
`
`
`

`

`Case: 1:22-cv-00149 Document #: 1 Filed: 01/10/22 Page 12 of 30 PageID #:12
`
`
`
`
`26.
`
`On March 10, 2021, Oak Street filed its Annual Report with the SEC on Form 10-
`
`K for the annual period ended December 31, 2020. The Company’s Form 10-Q was signed by
`
`Defendants Pykosz and Cook, and reaffirmed the Company’s financial results previously
`
`announced on March 9, 2020. The Form 10-K contained certifications pursuant to SOX, signed by
`
`Defendants Pykosz and Cook, substantially similar to the certifications described in ¶ 22, supra.
`
`With respect to marketing, the 10-K, in relevant part, stated:
`
`We employ a multichannel marketing strategy that goes directly to our target
`customer. We fundamentally control our own destiny and can scale the number of
`centers on our platform rapidly and fill them with any interested patients we attract.
`
`
`*
`
`*
`
`*
`
`
`We grow our patient base through our own internal sales and marketing efforts,
`which drive most of our new patient growth, as well as assignments from our MA
`plan partners. We grew our patient base from approximately 79,000 patients as of
`December 31, 2019 to approximately 97,000 as of December 31, 2020. Our growth
`during this period was more modest than we would have anticipated due to the
`measures we took to limit our outreach and marketing activities in response to the
`COVID-19 pandemic (see — COVID-19 Update on our Business).
`
`
`*
`
`*
`
`*
`
`We expect to continue to focus on long-term growth through investments in our
`centers, care model and sales and marketing. In addition, we expect our corporate,
`general and administrative expenses to increase in absolute dollars for the
`foreseeable future to support our growth and because of additional costs of being a
`public company.
`
`27.
`
`On May 10 2021, Oak Street published a press release titled “Oak Street Health
`
`Reports First Quarter 2021 Financial Results.” Therein, Oak Street, in relevant part, stated:
`
`Oak Street Health, Inc. (NYSE: OSH, or the “Company”), a network of value-based
`primary care centers for adults on Medicare, today reported financial results for its
`quarter ended March 31, 2021.
`
`“We were pleased with another strong quarter of results. Most importantly, we are
`proud of the impact we made on our patients and our communities, including
`continuing to provide them with outstanding care while also administering over
`
`
`
`

`

`Case: 1:22-cv-00149 Document #: 1 Filed: 01/10/22 Page 13 of 30 PageID #:13
`
`
`
`150,000 vaccine doses, predominantly to older adults from underserved
`communities,” said Mike Pykosz, Chief Executive Officer of Oak Street Health.
`“In the first quarter we generated revenue growth of 47%. Our execution was
`further highlighted by the opening of seven new centers, including four new
`markets, during the quarter. As of March 31, we operated 86 clinics across 20
`markets in 13 states. Our patient growth in the first quarter demonstrated the
`continued demand for Oak Street Health’s innovative model in all our markets. We
`are encouraged by our early traction with the CMS Direct Contracting program as
`we enrolled approximately 6,500 participants for the April 1st launch and are
`optimistic about the opportunity this program represents over the coming years. We
`remain committed to our mission and are excited about our growth opportunities.”
`
`First Quarter 2021 Financial Highlights
`
`
` Total revenue was $296.7 million, up 47% year over year
` Capitated revenue totaled $291.2 million, up 48% year over year
` The Company cared for approximately 75,500 risk-based patients,
`representing 69% of its total patients
` Loss from operations was ($63.8) million, compared to ($13.0) million in
`the first quarter of 2020
` Platform contribution was $36.7 million, up 43% year over year Net loss
`was ($64.0) million, compared to ($15.4) million in the first quarter of 2020
` Adjusted EBITDA was ($17.4) million, compared to ($8.7) million in the
`first quarter of 2020
` As of March 31, 2021, the Company operated 86 centers, compared to 54
`centers as of March 31, 2020
`
`
`(Footnotes omitted.)
`
`28.
`
`On the same day, May 10, 2021, Oak Street filed its Quarterly Report with the SEC
`
`on Form 10-Q for the quarterly period ended March 31, 2021. The Company’s Form 10-Q was
`
`signed by Defendant Cook, and reaffirmed the Company’s financial results announced the same
`
`day. The Form 10-Q contained certifications pursuant to SOX, signed by Defendants Pykosz and
`
`Cook, substantially similar to the certifications described in ¶ 22, supra. The Form 10-Q also stated
`
`the following with respect to marketing:
`
`We grow our patient base through our own internal sales and marketing efforts,
`which drive most of our new patient growth, as well as assignments from our MA
`plan partners. We grew our patient base from approximately 85,500 patients as of
`March 31, 2020 to approximately 109,500 as of March 31, 2021.
`
`
`
`
`

`

`Case: 1:22-cv-00149 Document #: 1 Filed: 01/10/22 Page 14 of 30 PageID #:14
`
`
`
`*
`
`*
`
`*
`
`We expect to continue to focus on long-term growth through investments in our
`centers, care model, and sales and marketing. In addition, we expect our corporate,
`general and administrative expenses to increase in absolute dollars for the
`foreseeable future to support our growth and because of additional costs of being a
`public company.
`
`29.
`
`On August 9, 2021, Oak Street published a press release titled “Oak Street Health
`
`Reports Second Quarter 2021 Financial Results.” Therein, Oak Street, in relevant part, stated:
`
`Oak Street Health, Inc. (NYSE: OSH, or the “Company”), a network of value-based
`primary care centers for adults on Medicare, today reported financial results for its
`quarter ended June 30, 2021.
`
`“We were pleased with another quarter of strong growth in light of continued
`uncertainty navigating the COVID-19 pandemic. We remain committed to our
`patients and communities, as we have throughout the pandemic, and are particularly
`proud of the more than 180,000 vaccine doses we have administered this year to
`predominantly older adults in underserved communities,” said Mike Pykosz, Chief
`Executive Officer of Oak Street Health. “In the second quarter, we generated at-
`risk patient growth of 54% and total revenue growth of 65% and continued our
`national expansion, opening 9 new centers in four new markets. On August 5th, we
`opened our 100th center compared to just 54 when the pandemic began in March
`2020. We did encounter medical cost headwinds during the quarter related to
`COVID-19 hospitalizations, a significant increase in non-acute utilization, and
`historically high medical costs for new patients, resulting in an Adjusted EBITDA
`loss of $53.5 million compared to the low end of our prior guidance of $40.0
`million. However, based on the strong performance across the majority of the
`drivers of business performance, our belief that the increase in medical costs will
`be temporary, and the expectation that we will receive an increase in per patient
`revenue in 2022 based on the increasing disease burden of our patient population,
`we are confident in the economics of our business in 2022 and beyond. Because of
`this confidence, we are increasing our new center guidance from 38-42 to 46-48
`new centers for full year 2021.” Tim Cook, Chief Financial Officer of Oak Street
`Health added, “We recognized revenue and incurred medical claims expense of
`approximately $14.5 million and $19.0 million, respectively, in the second quarter
`related to prior periods. In light of our strong growth, we are increasing our revenue
`guidance for the full year to $1.37 billion to $1.40 billion, representing an increase
`of 5% at the midpoint compared to our prior full year guidance, but we are
`increasing our Adjusted EBITDA loss for the year to a range of $240 million to
`$220 million given the medical cost trends we experienced in the first half of the
`year and the assumed continuation of those costs for the remainder of the year as
`well as the increase in the number of new centers in the second half of 2021.”
`
`
`
`
`

`

`Case: 1:22-cv-00149 Document #: 1 Filed: 01/10/22 Page 15 of 30 PageID #:15
`
`
`
`Second Quarter 2021 Financial Highlights
`
`
` Total revenue was $353.1 million, up 65% yea

This document is available on Docket Alarm but you must sign up to view it.


Or .

Accessing this document will incur an additional charge of $.

After purchase, you can access this document again without charge.

Accept $ Charge
throbber

Still Working On It

This document is taking longer than usual to download. This can happen if we need to contact the court directly to obtain the document and their servers are running slowly.

Give it another minute or two to complete, and then try the refresh button.

throbber

A few More Minutes ... Still Working

It can take up to 5 minutes for us to download a document if the court servers are running slowly.

Thank you for your continued patience.

This document could not be displayed.

We could not find this document within its docket. Please go back to the docket page and check the link. If that does not work, go back to the docket and refresh it to pull the newest information.

Your account does not support viewing this document.

You need a Paid Account to view this document. Click here to change your account type.

Your account does not support viewing this document.

Set your membership status to view this document.

With a Docket Alarm membership, you'll get a whole lot more, including:

  • Up-to-date information for this case.
  • Email alerts whenever there is an update.
  • Full text search for other cases.
  • Get email alerts whenever a new case matches your search.

Become a Member

One Moment Please

The filing “” is large (MB) and is being downloaded.

Please refresh this page in a few minutes to see if the filing has been downloaded. The filing will also be emailed to you when the download completes.

Your document is on its way!

If you do not receive the document in five minutes, contact support at support@docketalarm.com.

Sealed Document

We are unable to display this document, it may be under a court ordered seal.

If you have proper credentials to access the file, you may proceed directly to the court's system using your government issued username and password.


Access Government Site

We are redirecting you
to a mobile optimized page.





Document Unreadable or Corrupt

Refresh this Document
Go to the Docket

We are unable to display this document.

Refresh this Document
Go to the Docket