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

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`Plaintiff Reginald T. Allison (“Plaintiff”), individually and on behalf of all others similarly
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`situated, by and through his attorneys, alleges the following upon information and belief, except
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`as to those allegations concerning Plaintiff, which are alleged upon personal knowledge. Plaintiff’s
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`information and belief is based upon, among other things, his counsel’s investigation, which
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`includes without limitation: (a) review and analysis of regulatory filings made by Oak Street
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`Health, Inc. (“Oak Street” or the “Company”) with the United States (“U.S.”) Securities and
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`Exchange Commission (“SEC”); (b) review and analysis of press releases and media reports issued
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`by and disseminated by Oak Street; and (c) review of other publicly available information
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`concerning Oak Street.
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`NATURE OF THE ACTION AND OVERVIEW
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`1.
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`This is a class action on behalf of persons and entities that purchased or otherwise
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`acquired Oak Street securities between August 6 2020, and November 8, 2021, inclusive (the
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`“Class Period”). Plaintiff pursues claims against the Defendants under the Securities Exchange
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`Act of 1934 (the “Exchange Act”).
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`2.
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`Oak Street purportedly operates primary care centers within the United States. Oak
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`Street claims that it “engages Medicare eligible patients through the use of an innovative
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`community outreach approach.” The Company claims it contracts with health plans to generate
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`medical costs savings and realize a return on its investment in primary care. As of December 31,
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`2020, the Oak Street claims to have operated 79 centers in 16 markets across 11 states, which
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`provided care for approximately 97,000 patients.
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`3.
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`On November 8, 2021, Oak Street filed its third quarter quarterly report with the
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`SEC on Form 10-Q for the quarter ended September 30, 2021. Therein, the Company, in relevant
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`part, disclosed that on November 1, 2021 the Company received a civil investigative demand
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`(“CID”) from the United States Department of Justice (“DOJ”). According to the CID, the DOJ
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`was is investigating whether the Company violated the False Claims Act. The CID also requests
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`documents and information related to the Oak Street’s relationships with “third-party marketing
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`agents” and Oak Street’s “provision of free transportation to federal health care beneficiaries.”
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`4.
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`On this news, the Company’s share price fell $9.75, or more than 20%, to close at
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`$37.14 per share on November 9, 2021, on unusually heavy trading volume.
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`5.
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`Throughout the Class Period, Defendants made materially false and/or misleading
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`statements, as well as failed to disclose material adverse facts about the Company’s business,
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`operations, and prospects. Specifically, Defendants failed to disclose to investors: (1) that Oak
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`Street maintained relationships with third-party marketing agents likely to provoke law
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`enforcement scrutiny; (2) that Oak Street was providing free transportation to federal health care
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`beneficiaries in a manner that would provoke law enforcement scrutiny; (3) that these activities
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`may be violations of the False Claims Act; (4) that, as such, Oak Street was at heightened risk of
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`investigation by the DOJ and/or other federal law enforcement agencies; (5) that, as a result, Oak
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`Street was subject to adverse impacts related to defense and settlement costs and diversion of
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`management resources; and (6) that, as a result of the foregoing, Defendants’ positive statements
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`about the Company’s business, operations, and prospects were materially misleading and/or lacked
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`a reasonable basis.
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`6.
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`As a result of Defendants’ wrongful acts and omissions, and the precipitous decline
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`in the market value of the Company’s securities, Plaintiff and other Class members have suffered
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`significant losses and damages.
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`JURISDICTION AND VENUE
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`7.
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`The claims asserted herein arise under Sections 10(b) and 20(a) of the Exchange
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`Act (15 U.S.C. §§ 78j(b) and 78t(a)) and Rule 10b-5 promulgated thereunder by the SEC (17
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`C.F.R. § 240.10b-5).
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`8.
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`This Court has jurisdiction over the subject matter of this action pursuant to 28
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`U.S.C. § 1331 and Section 27 of the Exchange Act (15 U.S.C. § 78aa).
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`9.
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`Venue is proper in this Judicial District pursuant to 28 U.S.C. § 1391(b) and Section
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`27 of the Exchange Act (15 U.S.C. § 78aa(c)). Substantial acts in furtherance of the alleged fraud
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`or the effects of the fraud have occurred in this Judicial District. Many of the acts charged herein,
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`including the dissemination of materially false and/or misleading information, occurred in
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`substantial part in this Judicial District. In addition, the Company’s principal executive offices are
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`in this District.
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`10.
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`In connection with the acts, transactions, and conduct alleged herein, Defendants
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`directly and indirectly used the means and instrumentalities of interstate commerce, including the
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`United States mail, interstate telephone communications, and the facilities of a national securities
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`exchange.
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`PARTIES
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`11.
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`Plaintiff Reginald T. Allison, as set forth in the accompanying certification,
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`incorporated by reference herein, purchased Oak Street securities during the Class Period, and
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`suffered damages as a result of the federal securities law violations and false and/or misleading
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`statements and/or material omissions alleged herein.
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`12.
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`Defendant Oak Street is incorporated under the laws of Delaware with its principal
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`executive offices located in Chicago, Illinois. Oak Street’s common stock trades on the New York
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`Stock Exchange (“NYSE”) under the symbol “OSH.”
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`13.
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`Defendant Michael Pykosz (“Pykosz”) was the Company’s Chief Executive Officer
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`(“CEO”) at all relevant times.
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`14.
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`Defendant Timothy Cook (“Cook”) was the Company’s Chief Financial Officer
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`(“CFO”) at all relevant times.
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`15.
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`Defendants Pykosz and Cook (collectively the “Individual Defendants”), because
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`of their positions with the Company, possessed the power and authority to control the contents of
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`the Company’s reports to the SEC, press releases and presentations to securities analysts, money
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`and portfolio managers and institutional investors, i.e., the market. The Individual Defendants
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`were provided with copies of the Company’s reports and press releases alleged herein to be
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`misleading prior to, or shortly after, their issuance and had the ability and opportunity to prevent
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`their issuance or cause them to be corrected. Because of their positions and access to material non-
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`public information available to them, the Individual Defendants knew that the adverse facts
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`specified herein had not been disclosed to, and were being concealed from, the public, and that the
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`positive representations which were being made were then materially false and/or misleading. The
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`Individual Defendants are liable for the false statements pleaded herein.
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`SUBSTANTIVE ALLEGATIONS
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`Background
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`16.
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`Oak Street purportedly operates primary care centers within the United States. Oak
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`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,
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`2020, the Oak Street claims to have operated 79 centers in 16 markets across 11 states, which
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`provided care for approximately 97,000 patients.
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`Materially False and Misleading
`Statements Issued During the Class Period
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`The Class Period begins on August 6, 2020, the day the Company’s stock began
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`17.
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`trading on the public market. The previous day, August 5, 2020, Oak Street filed an amendment
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`to its common stock registration statement (the “Amendment”). Therein, under a section titled
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`“Our Competitive Advantages,” Oak Street stated:
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`Organic, Community-Based Marketing and Patient Recruitment
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`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.
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`18.
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`In the Amendment, under a section titled “Key Factors Affecting Our
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`Performance,” the Company stated:
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`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.
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`19. With Respect to the False Claims Act, Oak Street did not claim it was involved in
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`any wrongdoing, but the Amendment stated:
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`
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`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.
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`20.
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`On September 16, 2020, Oak Street published a press release titled “Oak Street
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`Health Reports Second Quarter 2020 Financial Results.” Therein, Oak Street, in relevant part,
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`stated:
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`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
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` 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
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`“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.)
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`21.
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`On September 16, 2020, Oak Street filed its Quarterly Report with the SEC on Form
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`10-Q for the quarterly period ended June 30, 2020. The Company’s 10-Q was signed by Defendant
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`Cook and reaffirmed the Company’s financial results previously announced the same day.
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`22.
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`The Company’s Form 10-Q contained certifications pursuant to the Sarbanes-
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`Oxley Act of 2002 (“SOX”), signed by Defendants Pykosz and Cook, who certified:
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`1. I have reviewed this Quarterly Report on Form 10-Q of Oak Street Health, Inc.;
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`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;
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`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;
`
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`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:
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`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;
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`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
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`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
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`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):
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`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
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`
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`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.
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`23.
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`On November 9, 2020, Oak Street published a press release titled “Oak Street
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`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.”
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`Third Quarter 2020 Financial Highlights
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` 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
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`
`(Footnotes omitted.)
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`24.
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`On November 10, 2020, Oak Street filed its Quarterly Report with the SEC on Form
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`10-Q for the quarterly period ended September 30, 2020. The Company’s Form 10-Q was signed
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`by Defendant Cook, and reaffirmed the Company’s financial results previously announced on
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`November 9, 2020. The Form 10-Q contained certifications pursuant to SOX, signed by
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`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.
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`On March 9, 2021, Oak Street published a press release titled “Oak Street Health
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`Reports Fourth Quarter 2020 Financial Results.” Therein, Oak Street, in relevant part, stated:
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`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.
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`“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.)
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`26.
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`On March 10, 2021, Oak Street filed its Annual Report with the SEC on Form 10-
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`K for the annual period ended December 31, 2020. The Company’s Form 10-Q was signed by
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`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
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`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
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`
`(Footnotes omitted.)
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`28.
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`On the same day, May 10, 2021, Oak Street filed its Quarterly Report with the SEC
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`on Form 10-Q for the quarterly period ended March 31, 2021. The Company’s Form 10-Q was
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`signed by Defendant Cook, and reaffirmed the Company’s financial results announced the same
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`day. The Form 10-Q contained certifications pursuant to SOX, signed by Defendants Pykosz and
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`Cook, substantially similar to the certifications described in ¶ 22, supra. The Form 10-Q also stated
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`the following with respect to marketing:
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`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.
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`

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`Case: 1:22-cv-00149 Document #: 1 Filed: 01/10/22 Page 14 of 30 PageID #:14
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`*
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`*
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`*
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`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.
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`29.
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`On August 9, 2021, Oak Street published a press release titled “Oak Street Health
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`Reports Second Quarter 2021 Financial Results.” Therein, Oak Street, in relevant part, stated:
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`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.
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`“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.”
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`Case: 1:22-cv-00149 Document #: 1 Filed: 01/10/22 Page 15 of 30 PageID #:15
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`Second Quarter 2021 Financial Highlights
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` Total revenue was $353.1 million, up 65% yea