A US health plan covering Medicare Advantage or Medicaid members in 2020 was paying for a population whose costs were concentrated: the most complex, chronically ill seniors were about 2% of the population and about 25% of costs BBX-3. Many of these members lived in low-income neighborhoods with little primary care nearby, and a typical doctor carried 2,000 to 2,500 patients and saw each for 13 to 16 minutes, too little time to head off the hospital stays that drove spending BBX-2. A plan could hand a provider a fixed monthly payment per member, often a percentage of the plan's premium, and let it keep the savings or pay the excess when actual medical costs came in BA1. The arrangement paid off only for a provider that could lower members' total cost of care.
Babylon Health
Babylon took on the medical costs of Medicaid and Medicare members through an app laid over doctor networks it bought or borrowed, while Oak Street Health built its own clinics, gave each doctor a small panel of Medicare patients and kept them out of the hospital.
Why Babylon Health lost to Oak Street Health
Versus Oak Street Health: Oak Street Health built its own centers for Medicare patients, kept each doctor's panel near 500 and held hospital admissions about 51% below benchmark; in 2022 its medical claims were $1,645.0 million on revenue of $2,160.9 million, and although it still lost $509.7 million, CVS bought it in 2023 at an enterprise value of about $10.6 billion BBX-2 BBX-4 BBX-1 BBX-6. Babylon took the same kind of risk, 79% of it for Medicaid members, through an app laid over acquired and partner networks, and its 2022 claims expense of $1,017.0 million nearly matched revenue of $1,109.7 million BA1.
Arena: Market Conditions Before Babylon Health
How each step happened
Step 1 of 4 · 2013–20
Primary care through an app, proved in the NHS
Babylon's founding choice was to deliver primary care through a phone. Founded by Ali Parsadoust in 2013, it began remote consultations with its own clinicians in 2015, and in 2017 it opened GP at Hand, an NHS practice paid by capitation, a fixed amount per patient set mainly by age and gender BA1. GP at Hand grew from 2,000 to more than 100,000 members BA1. Babylon also licensed its Symptom Checker and Health Assessment, AI tools that point a user to possible conditions and next steps, to partners such as Prudential in Asia and TELUS in Canada BA1. In 2020 it handled about 2 million clinical consultations and 3.9 million AI interactions BBX-9.
The choice made Babylon cheap to reach and easy to license, and it set how Babylon expected to lower the cost of care. Its filing described a digital-first approach "intrinsically built into our care delivery solutions, in contrast to other care providers that have bolted technology capabilities onto a traditional care delivery model" BA1. Babylon cited a study it had commissioned that found up to 35% acute care cost savings for GP at Hand members BA1. In 2020 it entered the US with Babylon 360, carrying that model into a market where it would be paid to manage members' total medical cost BA1.
Rivals Oak Street Health was founded in Chicago in 2012 by three former Boston Consulting Group consultants, one of them emergency physician Griffin Myers, and opened its first two centers in September 2013 for Medicare patients only, mostly in low-income neighborhoods BBX-2 BBX-3. Its CEO, Mike Pykosz, argued that older patients with complex needs were hard to serve through an app BBX-3.
Step 2 of 4 · 2020–21
Medical risk carried through bought and borrowed networks
In the US Babylon chose to carry medical risk without building clinics. Under its value-based-care (VBC) contracts a health plan paid a fixed amount per member per month, often a percentage of the plan's premium, and Babylon kept the savings or paid the excess when members' actual medical costs came in BA1. To gain members and doctors it bought part of FirstChoice Medical Group's Fresno business in October 2020 for $25.7 million and Meritage Medical Network in April 2021 for $31.0 million, planning to move Meritage's more than 20,000 Medicare Advantage and commercial HMO patients onto digital-first tools BA1. agilon health had sold First Choice to Babylon after leaving California BBX-8.
Speed was the appeal. In Missouri, Babylon made Babylon 360 available to about 17,000 members of a Centene plan within three months "with limited incremental investment," using the plan's existing local network BA1. The in-person care where most medical spending happens stayed in doctors' offices that Babylon had bought or borrowed, and each new group of members took months of outreach and substantial cost before Babylon could engage them BA1. Babylon's own filing said it had "limited experience providing services and managing contracts centered around a value-based care model" BA1.
Rivals Oak Street built its own centers and gave each physician about 500 patients against 2,000 to 2,500 at a typical practice, with 30-minute visits, vans and community centers BBX-2. By March 2020 its patients' hospital admissions ran about 51% below the Medicare benchmark, and about 97% of its 2019 revenue was capitated BBX-4.
Step 3 of 4 · 2021–22
Members grew faster than their costs came under control
Public money paid for the growth. Babylon listed on the NYSE on October 21, 2021 after merging with Alkuri, a deal announced at a pro forma equity value of about $4.2 billion with proceeds meant to scale US operations, organically and through acquisitions BA1 BBX-9. US VBC members grew from 66,000 in 2020 to 167,000 in 2021 and 261,000 in 2022, 79% of them on Medicaid in 2022, and 44% of the year-end 2022 members had joined that year BA1. VBC arrangements produced 92.5% of 2022 revenue, and the top ten customers produced 91.2% BA1.
Revenue grew with the medical bills attached to it. Total revenue rose from $79.3 million in 2020 to $320.8 million in 2021 and $1,109.7 million in 2022, while claims expense rose from $25.1 million to $219.6 million and $1,017.0 million BA1. After $80.6 million of clinical care delivery expense and $227.9 million of sales, general and administrative expense, Babylon lost $369.8 million from operations in 2022 BA1. Claims took 99.1% of its value-based-care revenue that year, the medical loss ratio Babylon itself reported, leaving almost nothing to pay its clinicians and overhead BA1. Each new cohort brought revenue before Babylon knew what its members would cost, and the first quarter of 2023 still produced a $54.4 million loss from operations BA1 BA2.
Rivals Oak Street served Medicare patients only, sold through 23 payors, including all five of the largest national Medicare Advantage payors, and ran its centers on Canopy, software that uses claims, pharmacy and hospital data to refine its clinical rules BBX-2 BBX-4. It raised $328 million in a 2020 IPO and grew from 54 centers in March 2020 to 169 at the end of 2022 BBX-5 BBX-4 BBX-1. In 2022 its medical claims expense was $1,645.0 million on revenue of $2,160.9 million, against Babylon's $1,017.0 million on $1,109.7 million, and Oak Street still posted a net loss of $509.7 million BBX-1 BA1.
Step 4 of 4 · 2023
Liquidated and sold in pieces
The networks bought in 2020 and 2021 became assets to sell. By March 2023 Babylon was trying to sell the Meritage independent physician association business to raise capital, had cut average headcount from 2,573 in 2021 to 2,147 in 2022, and reported substantial doubt about its ability to continue as a going concern BA1. Affiliates of its lender AlbaCore provided a bridge facility of up to $34.5 million in March 2023 and a second of the same size in May BA1 BA2. Meritage drew no buyer over about six months BBX-8.
A take-private deal with MindMaze and AlbaCore, announced in June 2023, fell apart; Babylon closed its US operations, laid off 94 people, and in August two US subsidiaries filed for Chapter 7 liquidation in Delaware BBX-11 BBX-12. Its UK assets sold for $620,000, and the group balance sheet showed $35.2 million of assets against $378.4 million of liabilities BA3. The acquired networks had given Babylon members and doctors, and the app had given it reach, but neither had lowered what those members cost enough to fund the company.
Rivals CVS agreed to buy Oak Street in February 2023 and completed the deal in May at $39 a share in cash, an enterprise value of about $10.6 billion, to broaden its value-based primary care business BBX-1 BBX-6. Under CVS the network grew to 246 locations before 16 closures were announced in October 2025, citing elevated medical costs and changes to Medicare's risk-adjustment model BBX-7.
Key dates
- 2012Oak Street Health founded in Chicago BBX-2
- 2013Babylon founded by Ali Parsadoust BA1
- 2013-09Oak Street opens its first two Chicago centers BBX-3
- 2015Remote clinical consultations begin BA1
- 2017GP at Hand opens as a capitated NHS practice BA1
- 2020$79.3M revenue Full year; 66,000 US value-based-care members BA1
- 2020-08Oak Street IPO raises $328 million BBX-5
- 2020-10Part of FirstChoice Medical Group's Fresno business bought for $25.7 million BA1
- 2021$320.8M revenue Full year; 167,000 US value-based-care members BA1
- 2021-04Meritage Medical Network bought for $31.0 million BA1
- 2021-06SPAC merger announced at about $4.2 billion pro forma equity value BBX-9
- 2021-10Listed on the NYSE after merging with Alkuri BA1
- 2022$1,109.7M revenue Full year; claims expense $1,017.0M; 261,000 members BA1
- 2022-121-for-25 reverse share split BA1
- 2023-02CVS agrees to buy Oak Street Health BBX-1
- 2023-05CVS completes Oak Street deal at about $10.6 billion enterprise value BBX-6
- 2023-05First-quarter report: $54.4M loss from operations, going-concern doubt BA2
- 2023-08US operations closed; two US subsidiaries file for Chapter 7 BBX-11 BBX-12
- 2023-09UK assets sold for $620,000 BA3
Sources
Oldest first.
- BBX-3 Innovation Diffusion: Oak Street Health CEO Mike Pykosz on Building a Care Model for Seniors. Founder interview
- BBX-2 Reimagining primary care is 'harder than rocket science'. Trade press with founder interviews
- BBX-4 Oak Street Health, Inc. Form S-1. Filing
- BBX-5 Shares in Oak Street Health soar 90% in market debut. Trade press
- BBX-9 Babylon Announces Plans To Become A Public Company via $4.2 Billion Merger with Alkuri Global Acquisition Corp.. Company press release with founder quote
- BBX-1 Oak Street Health Reports Full Year 2022 Results. Earnings release with CEO quote
- BA1 Babylon 2022 annual report. Primary filing
- BBX-6 CVS Health completes acquisition of Oak Street Health. Company press release
- BA2 Babylon Q1 2023 report. Primary filing
- BBX-8 The Downfall of Babylon Health. Outside analysis
- BBX-11 Babylon Shuts Down US Operations After Rescue Merger Falls Apart. Trade press with analyst quotes
- BBX-12 Babylon files for liquidation in US Bankruptcy Court. Trade press
- BA3 Babylon's UK asset sale and liabilities. Outside reporting
- BBX-7 CVS plans to close 16 Oak Street clinics. Trade press summarizing acquirer statements