The news: CVS Health posted a $5.7 billion goodwill impairment charge in Q3, primarily attributed to Oak Street Health, its primary care clinic chain for seniors. CVS will also close 16 underperforming Oak Street locations, or about 7% of Oak Street’s clinic footprint, and won’t open any new centers in 2026.

Zooming in: CVS is losing heavily on Oak Street, the $10.6 billion 2023 acquisition meant to expand its primary care business beyond MinuteClinics. CVS doesn’t carve out Oak Street’s financials separately, but said it’s been unable to grow the business at the rate it expected.

However, CVS’ chief financial officer said in the company’s Q3 earnings call that Oak Street has experienced patient growth. It seems that seniors with chronic conditions were becoming too costly for CVS’ Medicare Advantage business (Aetna) to manage, or that operating costs were too high to justify keeping some locations open.

The bigger picture: Oak Street’s struggles are another example where a retail healthcare player’s primary care investment did not pay off.

Primary care clinics aren’t big profit drivers for companies that own them. In some cases, like Walgreens—which lost billions on its primary care chain VillageMD—bringing patients into its new clinics and pulling clinical staff away from conventional practices proved far too difficult. Lack of interest from patients and physicians was also the chief reason why retail health clinics operated by CVS, Walgreens, and Walmart never took off as legitimate primary care entities.

What it means for the primary care market: Our estimates show that more patients have returned to primary care offices after the pandemic, which caused a telehealth surge as patients were hesitant to visit doctors in person. However, those in-person visits are likely occurring at patients’ established primary care clinics, not at newer brick-and-mortar upstarts.

Companies looking to enter the primary care market—or larger healthcare players seeking a reset—should focus on strategies that don’t require massive upfront investments. That could include partnering with incumbents, or leaning into direct-to-consumer telehealth, where disruptors have had some success.