Oak Street Health, Inc. - Quarter Report: 2021 September (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-39427

Oak Street Health, Inc.

(Exact Name of Registrant as Specified in its Charter)

Delaware	84-3446686
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

30 W. Monroe Street Suite 1200 Chicago, Illinois 60603	60603
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (312) 733-9730

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading

Symbol(s)

Name of each exchange

on which registered

Common Stock, $0.001 par value

OSH

NYSE

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☐
Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November 4, 2021, the registrant had 240,927,344 shares of common stock, $0.001 par value per share, outstanding.

PART I.	FINANCIAL INFORMATION	5

Item 1.	Financial Statements	5

	Consolidated Balance Sheets as of September 30, 2021 (unaudited) and December 31, 2020	6

	Consolidated Statements of Operations for the Three and Nine-Months Ended September 30, 2021 and 2020 (unaudited)	8

	Consolidated Statements of Comprehensive Loss for the Three and Nine-Months Ended September 30, 2021 and 2020 (unaudited)	9

	Consolidated Statements of Changes in Redeemable Investor Units and Stockholders’ Equity/Members’ (Deficit) for the Three and Nine-Months Ended September 30, 2021 and 2020 (unaudited)	10

	Consolidated Statements of Cash Flows for the Nine-Months Ended September 30, 2021 and 2020 (unaudited)	14

	Notes to Consolidated Financial Statements	16

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	33

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	46

Item 4.	Controls and Procedures	46

PART II.	OTHER INFORMATION	47

Item 1.	Legal Proceedings	47

Item 1A.	Risk Factors	47

Item 2.	Unregistered Sale of Equity Securities and Use of Proceeds	51

Item 3.	Defaults upon Senior Securities	51

Item 4.	Mine Safety Disclosures	51

Item 5.	Other Information	51

Item 6.	Exhibits	52

FORWARD-LOOKING STATEMENTS

Throughout this Quarterly Report on Form 10-Q, we make “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements describe future expectations, plans, results or strategies and can often be identified by the use of terminology such as “may,” “will,” “estimate,” “intend,” “plan,” “continue,” “believe,” “expect,” “anticipate,” “target,” “should,” “could,” “potential,” “opportunity,” “goal” or similar terminology. The forward-looking statements contained in this Quarterly Report on Form 10-Q are generally set forth under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations” but may be found in other sections as well. These statements are based upon management’s current expectations, assumptions and estimates and are not guarantees of timing, future results or performance. Therefore, you should not rely on any of these forward-looking statements as predictions of future events. Actual results may differ materially from those contemplated in these statements due to a variety of risks and uncertainties and other factors, including, among other things:

•

our history of net losses and our ability to achieve or maintain profitability in an environment of increasing expenses;

•

the impact of the Coronavirus disease (“COVID-19”) pandemic or any other pandemic, epidemic or outbreak of an infectious disease in the United States or worldwide on our business, financial condition and results of operations;

•

the effect of our relatively limited operating history on investors’ ability to evaluate our current business and future prospects;

•

the viability of our growth strategy and our ability to realize expected results;

•

our ability to successfully integrate a newly acquired business or achieve the expected growth, cost savings or synergies from such integration;

•

our ability to attract new patients;

•

the dependence of our revenues and operations on a limited number of key payors;

•

the risk of termination or non-renewal of the Medicare Advantage contracts held by the health plans with which we contract, or the termination or non-renewal of our contracts with those plans;

•

the impact on our business from changes in the payor mix of our patients and potential decreases in our reimbursement rates;

•

our ability to manage our growth effectively, execute our business plan, maintain high levels of service and patient satisfaction and adequately address competitive challenges;

•

our ability to compete in the healthcare industry;

•

our ability to timely enroll new physicians and other providers in governmental healthcare programs before we can receive reimbursement for their services;

•

the impact on our business of reductions in Medicare reimbursement rates or changes in the rules governing the Medicare program;

•

our dependence on reimbursements by third-party payors and payments by individuals;

•

our assumption under most of our agreements with health plans of some or all of the risk that the cost of providing services will exceed our compensation;

•

the impact on our business of renegotiation, non-renewal or termination of capitation agreements with health plans;

•

risks associated with estimating the amount of revenues and refund liabilities that we recognize under our risk agreements with health plans;

•

the impact on our business of security breaches, loss of data or other disruptions causing the compromise of sensitive information or preventing us from accessing critical information;

•

our ability to develop and maintain proper and effective internal control over financial reporting;

•

the impact on our business of disruptions in our disaster recovery systems or management continuity planning;

•

the potential adverse impact of legal proceedings and litigation;

•

the impact of reductions in the quality ratings of the health plans we serve;

•

the risk of our agreements with the physician equity holder of our practices being deemed invalid;

•

our ability to maintain and enhance our reputation and brand recognition;

•

our ability to effectively invest in, implement improvements to and properly maintain the uninterrupted operation and data integrity of our information technology and other business systems;

•

our ability to obtain, maintain and enforce intellectual property protection for our technology;

•

the potential adverse impact of claims by third parties that we are infringing on or otherwise violating their intellectual property rights;

•

our ability to protect the confidentiality of our trade secrets, know-how and other internally developed information;

•

the impact of any restrictions on our use of or ability to license data or our failure to license data and integrate third-party technologies;

•

risks associated with our use of “open-source” software;

•

our dependence on our senior management team and other key employees;

•

the concentration of our primary care centers in Illinois, Michigan, Pennsylvania, Ohio and Texas;

•

the impact on our business of an economic downturn;

•

our ability to attract and retain highly qualified personnel;

•

our management team’s limited experience managing a public company;

•

the impact on our business of the termination of our leases, increases in rent or inability to renew or extend leases;

•

the impact of failures by our suppliers, material price increases on supplies, lack of reimbursement for drugs we purchase or limitations on our ability to access new technology or products;

•

our ability to maintain our corporate culture;

•

the impact of competition for physicians and nurses, shortages of qualified personnel and related increases in our labor costs;

•

our ability to attract and retain the services of key primary care physicians;

•

the risk that our submissions to health plans may contain inaccurate or unsupportable information regarding risk adjustment scores of members;

•

our ability to accurately estimate incurred but not reported medical expense;

•

the impact of negative publicity regarding the managed healthcare industry;

•

the impact of state and federal efforts to reduce Medicaid spending;

•

the impact on our centers of adverse weather conditions and other factors beyond our control;

•

factors related to our issuance of Convertible Senior Notes (as defined later within this Quarterly Report on Form-10-Q); and

•

other factors disclosed in the section entitled “Risk Factors” in this Quarterly Report on Form 10-Q and in similar sections in our other filings with the Securities and Exchange Commission (“SEC”).

We derive many of our forward-looking statements from our operating budgets and forecasts, which are based on many detailed assumptions. While we believe that our assumptions are reasonable, we caution that it is very difficult to predict the impact of known factors, and it is impossible for us to anticipate all factors that could affect our actual results. Important factors that could cause actual results to differ materially from our expectations, or cautionary statements, are disclosed under the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Quarterly Report on Form 10-Q. All written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by these cautionary statements as well as other cautionary statements that are made from time to time in our other SEC filings and public communications. You should evaluate all forward-looking statements made in this Quarterly Report on Form 10-Q in the context of these risks and uncertainties.

We caution you that the important factors referenced above may not contain all of the factors that are important to you. In addition, we cannot assure you that we will realize the results or developments we expect or anticipate or, even if substantially realized, that they will result in the consequences or affect us or our operations in the way we expect. The forward-looking statements included in this Quarterly Report on Form 10-Q are made only as of the date hereof. We undertake no obligation to update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.

PART I

FINANCIAL INFORMATION

Item 1.

FINANCIAL STATEMENTS

OAK STREET HEALTH, INC.

CONSOLIDATED FINANCIAL STATEMENTS

For the quarterly period ended September 30, 2021

OAK STREET HEALTH, INC.

CONSOLIDATED BALANCE SHEETS

($ in millions, except shares/units and per share data)

		September 30, 2021 (unaudited)				December 31, 2020
Assets
Current assets:
Cash	$		241.7		$		409.3
Restricted cash			16.6				10.4
Other patient service receivables, net (Humana comprised $0.1 and $0.0 as of September 30, 2021 and December 31, 2020, respectively)			0.5				7.6
Capitated accounts receivable (Humana comprised $118.8 and $65.7 as of September 30, 2021 and December 31, 2020, respectively)			464.0				248.9
Marketable debt securities			771.3				-
Prepaid expenses			9.6				6.8
Other current assets (Humana comprised $5.9 and $0.0 as of September 30, 2021 and December 31, 2020, respectively)			11.1				4.2
Total current assets			1,514.8				687.2

Long-term assets:
Property and equipment, net			112.7				78.8
Security deposits			1.6				1.3
Operating lease right-of-use assets (Humana comprised $60.8 and $0.0 as of September 30, 2021 and December 31, 2020, respectively)			145.9				-
Goodwill			12.5				9.6
Intangible assets, net			2.7				3.0
Other long-term assets			0.8				1.1

Total assets	$		1,791.0		$		781.0

Liabilities and stockholders' equity
Current liabilities:
Accounts payable	$		30.2		$		8.8
Accrued compensation and benefits			38.4				32.0
Liability for unpaid claims (Humana comprised $97.8 and $78.5 as of September 30, 2021 and December 31, 2020, respectively)			442.3				262.1
Other liabilities (Humana comprised $16.6 and $4.6 as of September 30, 2021 and December 31, 2020, respectively)			34.0				12.6
Total current liabilities			544.9				315.5

Long-term liabilities:
Long-term operating lease liabilities (Humana comprised $56.6 and $0.0 as of September 30, 2021 and December 31, 2020, respectively)			153.0				-
Deferred rent expense (Humana comprised $0.0 and $0.8 as of September 30, 2021 and December 31, 2020, respectively)			-				13.5
Other long-term liabilities (Humana comprised $36.2 and $20.1 as of September 30, 2021 and December 31, 2020, respectively)			39.7				28.8
Long-term debt			900.3				-

Total liabilities			1,637.9				357.8
Commitments and contingencies (See Notes 6 & 10)
Stockholders' equity:
Preferred stock, par value $0.001; 50,000,000 shares authorized as of September 30, 2021 and December 31, 2020; no shares issued and outstanding as of September 30, 2021 and December 31, 2020			-				-
Common stock, par value $0.001; 500,000,000 shares authorized as of September 30, 2021 and December 31, 2020; 240,919,956 and 240,756,714 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively			0.2				0.2
Additional paid-in capital (Humana comprised $50.0 and $50.0 as of September 30, 2021 and December 31, 2020, respectively)			977.6				971.8
Accumulated other comprehensive loss			(0.2	)			-
Accumulated deficit			(826.6	)			(555.8	)
Total stockholders' equity allocated to Oak Street Health, Inc.			151.0				416.2
Non-controlling interests			2.1				7.0
Total stockholders' equity			153.1				423.2

Total liabilities and stockholders' equity	$		1,791.0		$		781.0

The accompanying notes are an integral part of these consolidated financial statements.

OAK STREET HEALTH, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

($ in millions, except shares/units and per share data)

		Three-Months Ended								Nine-Months Ended
		September 30, 2021				September 30, 2020				September 30, 2021				September 30, 2020
Revenues:
Capitated revenue (Humana comprised $130.7 and $92.3 for the three-months ended September 30, 2021 and 2020, respectively, and $379.2 and $286.1 for the nine-months ended September 30, 2021 and 2020, respectively)	$		376.7		$		211.8		$		1,014.6		$		616.4
Other patient service revenue (Humana comprised $2.8 and $0.8 for the three-months ended September 30, 2021 and 2020, respectively, and $4.5 and $2.4 for the nine-months ended September 30, 2021 and 2020, respectively)			12.0				6.1				23.9				17.7
Total revenues			388.7				217.9				1,038.5				634.1

Operating expenses:
Medical claims expense (Humana comprised $99.1 and $62.2 for the three-months ended September 30, 2021 and 2020, respectively, and $277.7 and $186.0 for the nine-months ended September 30, 2021 and 2020, respectively)			309.7				154.5				790.9				442.3
Cost of care, excluding depreciation and amortization (Humana comprised $2.8 and $1.5 for the three-months ended September 30, 2021 and 2020, respectively, and $7.1 and $3.9 for the nine-months ended September 30, 2021 and 2020, respectively)			76.3				43.2				203.6				126.5
Sales and marketing			30.5				15.5				80.5				37.4
Corporate, general and administrative expenses			77.0				57.2				224.3				112.5
Depreciation and amortization			4.5				2.9				11.7				8.1
Total operating expenses			498.0				273.3				1,311.0				726.8

Loss from operations			(109.3	)			(55.4	)			(272.5	)			(92.7	)

Other (expense)/income:
Interest expense, net			(0.6	)			(3.9	)			(1.8	)			(8.8	)
Other			-				-				-				0.2
Total other (expense)			(0.6	)			(3.9	)			(1.8	)			(8.6	)
Net loss			(109.9	)			(59.3	)			(274.3	)			(101.3	)

Net loss attributable to non-controlling interests			0.6				0.1				3.5				0.5
Net loss attributable to Oak Street Health, Inc.	$		(109.3	)	$		(59.2	)	$		(270.8	)	$		(100.8	)

Undeclared and deemed dividends	$		-		$		(5.4	)	$		-		$		(27.2	)
Net loss attributable to common stock/unitholders	$		(109.3	)	$		(64.6	)			(270.8	)	$		(128.0	)
Weighted average common stock outstanding - basic and diluted¹			223,435,698				218,261,866				221,932,624				218,261,866
Net loss per share – basic and diluted	$		(0.49	)	$		(0.15	)	$		(1.22	)	$		(0.15	)

The accompanying notes are an integral part of these consolidated financial statements.

¹ Basic and diluted earnings per share of common stock is applicable only for periods after the Company's IPO that was completed on August 10, 2020

OAK STREET HEALTH, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Unaudited)

($ in millions, except shares/units and per share data)

		Three-Months Ended								Nine-Months Ended
		September 30, 2021				September 30, 2020				September 30, 2021				September 30, 2020
Net loss	$		(109.9	)	$		(59.3	)	$		(274.3	)	$		(101.3	)
Other comprehensive loss:
Net unrealized gain (loss) on marketable debt securities, net of tax			0.1				-				(0.2	)			-
Comprehensive loss			(109.8	)			(59.3	)			(274.5	)			(101.3	)
Less: Comprehensive loss attributable to non-controlling interests			0.6				0.1				3.5				0.5
Comprehensive loss attributable to Oak Street Health, Inc.	$		(109.2	)	$		(59.2	)	$		(271.0	)	$		(100.8	)

The accompanying notes are an integral part of these consolidated financial statements.

OAK STREET HEALTH, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN

REDEEMABLE INVESTOR UNITS AND STOCKHOLDERS’ EQUITY/MEMBERS’ (DEFICIT)

(Unaudited)

($ in millions, except shares/units and per share data)

	Three-Months Ended
	Redeemable Investor Units							Members’ Capital							Common Stock
	Shares Issued				Amount			Shares Issued				Amount			Shares Issued				Amount			Additional Paid-In Capital			Accumulated Deficit				Non-controlling Interest				Total Equity/(Deficit)
Balances June 30, 2020		12,472,242		$		545.0			3,461,459		$		3.4			-		$		-	$		-	$		(409.5	)	$		4.9		$		(401.2	)
Conversion of redeemable preferred stock into common stock upon closing of initial public offering		(12,472,242	)			(545.0	)		-				-			184,787,783				0.2			544.8			-				-				545.0
Conversion of members' capital into common stock upon closing of initial public offering		-				-			(1,117,312	)			(7.0	)		15,498,529				-			7.0			-				-				-
Conversion of members' capital into restricted stock upon closing of initial public offering		-				-			(2,339,322	)			-			22,612,472				-			-			-				-				-
Issuance of common stock upon closing of initial public offering, net		-				-			-				-			17,968,750				-			351.2			-				-				351.2
Issuance of Common Units		-				-							-			-				-			-			-				-				-
Exercise of Options		-				-			-				-			2,831				-			0.1			-				-				0.1
Repurchases		-				-			(3,825	)			-			-				-			-			-				-				-
Forfeitures		-				-			(1,000	)			(0.1	)		(41,651	)			-			-			-				-				(0.1	)
Stock and Unit-Based Compensation		-				-			-				3.7			-				-			25.7			-				-				29.4
Payments from Non-controlling Interest		-				-			-				-			-				-			-			-				5.9				5.9
Payments to Non-controlling Interest		-				-			-				-			-				-			-							(0.1	)			(0.1	)
Net loss		-				-			-				-			-				-			-			(59.2	)			(0.1	)			(59.3	)
Balances September 30, 2020		-		$		-			-		$		-			240,828,714		$		0.2	$		928.8	$		(468.7	)	$		10.6		$		470.9

The accompanying notes are an integral part of these consolidated financial statements.

OAK STREET HEALTH, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN

REDEEMABLE INVESTOR UNITS AND STOCKHOLDERS’ EQUITY/MEMBERS’ (DEFICIT)

(Unaudited)

($ in millions, except shares/units and per share data)

	Three-Months Ended
	Common Stock
	Shares Issued				Amount			Additional Paid-In Capital				Accumulated Deficit				Accumulated Other Comprehensive Loss				Non-controlling Interests				Total Equity/Deficit
Balances June 30, 2021		240,785,554		$		0.2	$		935.0		$		(717.3	)	$		(0.3	)	$		3.1		$		220.7
Issuance of common stock upon vesting of restricted stock units		33,542				-			-				-				-				-				-
Issuance of common stock upon exercise of options		47,389				-			0.9				-				-				-				0.9
Shares withheld related to net settlement of stock based awards		(782	)			-			-				-				-				-				-
Issuance of common stock under the employee purchase plan		62,575				-			3.0																3.0
Forfeitures		(8,322	)			-			(0.1	)			-				-				-				(0.1	)
Stock compensation expense		-				-			38.8				-				-				-				38.8
Payments to non-controlling interests		-				-			-				-				-				(0.4	)			(0.4	)
Net unrealized loss on marketable debt securities		-				-			-				-				0.1				-				0.1
Net loss		-				-			-				(109.3	)			-				(0.6	)			(109.9	)
Balances September 30, 2021		240,919,956		$		0.2	$		977.6		$		(826.6	)	$		(0.2	)	$		2.1		$		153.1

The accompanying notes are an integral part of these consolidated financial statements.

OAK STREET HEALTH, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN

REDEEMABLE INVESTOR UNITS AND STOCKHOLDERS’ EQUITY/MEMBERS’ (DEFICIT)

(Unaudited)

($ in millions, except shares/units and per share data)

	Nine-Months Ended
	Redeemable Investor Units							Members’ Capital							Common Stock
	Shares Issued				Amount			Shares Issued				Amount			Shares Issued				Amount			Additional Paid-In Capital			Accumulated Deficit				Non-controlling Interest				Total Equity/(Deficit)
Balances December 31, 2019		11,000,619		$		320.6			2,530,864		$		4.1			-		$		-	$		-	$		(354.4	)	$		5.3		$		(345.0	)
Issuance of Series I, II and III Investor Units		1,471,623				224.4			-				-			-				-			-			-				-				-
Conversion of redeemable preferred stock into common stock upon closing of initial public offering		(12,472,242	)			(545.0	)		-				-			184,787,783				0.2			544.8			-				-				545.0
Conversion of members' capital into common stock upon closing of initial public offering		-				-			(1,117,312	)			(7.0	)		15,498,529				-			7.0			-				-				-
Conversion of members' capital into restricted stock upon closing of initial public offering		-				-			(2,339,322	)			-			22,612,472				-			-			-				-				-
Issuance of common stock upon closing of initial public offering, net		-				-			-				-			17,968,750				-			351.2											351.2
Issuance of Common Units		-				-			1,095,067				-			-				-			-			-				-				-
Tender Offer – Investor Units, Founder’s Units, Incentive Units		-				-			(131,151	)			(5.9	)		-				-			-			(13.5	)			-				(19.4	)
Exercise of Options		-				-			-				-			2,831				-			0.1			-				-				0.1
Repurchases – Profits Interests		-				-			(5,856	)			-			-				-			-			-				-				-
Forfeitures – Profits Interests		-				-			(32,290	)			(0.2	)		(41,651	)			-			-			-				-				(0.2	)
Stock and Unit-Based Compensation		-				-			-				9.0			-				-			25.7			-				-				34.7
Payments from Non-controlling Interest		-				-			-				-			-				-			-			-				5.9				5.9
Payments to Non-controlling Interest		-				-			-				-			-				-			-			-				(0.1	)			(0.1	)
Net loss		-				-			-				-			-				-			-			(100.8	)			(0.5	)			(101.3	)
Balances September 30, 2020		-		$		-			-		$		-			240,828,714		$		0.2	$		928.8	$		(468.7	)	$		10.6		$		470.9

The accompanying notes are an integral part of these consolidated financial statements.

OAK STREET HEALTH, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN

REDEEMABLE INVESTOR UNITS AND STOCKHOLDERS’ EQUITY/MEMBERS’ (DEFICIT)

(Unaudited)

($ in millions, except shares/units and per share data)

	Nine-Months Ended
	Common Stock
	Shares Issued				Amount			Additional Paid-In Capital				Accumulated Deficit				Accumulated Other Comprehensive Income (Loss)				Non-controlling Interest				Total Equity/Deficit
Balances December 31, 2020		240,756,714		$		0.2	$		971.8		$		(555.8	)	$		-		$		7.0		$		423.2
Purchase of capped calls		-				-			(123.6	)			-				-				-				(123.6	)
Issuance of common stock upon vesting of restricted stock units		55,781				-			-				-				-				-				-
Issuance of common stock upon exercise of options		222,203				-			4.5				-				-				-				4.5
Shares withheld related to net settlement of stock based awards		(1,412	)			-			-				-				-				-				-
Issuance of common stock under the employee purchase plan		62,575							3.0																3.0
Forfeitures		(175,905	)			-			(0.9	)			-				-				-				(0.9	)
Stock compensation expense		-				-			122.8				-				-				-				122.8
Payments from non-controlling interest		-				-			-				-				-				0.1				0.1
Payments to non-controlling interest		-				-			-				-				-				(1.5	)			(1.5	)
Net unrealized loss on marketable debt securities		-				-			-				-				(0.2	)			-				(0.2	)
Net loss		-				-			-				(270.8	)			-				(3.5	)			(274.3	)
Balances September 30, 2021		240,919,956		$		0.2	$		977.6		$		(826.6	)	$		(0.2	)	$		2.1		$		153.1

The accompanying notes are an integral part of these consolidated financial statements.

OAK STREET HEALTH, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

($ in millions)

(Unaudited)

		Nine-Months Ended
		September 30, 2021				September 30, 2020
Cash flows from operating activities:
Net loss	$		(274.3	)	$		(101.3	)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of discount on debt and related issuance costs			2.4				4.2
Accretion of discounts and amortization of premiums on short-term marketable securities, net			2.4				-
Depreciation and amortization			11.7				8.1
Non-cash operating lease costs			11.2				-
Stock and unit-based compensation, net of forfeitures			121.9				34.4
Change in fair value of bifurcated derivative			-				0.2
Change in operating assets and liabilities, net of impact of acquisitions:
Accounts receivable			(208.0	)			(56.3	)
Prepaid expenses and other current assets			(10.6	)			(6.1	)
Security deposits and other long-term assets			0.1				0.1
Accounts payable			16.6				(5.9	)
Accrued compensation and benefits			6.5				(5.2	)
Liability for unpaid claims			180.2				86.6
Operating lease liabilities			(9.9	)			-
Other current liabilities			7.9				10.7
Other long-term liabilities			16.0				7.8
Other			-				0.4
Net cash used in operating activities			(125.9	)			(22.3	)

Cash flows from investing activities:
Proceeds from sales and maturities of marketable debt securities			43.7				-
Purchases of marketable debt securities			(817.6	)			-
Purchase of business			(1.4	)			-
Purchases of property and equipment			(40.6	)			(12.6	)
Net cash used in investing activities			(815.9	)			(12.6	)

Cash flows from financing activities:
Proceeds from initial public offering			-				377.3
Payments of underwriting fees, net of discounts and offering costs			-				(24.9	)
Principal payments on long-term debt			-				(80.0	)
End of term charge and prepayments for debt paydown			-				(5.6	)
Proceeds from borrowings on convertible senior notes, net			897.9				-
Purchase of capped calls			(123.6	)			-
Proceeds from issuance of redeemable investor units			-				224.4
Capital contributions from non-controlling interests			0.1				5.9
Capital distributions to non-controlling interests			(1.5	)			(0.1	)
Tender Offer - common units			-				(19.4	)
Proceeds from exercise of options			4.5				0.1
Proceeds from issuance of common stock under the employee purchase plan			3.0				-
Net cash provided by financing activities			780.4				477.7

Net change in cash, cash equivalents and restricted cash		(161.4	)		442.8
Cash, cash equivalents and restricted cash, beginning of period		419.7			42.2
Cash, cash equivalents and restricted cash, end of period	$	258.3		$	485.0
Supplemental disclosures
Cash paid for interest		-			5.5
Unpaid offering costs in accounts payable and accrued liabilities		-			1.2
Additions to construction in process funded through accounts payable		4.7			-

The accompanying notes are an integral part of these consolidated financial statements.

OAK STREET HEALTH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1. ORGANIZATION AND NATURE OF BUSINESS

Description of Business

Oak Street Health, Inc. (collectively with its consolidated subsidiaries is referred to as “Oak Street Health,” “OSH,” “we,” “us,” “our,” or the “Company”) was formed as a Delaware corporation on October 22, 2019 for the purpose of completing a public offering and related reorganization transactions (collectively referred to as the “IPO”) in order to carry on the business of Oak Street Health, LLC (“OSH LLC”) and its affiliates. On August 10, 2020, we completed our IPO. As the managing member of OSH LLC, Oak Street Health, Inc. operates and controls all of the business affairs of OSH LLC and its affiliates.

The Company operates primary care centers serving Medicare beneficiaries. The Company, through its centers and management services organization, combines an innovative care model with superior patient experience. The Company invests resources into primary care to prevent unnecessary acute events and manage chronic illnesses. The Company engages Medicare eligible patients through the use of a novel community outreach approach. Once patients are engaged, the Company integrates population health analytics, social support services and primary care into the care model to drive improved outcomes. The Company contracts with health plans to generate medical costs savings and realize a return on its investment in primary care. As of September 30, 2021, the Company operated 110 centers.

Basis of Presentation and Consolidation

The accompanying unaudited interim consolidated financial statements and accompanying notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been omitted pursuant to such regulations. These financial statements have been prepared on a basis consistent with the accounting principles applied for the fiscal year ended December 31, 2020 in the Company’s Annual Report on Form 10-K filed with the SEC. In the opinion of management, all adjustments (consisting of all normal and recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three and nine-months ended September 30, 2021, including the impact of COVID-19, are not necessarily indicative of the results that may be expected for the year ending December 31, 2021.

The consolidated financial statements of the Company include the financial statements of all wholly owned subsidiaries and majority-owned or controlled companies, which include the variable interest entities (“VIE”) in which OSH has an interest and is the primary beneficiary. See Note 11, “Variable Interest Entities.” For those consolidated subsidiaries where our ownership is less than 100%, the portion of the net income or loss allocable to the non-controlling interests is reported as “Net loss (gain) attributable to non-controlling interests” in the consolidated statements of operations. Intercompany balances and transactions have been eliminated in consolidation.

In addition, Oak Street Health is the majority interest owner in three joint ventures: OSH-PCJ Joliet, LLC, OSH-RI, LLC and OSH-ESC Joint Venture, LLC, which are consolidated in the Company’s financial statements. In March and September 2021, distributions were made from OSH-PCJ Joliet, LLC to Oak Street Health MSO, LLC (50.1% ownership) and Primary Care Physicians of Joliet (49.9% ownership) totaling $1.5 million to each owner.

Segment Information

The Company has concluded that we have one operating and reportable segment as the chief operating decision maker regularly reviews financial operating results on a consolidated basis for purposes of allocating resources and evaluating financial performance. While we generate revenues in a number of centers in several geographic regions, we have determined that the centers all have similar economic characteristics, such as the types of services provided and the nature of patients served. The Company evaluates performance and allocates resources as a single operating segment based on revenue growth and pre-tax profit or loss from operations.

Emerging Growth Company Status

We currently meet the definition of an emerging growth company, as defined in the Jumpstart Our Business Startups Act (“JOBS Act”). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. We elected to use this extended transition period until we are no longer an emerging growth company or until we affirmatively and irrevocably opt out of the extended transition period. Based on the aggregate worldwide market value of our shares of common stock held by our non-affiliate stockholders as of June 30, 2021, we expect that we will become a “large accelerated filer” and lose emerging growth status beginning with our Annual Report on Form 10-K for the year ended December 31, 2021. We will also no longer be exempt from the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002, as amended, and our independent registered public accounting firm will evaluate and report on the effectiveness of internal control over financial reporting.

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. The Company bases its estimates on the information available at the time, its experiences and various other assumptions believed to be reasonable under the circumstances including estimates of the impact of COVID-19. The areas where significant estimates are used in the accompanying financial statements include revenue recognition, the liability for unpaid claims, stock/unit-based compensation, valuation and related impairment recognition of long-lived assets, including intangibles and goodwill and the valuation of stock options. Actual results could differ from those estimates.

COVID-19 CARES ACT

On March 27, 2020, the United States President signed into law the Coronavirus Aid, Relief and Economic Securities Act (“CARES Act”) which provides economic assistance to a wide array of industries, including healthcare. Thus far, the Company has taken the following actions related to this legislation:

•

Provider Relief Funds. The U.S. Department of Health and Human Services (“HHS”) distributed grants to healthcare providers to offset the impacts of COVID-19 pandemic related expenses and lost revenues through the Public Health and Social Services Emergency Fund. Grants received are subject to the terms and conditions of the program, including that such funds may only be used to prevent, prepare for and respond to COVID-19 and will reimburse only for health care related expenses, general and administrative expenses or lost revenues that are attributable to the COVID-19 pandemic as defined by the HHS. Payments from this fund are not loans and, therefore, they are not subject to repayment. We recognize grant payments as income when there is reasonable assurance that we have complied with conditions associated with the grant. Our estimates could change materially in the future based on the government’s evolving compliance guidance. During the nine-months ended September 30, 2021 and 2020, the Company received $2.6 million and $4.7 million, respectively, related to these grants. The Company recognized $0.0 million and $3.9 million, for the three-months ended September 30, 2021 and 2020, respectively, and $3.5 million and $4.7 million for the nine-months ended September 30, 2021 and 2020, respectively, as income to offset COVID-19 pandemic related expenses incurred in the cost of care, excluding depreciation and amortization. There were no unrecognized grants on the balance sheet as of September 30, 2021.

•

Medicare Accelerated and Advanced Payment Program. The Centers for Medicare & Medicaid Services (“CMS”) expanded its Accelerated and Advance Payment Program which allows participants to receive expedited payments during periods of national emergencies. Under the program, we received an interest-free advancement of 100% of our Medicare payment amount for a three-month period. Repayment will begin one year from the date the payments were received and will be paid back against future fee-for-service claims. Beginning at one year from the date the payment was issued and continuing for eleven months, payments will be recouped at a rate of 25%. After the eleven months end, payments will be recouped at a rate of 50% for another six months, after which any remaining balance will become due. During 2020, the Company received approximately $1.5 million in CMS advance payments, which will be paid back against future fee-for-service claims. During the three and nine-months ended September 30, 2021, the Company paid back $0.3 million and recorded an offset to other patient service receivables. As of September 30, 2021, there was $1.2 million remaining in other current liabilities.

•

Payroll Tax Deferral. Under the CARES Act, the Company elected to defer payment on its portion of Social Security taxes, on an interest free basis, incurred from March 27, 2020 to December 31, 2020. One-half of such deferral amount will become due on each of December 31, 2021 and December 31, 2022. The total deferred payroll taxes were $7.0 million, $3.5 million was classified as a short-term liability and $3.5 million was classified as a long-term liability at September 30, 2021.

•

Temporary Suspension of Medicare Sequestration. The Budget Control Act of 2011 requires a mandatory, across the board reduction in federal spending, called a sequestration. Medicare fee-for-service claims with dates of service or dates of discharge on or after April 1, 2013 incur a 2.0% reduction in Medicare payments. All Medicare rate payments and settlements have incurred this mandatory reduction and it will continue to remain in place through at least 2023, unless Congress takes further action. In response to COVID-19, the CARES Act temporarily suspended the automatic 2.0% reduction of Medicare claim reimbursements for the period of May 1, 2020 through December 31, 2021, which immaterially increased both revenues and medical expenses for the three and nine-months ended September 30, 2021 and 2020.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Company described its significant accounting policies in Note 2 of the Notes to Consolidated Financial Statements for the year ended December 31, 2020 included in its Annual Report on Form 10-K. During the nine-months ended September 30, 2021, there were no significant changes to those accounting policies, other than the adoption of ASC 842 (as defined below), Accounting Standards Update (“ASU”) 2020-06 and those policies impacted by the new accounting pronouncements adopted during the period and further described below as well as in the “Recently Adopted Accounting Pronouncements” section.

Cash and Cash Equivalents

The Company considers all short-term, highly liquid investments purchased with an original maturity of three months or less at the date of purchase to be cash equivalents. Cash and cash equivalents consisted of cash on deposit and investments in money market funds.

Marketable Debt Securities

The Company’s investments in marketable debt securities are classified as available-for-sale and are carried at fair value, with the unrealized gains and losses reported as a component of accumulated other comprehensive income (loss) in total equity (deficit). The Company determines the appropriate classification of these investments at the time of purchase and reevaluates such designation at each balance sheet date. The Company classifies the available-for-sale investments as current assets under the caption marketable debt securities on the consolidated balance sheets as these investments generally consist of highly marketable securities that are identified to be available to meet near-term cash requirements and fund current operations. Realized gains and losses and declines in value determined to be other-than-temporary are based on the specific identification method and are included as a component of other (expense) income, net in the consolidated statements of operations.

The Company periodically evaluates its investments in marketable debt securities for other-than-temporary impairment. When assessing short-term marketable security investments for other-than-temporary declines in value, the Company considers such factors as, among other things, how significant the decline in value is as a percentage of the original cost, how long the market value of the investment has been less than its original cost, the Company’s ability and intent to retain the short-term marketable security investment for a period of time sufficient to allow for any anticipated recovery in fair value and market conditions in general. If any adjustment to fair value reflects a decline in the value of the marketable security that the Company considers to be other-than-temporary, the Company reduces the marketable debt securities through a charge to the consolidated statement of operations. No such adjustments were necessary during the periods presented.

Leases

The Company leases offices, operating facilities, vehicles and IT equipment, which are accounted for as operating leases. These leases have remaining lease terms of up to 30 years, inclusive of renewal or termination options that the Company is reasonably certain to exercise. The Company determines if an arrangement is a lease at inception and evaluates the lease classification (i.e., operating lease or financing lease) at that time. Lease arrangements with an initial term of 12 months or less are considered short-term leases and are not recorded on the balance sheet. The Company recognizes lease expense for these leases on a straight-line basis over the term of the lease.

Operating leases are included in operating lease right-of-use assets, operating lease liabilities, current portion (recorded within other current liabilities) and long-term operating lease liabilities on the Company’s consolidated balance sheets. Operating lease right-of-use assets represent our right to use an underlying asset for the lease term, and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease right-of-use assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. The Company has no financing leases.

The Company uses its incremental borrowing rate on the commencement date for determining the present value of lease payments. The Company considers the likelihood of exercising options to extend or terminate the lease when determining the lease term.

The Company has lease agreements with lease and non-lease components. The Company has elected the practical expedient to account for the lease and non-lease components as a single lease component for all leases.

Convertible Debt

The Company evaluates all conversion, repurchase and redemption features contained in a debt instrument to determine if there are any embedded features that require bifurcation as a derivative. In accounting for the issuance of the 0% Convertible Senior Notes due 2026 issued in March 2021 (the “Convertible Senior Notes”), the Company recorded a long-term debt liability equal to the proceeds received from issuance, including the embedded conversion feature, net of the debt issuance and offering costs on the Company’s consolidated balance sheets. The conversion feature is not required to be accounted for separately as an embedded derivative. The Company amortizes debt issuance and offering costs over the term of the Convertible Senior Notes as interest expense utilizing the effective interest method on the Company’s consolidated statements of operations.

Capped Call Transactions

In connection with the issuance of the Convertible Senior Notes, the Company entered into capped call transactions. The capped call transactions are expected generally to reduce the potential dilution to the holders of the Company’s common stock upon any conversion of the Convertible Senior Notes. The capped call transactions are purchased call options on the issuer’s stock that settle by reference to the Company’s stock with no forced cash payment. The terms of the capped call transactions allow the purchased call options to be classified as an equity instrument and will not be subsequently remeasured as long as the conditions for equity classification continue to be met. The Company recorded the cash used to purchase the capped call transactions as a reduction to additional paid-in capital within the Company’s consolidated statements of changes in redeemable investor units and stockholders’ equity/members’ (deficit).

Net Income (Loss) Per Share

The diluted net income (loss) per share attributable to common stockholders is computed by giving effect to all potential dilutive common stock equivalents outstanding for the period determined using the treasury stock method or the if-converted method, as appropriate. For purposes of this calculation, stock options, restricted stock units, restricted stock awards and contingently issuable shares under our Convertible Senior Notes are considered common stock equivalents but have been excluded from the calculation of diluted net loss per share attributable to common stockholders as their effect is anti-dilutive.

Recently Adopted Accounting Pronouncements

In 2016, the Financial Accounting Standards Board (“FASB”) issued guidance on leases, Accounting Standards Updates 2016-02, Leases (“ASU 2016-02), with amendments issued in 2018 and 2019 (collectively, “ASC 842”). ASC 842 requires lessees to recognize assets and liabilities related to lease arrangements on the balance sheet; leases are to be recorded as a lease liability (on a discounted basis) with a corresponding right-of-use (“ROU”) asset. Leases will be classified as finance or operating, with the classification affecting the pattern and classification of expense recognition over the lease term. The recognition, measurement and presentation of expenses and cash flows arising from a lease by a lessee have not significantly changed from previous GAAP. This guidance also expands the required quantitative and qualitative disclosures for leasing arrangements and gives rise to other changes impacting certain aspects of lessee and lessor accounting. The two permitted transition methods under the guidance are the modified retrospective transition approach, which requires application of the guidance for all comparative periods, and the cumulative effect adjustment approach, which requires prospective application the adoption date.

The Company adopted ASC 842 effective January 1, 2021 under the modified retrospective transition method. Under this method, financial statements for periods after the adoption date are presented in accordance with ASC 842 and prior-period financial statements continue to be presented in accordance with ASC 840, the accounting standard originally in effect for such periods. The package of practical expedients included that the Company was not required to reassess under the new standard its prior conclusions about lease identification, lease classification and initial direct costs. Also, as part of the adoption, the Company elected to not recognize short-term leases (those with lease terms less than a year) on the consolidated balance sheets, not separate lease and non-lease components and did not use hindsight to determine lease term. The most significant impact was the recognition of ROU assets and lease liabilities for our operating leases. The ROU assets represent the right to use an underlying asset for the lease term, and lease liabilities represent an obligation to make lease payments arising from the lease at lease commencement date. The Company’s operating leases resulted in the recognition of additional assets and the corresponding liabilities on its consolidated balance sheets, however it did not have a material impact on the consolidated statements of operations or cash flows for the three and nine months ended September 30, 2021. The Company recognized ROU assets and lease liabilities for operating leases of $108.1 million and $(126.8) million, respectively, upon adoption as of January 1, 2021. The difference between the lease liability and right-of-use asset mainly related to the reversal of existing deferred rent balances.

The Company utilized a comprehensive approach to assess the impact of this guidance on the consolidated financial statements and related disclosures, including the increase in assets and liabilities on the consolidated balance sheets and the impact on the current lease portfolio.

See Note 6 in this Quarterly Report for our lease accounting policy and the quarterly impact of our adoption of ASC 842.

In August 2020, the FASB issued Accounting Standards Update (“ASU”) 2020-06 Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity. Among other changes, ASU 2020-06 removes the liability and equity separation model for convertible instruments with a cash conversion feature, and as a result, after adoption, entities will no longer separately present in equity an embedded conversion feature for such debt. Similarly, the embedded conversion feature will no longer be amortized into income as interest expense over the life of the instrument. Instead, entities will account for a convertible debt instrument wholly as debt unless (1) a convertible instrument contains features that require bifurcation as a derivative under ASC Topic 815, Derivatives and Hedging, or (2) a convertible debt instrument was issued at a substantial premium. Additionally, ASU 2020-06 requires the application of the if-converted method to calculate the impact of convertible instruments on diluted earnings per share and updates the disclosure requirements in ASC 470-20, making them easier to understand for financial statement preparers and improving the decision-usefulness and relevance of the information for financial statement users. This ASU was early adopted on January 1, 2021 and applied to the Company’s 0% Convertible Senior Notes due 2026 issued in March 2021 (Refer to Note 8, Convertible Senior Notes, for further information regarding the Company’s Convertible Senior Notes). The guidance was not applied to any other debt arrangements at the Company.

In December 2019, the FASB issued ASU 2019-12, “Income Taxes Topic 740-Simplifying the Accounting for Income Taxes” (“ASU 2019-12”), which intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application of ASC 740. This guidance is effective for fiscal years beginning after December 15, 2020, including interim periods therein. The Company adopted the new guidance on January 1, 2021, noting no impact on its consolidated financial statements and related disclosures.

In January 2020, the FASB issued ASU 2020-01, Investments—Equity Securities (Topic 321), Investments—Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815)—Clarifying the Interactions between Topic 321, Topic 323, and Topic 815 (“ASU 2020-01”). ASU 2020-01 clarifies the interaction of the accounting for equity securities under Topic 321 and investments accounted for under the equity method of accounting in Topic 323 and the accounting for certain forward contracts and purchased options accounted for under Topic 815. The Company adopted the new guidance on January 1, 2021, noting no impact on its consolidated financial statements and related disclosures.

Recent Accounting Pronouncements Not Yet Adopted

In October 2018, the FASB issued ASU 2018-17, Consolidation – Targeted Improvements to Related Party Guidance for Variable Interest Entities (Topic 810) (“ASU 2018-17”). ASU 2018-17 eliminates the requirement that entities consider indirect interests held through related parties under common control in their entirety when assessing whether a decision-making fee is a variable interest. Instead, the reporting entity will consider such indirect interests on a proportionate basis. ASU 2018-17 is effective for a private company for fiscal years beginning after December 15, 2020, and interim periods within fiscal years beginning after December 15, 2021. Due to the expected loss of emerging growth status for the year-ended December 31, 2021, this guidance will be effective in our annual filing for the year ended December 31, 2021. All entities are required to apply the adjustments in ASU 2018-17 retrospectively with a cumulative-effect adjustment to retained earnings at the beginning of the earliest period presented. The Company is currently evaluating the impact ASU 2018-17 will have on its consolidated financial statements and related disclosures.

In September 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). ASU 2016-13 introduces a new model for recognizing credit losses on financial instruments based on an estimate of current expected credit losses. The guidance is effective for private companies beginning January 1, 2023. Due to the expected loss of emerging growth status for the year-ended December 31, 2021, this guidance will be effective in our annual filing for the year ended December 31, 2021. The new current expected credit losses (“CECL”) model generally calls for the immediate recognition of all expected credit losses and applies to loans, accounts and trade receivables as well as other financial assets measured at amortized cost, loan commitments and off-balance sheet credit exposures, debt securities and other financial assets measured at fair value through other comprehensive income, and beneficial interests in securitized financial assets. The new guidance replaces the current incurred loss model for measuring expected credit losses, requires expected losses on available for sale debt securities to be recognized through an allowance for credit losses rather than as reductions in the amortized cost of the securities, and provides for additional disclosure requirements. The Company is currently evaluating the impact the adoption of ASU 2016-13 will have on its consolidated financial statements.

We do not expect that any other recently issued accounting guidance will have a significant effect on our consolidated financial statements.

NOTE 3. REVENUE RECOGNITION

Both our capitated and fee-for-service revenue generally relate to contracts with patients in which our performance obligation is to provide healthcare services to the patients. Revenues are recorded during the period our obligations to provide healthcare services are satisfied.

Capitated Revenue and Accounts Receivable

The Company has agreements in place with the payors listed below, and payor sources of capitated revenue for each period presented were as follows:

	For the three-months ended						For the nine-months ended
	September 30, 2021			September 30, 2020			September 30, 2021			September 30, 2020
Humana		35	%		44	%		37	%		46	%
Wellcare/Meridian		15	%		17	%		16	%		15	%
Cigna-HealthSpring		8	%		9	%		9	%		10	%
CMS		10	%		0	%		7	%		0	%
Other		32	%		30	%		31	%		29	%

Medicare Part D comprised 2% of capitated revenues for the three and nine-months ended September 30, 2021. Part D comprised 3% and 2% of capitated revenues for the three and nine-months ended September 30, 2020, respectively. Medicare Part D comprised 2% and 3% of medical claims expense for the three and nine-months ended September 30, 2021, respectively. Part D comprised 4% of medical claims expense for the three and nine-months ended September 30, 2020.

Our capitated accounts receivable includes $40.1 million and $4.9 million as of September 30, 2021 and 2020, respectively, for acuity-related adjustments that are estimated to be received in subsequent periods. In certain contracts, our fixed payment per patient per month (“PPPM”) fees also include adjustments for items such as performance incentives or penalties based on the achievement of certain clinical quality metrics as contracted with payors. There were no PPPM adjustments related to performance incentives/penalties for quality-related metrics for the three and nine-months ended September 30, 2021 and 2020.

Other Patient Service Revenue

The composition of other patient service revenue for each period was as follows ($ in millions):

		For the three-months ended					For the nine-months ended
		September 30, 2021			September 30, 2020		September 30, 2021			September 30, 2020
Fee for service	$		2.2	$		0.9		5.5	$		3.2
Care coordination and care management services			9.8			5.2		18.4			14.5
Total other patient service revenue	$		12.0	$		6.1		23.9	$		17.7

As of September 30, 2021 and December 31, 2020, the Company’s contract liabilities related to the Humana care coordination payments totaled $28.3 million and $16.6 million, respectively. The short-term portion is recorded in other liabilities and the long-term portion is included in other long-term liabilities in the accompanying consolidated balance sheets.

The fee-for-service revenue by payor source for each period presented were as follows:

	For the three-months ended						For the nine-months ended
	September 30, 2021			September 30, 2020			September 30, 2021			September 30, 2020
Medicare		35	%		51	%		34	%		50	%
Humana		13	%		8	%		13	%		7	%
Other		52	%		41	%		53	%		43	%

The total amount of patient revenues that were waived per the Company’s financial assistance policy were $2.7 million and $1.7 million for the nine-months ended September 30, 2021 and 2020, respectively. This represents a change of $(0.6) million and $(0.1) million, respectively, as compared revenues waived for the six-months ended June 30, 2021 and 2020. The Company’s cost to provide care in regard to the services for which the patient’s financial obligation was waived was estimated to be $8.1 million and $2.9 million for the nine-months ended September 30, 2021 and 2020, respectively using a cost-to-charge ratio estimate. This represents a change of $(1.8) million and $(0.1) million, respectively, in the costs incurred for the six-months ended June 30, 2021 and 2020.

Remaining Performance Obligations

As our performance obligations relate to contracts with a duration of one year or less, the Company elected the optional exemption in ASC 606-10-50-14(a). Therefore, the Company is not required to disclose the transaction price for the remaining performance obligations at the end of the reporting period or when the Company expects to recognize revenue. The Company has minimal unsatisfied performance obligations at the end of the reporting period as our patients typically are under no obligation to continue receiving services at our facilities.

Note 4. Fair Value of Financial Instruments

Fair Value Measurements

In determining the fair value of financial assets and liabilities, the Company utilizes market data or other assumptions that it believes market participants would use in pricing the asset or liability in the principal or most advantageous market and adjusts for non-performance and/or other risks associated with the Company as well as counterparties, as appropriate. Assets and liabilities measured at fair value are classified using the following hierarchy, which is based upon the transparency of inputs to the valuation as of the measurement date:

Level 1 – Valuations based on unadjusted quoted prices which are available in active markets for identical assets or liabilities accessible at the measurement date.

Level 2 – Valuations with inputs other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability.

Level 3 – Valuations with unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date.

The following tables present information about the Company’s financial assets measured at fair value on a recurring basis ($ in millions):

		Fair Value Measurements as of September 30, 2021 using:
		Level 1			Level 2			Level 3			Total
Marketable debt securities:
Commercial paper	$		180.8	$		-	$		-	$		180.8
U.S. Treasury obligations			-			40.8			-			40.8
Corporate bonds			-			423.0			-			423.0
Asset-backed securities			-			104.5			-			104.5
Other			-			22.2			-			22.2
Total financial assets	$		180.8	$		590.5	$		-	$		771.3

The Company measures the fair value of corporate bonds, U.S. treasury obligations and asset-backed securities by taking into consideration valuations obtained from third-party pricing services. The pricing services utilize industry standard valuation models, including both income and market-based approaches, for which all significant inputs are observable, either directly or indirectly, to estimate fair value. There were no investments as of December 31, 2020. During the three and nine-months ended September 30, 2021, there were no transfers between Levels 1, 2 and 3.

The Company's Convertible Senior Notes are classified within Level 2 of the fair value hierarchy as the valuation inputs are based on quoted prices in an inactive market on the last day in the reporting period. As of September 30, 2021, the fair value of the Convertible Senior Notes was $833.9 million compared to their carrying value of $900.3 million, which is net of unamortized debt issuance and offering costs.

Investments

At September 30, 2021, the Company’s marketable debt securities classified as available-for-sale were as follows ($ in millions):

		September 30, 2021
		Amortized cost			Net unrealized gains (losses)				Fair value
Marketable debt securities:
Commercial paper	$		180.8	$		0.0		$		180.8
U.S. Treasury obligations			40.8			0.0				40.8
Corporate bonds			423.2			(0.2	)			423.0
Asset-backed securities			104.5			(0.0	)			104.5
Other			22.2			0.0				22.2
Total marketable debt securities	$		771.5	$		(0.2	)	$		771.3

These investments in marketable debt securities carry maturity dates between less than one year and four years from date of purchase. The net realized gains and losses were immaterial during the three and nine-months ended September 30, 2021.

NOTE 5. GOODWILL AND INTANGIBLE ASSETS

The following table details movements in goodwill for the period ended September 30, 2021.

		(in millions)
Balance as of December 31, 2020	$		9.6
Acquisitions and acquisition adjustments			2.9
Balance as of September 30, 2021	$		12.5

Intangible assets with a finite useful life continue to be amortized over their useful lives. Net intangible assets amounted to $2.7 million and $3.0 million at September 30, 2021 and December 31, 2020, respectively. The Company recorded amortization expense of $0.1 million for the three-months ended September 30, 2021 and 2020. The Company recorded amortization expense of $0.3 million for the nine-months ended September 30, 2021 and 2020.

NOTE 6. LEASES

ASC 842 Disclosures

Operating lease and variable lease costs are included in cost of care, excluding depreciation and amortization and corporate, general and administrative expenses in the consolidated statements of operations. Variable lease costs are the portion of lease payments that are not fixed over the lease term. Variable lease costs include real estate payments that are adjusted periodically for inflation or other variables as well as payments for taxes, insurance, maintenance and other expenses. Also included in variable lease costs are a portion of the license fee paid to Humana (see Note 12). We expense variable lease costs as incurred. The Company elected to combine lease and non-lease components as a single lease component and not include short-term leases, defined as leases with an initial term of twelve months or less, in its consolidated balance sheets. The Company’s short-term leases were immaterial. The components of lease expense for the Company’s operating leases were as follows for the three and nine-months ended September 30, 2021 ($ in millions):

		For the three-months ended September 30, 2021			For the nine-months ended September 30, 2021
Operating lease cost	$		5.6	$		15.0
Variable lease cost			5.3			14.0
Total lease cost	$		10.9	$		29.0

The Company entered into operating leases that resulted in $ 22.7 million and $49.5 million of right-of-use assets in exchange for operating lease obligations for the three and nine-months ended September 30, 2021, respectively.

The weighted-average remaining lease term and discount rate for operating lease liabilities included in the consolidated balance sheets are as follows:

	September 30, 2021
Weighted-average remaining lease term (in years)		10.2
Weighted-average discount rate		4.17	%

The table below presents the future minimum lease payments under the noncancelable operating leases as of September 30, 2021 ($ in millions):

2021	$	5.7
2022		23.2
2023		22.1
2024		20.2
2025		19.1
2026		19.0
Thereafter		102.5
Total lease payments	$	211.8
Less: imputed interest		(46.3	)
Total operating lease liabilities	$	165.5
Reported as:
Operating lease liabilities, current (1)		12.5
Operating lease liabilities, noncurrent		153.0
Total operating lease liabilities	$	165.5

(1) Included in other liabilities on the consolidated balance sheet

ASC 840 Disclosures

Prior to adoption of ASC 842, the Company accounted for its lease arrangements under ASC 840, Leases, with no ROU assets or lease liabilities being reflected on the consolidated balance sheets. Therefore, the Company recognized $2.1 million (including $0.9 million of Humana license fee expense) and $11.3 million (including $3.5 million of Humana license fee expense) of rent expense for the three and nine-months ended September 30, 2020 included in costs of care and corporate, general and administrative expenses in the consolidated statements of operations. Additionally, the Company recorded $13.5 million at December 31, 2020 of deferred rent that was classified as a long-term liability in the consolidated balance sheets.

NOTE 7. LIABILITY FOR UNPAID CLAIMS

Activity within liabilities for unpaid claims was as follows for the nine-months ended ($ in millions):

		September 30, 2021				September 30, 2020
Balance, beginning of period	$		262.1		$		170.6
Incurred health care costs:
Current year			785.2				428.7
Prior years			5.2				11.4
Total claims incurred	$		790.4		$		440.1
Claims paid:
Current year			(366.5	)			(233.4	)
Prior years			(246.4	)			(120.8	)
Total claims paid	$		(612.9	)	$		(354.2	)
Adjustments to other claims-related liabilities			2.7				0.7
Balance, end of period	$		442.3		$		257.2

We assess the profitability of our managed care capitation arrangement to identify contracts where current operating results or forecasts indicate probable future losses. If anticipated future variable costs exceed anticipated future revenues, a premium deficiency reserve is recognized. No premium deficiency reserves were recorded as of September 30, 2021 and December 31, 2020.

The Company purchases provider excess insurance to protect against significant, catastrophic claims expenses incurred on behalf of its patients. The total amount of provider excess insurance premium was $1.6 million and $0.9 million, and total reimbursements were $0.7 million and $0.8 million for the three-months ended September 30, 2021 and 2020, respectively. The total amount of provider excess insurance premium was $3.4 million and $2.6 million, and total reimbursements were $4.1 million and $1.5 million for the nine-months ended September 30, 2021 and 2020, respectively. The provider excess insurance premiums less reimbursements are reported in medical claims expense in the consolidated statements of operations. Provider excess recoverables due are reported in other current assets in the consolidated balance sheets. As of September 30, 2021, the Company’s provider excess insurance deductible was $0.3 million per member and covered up to a maximum of $5.0 million per member per calendar year.

NOTE 8. LONG-TERM DEBT

Convertible Senior Notes

On March 16, 2021, the Company issued, at par value, $920.0 million aggregate principal amount of 0% Convertible Senior Notes in a private offering exempt from registration under the Securities Act of 1933, including $120.0 million in aggregate principal amount pursuant to the option we granted to the initial purchasers to purchase additional convertible senior notes, which was exercised in full in March 2021 (collectively, the “Convertible Senior Notes”). Total proceeds received by the Company from the sale of the Convertible Senior Notes, net of debt issuance and offering costs of $22.1 million, were $897.9 million. The Company used $123.6 million of the net proceeds to pay for the cost of the capped call transactions (see discussion on capped call transactions further below).

The Convertible Senior Notes are governed by an indenture (“Indenture”), dated as of March 16, 2021, between the Company and U.S. Bank National Association, as trustee. Under the Indenture, the Convertible Senior Notes are general senior, unsecured obligations of the Company and will mature on March 15, 2026, unless earlier redeemed, repurchased or converted. The Convertible Senior Notes are equal in right of payment with the Company’s future senior, unsecured indebtedness and structurally subordinated to all indebtedness and liabilities of the Company’s subsidiaries. The Convertible Senior Notes will not bear regular interest, and the principal amount of the Convertible Senior Notes will not accrete. We will pay special interest, if any, at a rate per annum not exceeding 0.50% of the principal amount of the notes outstanding as the sole remedy at our election relating to the failure to comply with our reporting requirements with the Securities and Exchange Commission and certain other obligations under the Indenture for the first 365 days after the occurrence of such an event of default.

The Convertible Senior Notes are convertible, subject to certain conditions described below, into shares of our common stock at an initial conversion rate of 12.6328 shares per $1,000 principal amount of the Convertible Senior Notes, which represents an initial conversion price of approximately $79.16 per share, subject to adjustments upon occurrence of certain events set forth in the Indenture. Certain events described in the Indenture that occur prior to the maturity date or if the Company delivers a notice of redemption may increase the conversion rate for holders who elect to convert their Convertible Senior Notes in connection with such events should they occur.

Upon conversion, we will pay or deliver, as the case may be, cash, shares of our common stock or a combination thereof at our election. If the Company elects cash or combination settlement, the Company will pay an amount equal to the sum of the daily conversion values for each trading day in a 40 trading-day observation period. The maximum number of shares issuable should there be an increase in the conversion rate is 16,561,656 shares of the Company’s common stock.

The Convertible Senior Notes are convertible at the option of the holders at any time prior to the close of business on the business day immediately preceding December 15, 2025, only under the following circumstances:

•

during any calendar quarter ending after September 30, 2021, if our closing stock price is greater than or equal to 130% of the conversion price on each of at least 20 trading days (whether or not consecutive) of the last 30 consecutive trading days of the immediately preceding calendar quarter;

•

during the five business day period after any 10 consecutive trading day period in which the trading price (as defined in the Indenture) is less than 98% of the product of the closing price of our common stock and the conversion rate for the Notes on each such trading day;

•

if the Company calls such Notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date, but only with respect to the Notes called (or deemed called) for redemption; and

•

upon the occurrence of specified corporate events as set forth in the Indenture.

On or after December 15, 2025 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders of the Convertible Senior Notes may convert all or any portion of their Convertible Senior Notes at any time, regardless of the circumstances applicable to conversions prior to December 15, 2025.

We may not redeem the Convertible Senior Notes prior to March 20, 2024. On or after March 20, 2024, the Convertible Senior Notes are redeemable for cash, in whole or in part (subject to minimum redemption amounts), at our option at any time, and from time to time, if the last reported sale price of the common stock has been at least 130% of the conversion price for the Notes then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption at a redemption price equal to 100% of the principal amount of the Convertible Senior Notes to be redeemed, plus accrued and unpaid special interest, if any, to, but excluding, the redemption date. If the Company redeems less than all the outstanding Convertible Senior Notes, at least $150 million aggregate principal amount of Convertible Senior Notes must be outstanding and not subject to redemption as of the date of the relevant notice of redemption. No sinking fund is provided for the Convertible Senior Notes.

If the Company undergoes a fundamental change (as defined in the Indenture), holders may require, subject to certain exceptions, the Company to repurchase for cash all or any portion of their Convertible Senior Notes at a fundamental change repurchase price equal to 100% of the principal amount of the Convertible Senior Notes to be repurchased, plus accrued and unpaid special interest, if any, to, but excluding, the fundamental change repurchase date.

The Indenture includes customary covenants and events of default after which the Convertible Senior Notes may be declared immediately due and payable.

In accounting for the issuance of the Convertible Senior Notes, we performed an assessment of all of the embedded features of the debt instrument to determine if any will impact the initial measurement of the liability. The Company concluded that the embedded features are not required to be accounted for separately as embedded derivatives, and therefore the Convertible Senior Notes were accounted for in their entirety as a liability equal to the proceeds received from issuance net of debt issuance and offering costs. The Company will amortize debt issuance and offering costs over the term of the Convertible Senior Notes as additional non-cash interest expense utilizing the effective interest method.

Capped Call Transactions

In connection with the pricing of the Convertible Senior Notes, the Company entered into convertible note hedge transactions (the “capped call transactions”) with six initial purchasers or their respective affiliates and other financial institutions (the “option counterparties”) of $123.6 million concurrent to mitigate the impact of potential economic dilution to our common stock upon conversion of the Convertible Senior Notes and have an initial strike price of approximately $79.16 per share, which corresponds to the initial conversion price of the Convertible Senior Notes. The capped call transactions cover, subject to customary adjustments, the number of shares of common stock initially underlying the Convertible Senior Notes. The capped call transactions are expected to offset the potential dilution to the Company’s common stock upon any conversion of Convertible Senior Notes, with such reduction and/or offset subject to a cap initially equal to $138.8750 per share.

The capped call transactions will expire on March 12, 2026. The capped call transactions are separate transactions and are not part of the terms of the Convertible Senior Notes. The shares related to the capped call transactions are excluded from the calculation of diluted earnings per share as they are anti-dilutive.

The capped call transactions cover, subject to anti-dilution adjustments, approximately 11,622,176 shares of the Company’s common stock, par value $0.001. The capped call transactions are subject to either adjustment or termination upon the occurrence of specified extraordinary and disruption events affecting the Company.

The capped call transactions are purchased call options on our own stock that settle by reference to our own stock with no forced cash payment; therefore, the transactions are classified as an equity instrument and recorded within stockholders’ equity. These transactions are not accounted for as derivatives. The Company recorded the capped call transactions as a reduction to additional paid-in capital and will not be remeasured as long as the conditions for equity classification continue to be met.

The Convertible Senior Notes and capped call transactions consisted of the following balances reported in the Consolidated Balance Sheet as of September 30, 2021 ($ in millions):

	September 30, 2021
Liability component:
Principal		920.0
Less: debt issuance costs, net of amortization		(19.7	)
Net carrying amount		900.3

Equity component recorded at issuance:
Capped call transactions		123.6

The Company recognized $1.1 million and $2.4 million related debt issuance and offering costs in interest expense, net on the consolidated statements of operations related to the Convertible Senior Notes for the three and nine-months ended September 30, 2021, respectively.

NOTE 9. STOCK AND UNIT-BASED COMPENSATION

2020 Omnibus Incentive Plan

On August 5, 2020, the Company’s Board of Directors adopted the 2020 Omnibus Incentive Plan (the “2020 Plan,”). Under the 2020 Plan, employees, consultants and directors of our company and our affiliates that perform services for us are eligible to receive awards. The 2020 Plan provides for the grant of incentive stock options (“ISOs”), non-statutory stock options (“NSOs”), stock appreciation rights, restricted stock awards (“RSAs”), performance awards, other share-based awards (including restricted stock units (“RSUs”)) and other cash-based awards. The maximum number of shares available for issuance under the 2020 Plan may not exceed 48,138,967 shares (subject to annual increases as approved by the Board of Directors).

Stock Options Activity

Stock options granted by the Company generally vest over four years with 25% of the option shares vesting each year. Options generally expire ten years from the date of the grant.

The following is a summary of stock option activity transactions as of and for the nine-months ended September 30, 2021 ($ in millions):

	Number of Options				Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term (Years)			Aggregate Intrinsic Value

Outstanding, December 31, 2020		14,958,969		$		21.01		9.60	$		600.6
Granted		336,526				59.83
Exercised		(222,203	)			21.02
Cancelled		(73,908	)			23.09
Outstanding, September 30, 2021		14,999,384		$		21.87		8.86	$		315.6

Options exercisable as of September 30, 2021		4,462,330		$		21.00		8.85			96.1

The aggregate intrinsic value of options exercised in the three-months ended September 30, 2021 and 2020 was $1.6 million and $0.0 million, respectively and $8.2 million and $0.0 million in the nine-months ended September 30, 2021 and 2020, respectively. Aggregate intrinsic value represents the difference between the exercise price of the option and the closing price of the Company’s common stock on the date of exercise. The fair value of options granted for the three-months ended September 30, 2021 and 2020 was $0.4 million and $0.0 million, respectively, and $9.6 million and $0.0 million for the nine-months ended September 30, 2021 and 2020, respectively.

RSA Activity

Immediately prior to the IPO in 2020, the existing unitholders of OSH LLC exchanged their founders’ units, incentive units and profits interests in OSH LLC for common stock of the Company as approved by the Board of Directors of the Company, OSH LLC and OSH Management Holdings, LLC (“OSH MH LLC”). As part of this pre-IPO conversion, certain units were converted to RSAs. The following is a summary of RSA transactions as of and for the nine-months ended September 30, 2021:

	Unvested Shares				Grant Date Fair Value

Unvested, December 31, 2020		21,599,118		$		11.77
Granted		-
Vested		(4,631,079	)			2.76
Canceled and forfeited		(175,905	)			14.40
Unvested, September 30, 2021		16,792,134		$		14.23

Employee Stock Purchase Plan

On August 5, 2020, the Board of Directors adopted, and the OSH LLC’s and OSH MH LLC’s majority unitholders approved, the 2020 Employee Stock Purchase Plan (the “ESPP”) for the issuance of up to a total of 2,386,875 shares of common stock. In addition, the number of shares available for issuance under the ESPP will be increased annually on January 1 of each calendar year beginning in 2021 and ending in and including 2030, by an amount equal to the lesser of (A) 1% of the shares outstanding on the final day of the immediately preceding calendar year and (B) such smaller number of shares as is determined by our Board of Directors, subject to an increase each January. In no event will more than 30,000,000 shares of our common stock will be available for issuance under the ESPP. Each offering period will be approximately six months in duration commencing on January and July 1 of each year and terminating on September 30 or December 31. The ESPP allows participants to purchase common stock through payroll deductions of up to 15% of their eligible compensation. The purchase price of the shares will be 85% of the lower of the fair market value of our common stock on the grant date or purchase date.

The first offering period closed on June 30, 2021, and 62,575 shares were distributed to employees during the period.

Stock and Unit-Based Compensation Expense

The Company recognized $0.0 million and $3.6 million in unit-based compensation expense related to the profits interests for the three-months ended September 30, 2021 and 2020, respectively. The Company recognized $0.0 million and $8.8 million in unit-based compensation expense related to the profits interests for the nine-months ended September 30, 2021 and 2020, respectively. The Company recorded the expenses in corporate, general and administrative expenses. The Company recognized $38.7 million and $25.7 million related to RSAs, options and RSUs for the three-months ended September 30, 2021 and 2020, respectively. The Company recorded $37.4 million in corporate, general and administrative expenses, $0.8 million in sales and marketing, and $0.5 million in cost of care for the three-months ended September 30, 2021. The Company recognized $25.7 million in corporate, general, and administrative expenses for the three and nine-months ended September 30, 2020. The Company recognized $121.9 million and $25.7 million related to RSAs, options and RSUs for the nine-months ended September 30, 2021 and 2020, respectively. The Company recorded $118.2 million in corporate, general and administrative expenses, $2.5 million in sales and marketing, and $1.2 million in cost of care for the nine-months ended September 30, 2021.

As part of the pre-IPO equity conversion discussed above and in our Annual Report on Form 10-K for the year ended December 31, 2020, the profits interests that were subject to vesting over a period of continuous employment or service and were unvested upon the conversion were converted into RSAs and options that vest over the remaining requisite service period from the original grant dates. As a result of this conversion and modification of vesting terms from Sponsor’s Exit to service-based vesting at the IPO, the Company determined that RSAs and options should be accounted for as a Type III modification (the award was not probable to vest prior to the modification but it was probable of vesting under the modified condition). The stock compensation expense, net of forfeitures, recorded for these modifications was $29.2 million and $87.0 million for the three and nine-months ended September 30, 2021, respectively, and $18.2 million for the three and nine-months ended September 30, 2020.

As of September 30, 2021, the Company had approximately $172.0 million in unrecognized compensation expense related to all non-vested awards (RSAs, options and RSUs) that will be recognized over the weighted-average period of 1.22 years.

NOTE 10. COMMITMENTS AND CONTINGENCIES

Uncertainties

The Company is presently, and from time to time, subject to various claims and lawsuits arising in the normal course of business. In the opinion of management, the ultimate resolution of these matters will not have a material adverse effect on the Company’s financial position or results of operations.

The healthcare industry is subject to numerous laws and regulations of federal, state and local governments. These laws and regulations include, but are not limited to, matters such as licensure, accreditation, government healthcare program participation requirements, reimbursement for patient services, and Medicare and Medicaid fraud and abuse. Recently, government activity has increased with respect to investigations and allegations concerning possible violations of fraud and abuse statues and regulations by healthcare providers. Violations of these laws and regulations could result in expulsion from government healthcare programs together with imposition of significant fines and penalties, as well as significant repayments for patient services billed.

On November 1, 2021, the Company received a civil investigative demand (“CID”) from the United States Department of Justice. According to the CID, the Department of Justice is investigating whether the Company may have violated the False Claims Act, 31 U.S.C. §§ 3729-3722. The CID requests certain documents and information related to the Company’s relationships with third-party marketing agents and related to the Company’s provision of free transportation to federal health care beneficiaries and requests information and documents related to such matters. We intend to cooperate with the Department of Justice and produce information and documentation in response to the CID. We are currently unable to predict the outcome of this investigation or whether litigation is probable. Regardless of the outcome, this inquiry has the potential to have an adverse impact on us due to any related defense and settlement costs, diversion of management resources, and other factors.

Management believes that the Company is in compliance with fraud and abuse as well as other applicable government laws and regulations. While no regulatory inquiries have been made, compliance with such laws and regulations is subject to government review and interpretation, as well as regulatory actions unknown at this time.

NOTE 11. VARIABLE INTEREST ENTITIES

Oak Street Health Physicians Group PC, OSH-IN Physicians Group PC, OSH-MI Physicians Group PC, OSH-OH Physicians Group LLC, OSH-PA Physicians Group PC, OSH-RI Physicians Group PC, Oak Street Health of Texas, PLLC, Griffin Myers Medical PC, Oak Street Health Physicians Group of South Carolina LLC, Oak Street Health Physicians Group of Louisiana LLC, Oak Street Health Physicians Group of Mississippi LLC, Oak Street Health Physicians Group of Alabama, LLC, Oak Street Health Physicians Group of Kentucky, LLC, Oak Street Health Physicians Group of Missouri, Oak Street Health Physicians Group of New Mexico, LLC, Oak Street Health Physicians Group of Arizona, PLLC and Oak Street Health Physicians Group of Oklahoma, LLC (collectively, the “Physician Groups”) employ healthcare providers to deliver primary care services to the Medicare covered population of Alabama, Georgia, Illinois, Indiana, Kentucky, Louisiana, Michigan, Mississippi, New Mexico, New York, North Carolina, Ohio, Oklahoma, Pennsylvania, Rhode Island, South Carolina, Tennessee and Texas. The Physician Groups were established to employ healthcare providers, contract with managed care payors and to deliver healthcare services to patients in the markets that the Company serves. The Company concluded that it has variable interests in the Physician Groups on the basis of its Administrative Service Agreement (“ASA”) which provides for reimbursement of costs and a management fee payable to the Company from the Physician Groups in exchange for providing management and administrative services which creates risks and a potential return to the Company. The Physician Group’s equity at risk, as defined by U.S. GAAP, is insufficient to finance its activities without additional support, and, therefore, the Physician Groups are considered VIEs.

The table below illustrates the VIE assets and liabilities and performance for the Physician Groups as of and for the periods ended ($ in millions):

		September 30, 2021			December 31, 2020
Total assets	$		509.4	$		286.1
Total liabilities			499.7			332.1

		Three-Months Ended						Nine-Months Ended
		September 30, 2021			September 30, 2020			September 30, 2021			September 30, 2020
Total revenues	$		386.4	$		213.9	$		1,031.3	$		622.7
Medical claims expense			308.5			153.4			790.4			439.4
Cost of care			36.8			14.5			104.2			44.1
Total operating expenses	$		345.3	$		167.9	$		894.6	$		483.5

There are no restrictions on the Physician Groups’ assets or on the settlement of its liabilities. The assets of the Physician Groups can be used to settle obligations of the Company. The Physician Groups are included in the Company’s obligated group; thus, creditors of the Company have recourse to the assets owned by the Physician Groups. There are no liabilities for which creditors of the Physician Groups do not have recourse to the general credit of the Company. There are no restrictions placed on the retained earnings or net income of the Physician Groups with respect to potential dividend payments.

NOTE 12. RELATED PARTIES

Humana

Humana holds over 5% of our common stock. Additionally, a Humana representative served on the Board of Directors from 2019 until their retirement, effective September 7, 2021. Humana no longer has a representative on the Board of Directors as of September 7, 2021. The Company has capitated managed care contracts with Humana which result in capitated revenues and related receivables. Within the Company’s other patient services revenue, revenues from Humana are included in both fee-for-service revenue and care coordination revenue. The unearned portion of the Care Coordination Payments was recorded as a contract liability in both the short-term and long-term other liabilities accounts. The Company also incurs medical claims expenses related to the Humana payor contracts which are included in third-party medical expenses. Related unpaid claims are included in the liability for unpaid claims financial statement caption.

The Humana Alliance Provision contains an arrangement for a license fee that is payable by the Company to Humana for the Company’s provision of health care services in certain centers owned or leased by Humana. The license fee is a reimbursement to Humana for its costs of owning or leasing and maintaining the centers, including rental payments, center maintenance or repair expenses, equipment expenses, special assessments, cost of upgrades, taxes, leasehold improvements, and other expenses identified by Humana and is included in cost of care expenses in the consolidated statement of operations. The Company adopted ASC 842 as of January 1, 2021 and recorded an ROU asset and liability related to Humana leases. The liability was recorded in both the short-term and long-term other liabilities accounts.

The below tables present the balances related to Humana as of September 30, 2021 and December 31, 2020 and for the three- and nine-months ended September 30, 2021 and 2020 ($ in millions):

		September 30, 2021			December 31, 2020
Assets:
Other patient service receivables	$		0.1	$		-
Capitated accounts receivables			118.8			65.7
Other current assets			5.9			-
Operating lease right-of-use assets			60.8			-
Liabilities:
Liability for unpaid claims	$		97.8	$		78.5
Other liabilities
Short-term license fees			5.3			0.6
Short-term contract liability			5.4			4.0
Short-term operating lease liability			5.9			-
Long-term operating lease liabilities			56.6			-
Deferred rent			-			0.8
Other long-term liabilities:
Long-term license fees			13.4			7.3
Long-term contract liability			22.8			12.8
Equity:
Additional paid-in capital	$		50.0	$		50.0

		Three-Months Ended						Nine-Months Ended
		September 30, 2021			September 30, 2020			September 30, 2021			September 30, 2020
Revenues:
Capitated revenue	$		130.7	$		92.3	$		379.2	$		286.1
Other patient service revenue:
Care coordination revenue earned			1.5			0.8			3.8			2.2
Fee for service revenue			1.3			0.0			0.7			0.2
Expenses:
Medical claims expense	$		99.1	$		62.2	$		277.7	$		186.0
Cost of care:
License fee expense			0.8			0.7			2.2			2.0
Rent expense			2.0			0.8			4.9			1.9

Blue Cross Blue Shield of Rhode Island

Blue Cross Blue Shield of Rhode Island (“BCBSRI”) owns 49.9% of our joint venture, OSH-RI, LLC, and one of our Board members served as president and CEO of BCBSRI through the year ended December 31, 2020. The Board member has not served in this role in 2021, and as such we have only presented 2020 information herein. Total capitated revenue associated with the BCBSRI payor contract was $2.7 million for the three-months ended September 30, 2020, and $7.5 million for the nine-months ended September 30, 2020. Capitated receivables from BCBSRI represented $10.0 million of the capitated accounts receivable balance at December 31, 2020.

Total medical claims expenses related to the BCBSRI payor contract were $1.9 million for the three-months ended September 30, 2020, and $6.4 million for the nine-months ended September 30, 2020. Unpaid claims related to these capitated contracts represented $11.1 million of the liability for unpaid claims balance at December 31, 2020.

Consulting Arrangement with an Immediate Family Member of Our Chief Executive Officer

Carolyn Rose, the sister of Michael Pykosz, a member of our Board of Directors and our Chief Executive Officer, has provided us contracted legal services. Ms. Rose provided legal services resulting in fees of $0.0 million and $0.1 million for the three-months ended September 30, 2021 and 2020, respectively. For the nine-months ended September 30, 2021 and 2020, we incurred legal fees payable to Ms. Rose of $0.2 million and $0.2 million, respectively.

NOTE 13. NET LOSS PER SHARE

The following table sets forth the computation of basic and diluted net loss per common share for the three and nine-months ended September 30, 2021 and 2020 ($ in millions). The basic and diluted earnings per share for the three and nine-months ended September 30, 2020 is applicable only for the period from August 10, 2020 to September 30, 2020, which is the period following our IPO and related restructuring transactions and presents the period that the Company had outstanding common stock.

		Three-Months Ended								Nine-Months Ended
		September 30, 2021				September 30, 2020				September 30, 2021				September 30, 2020
Numerator:
Net loss attributable to common stockholders/unitholders	$		(109.9	)	$		(64.6	)	$		(274.3	)	$		(128.6	)
Less: Net loss attributable to non-controlling interests			(0.6	)			(0.1	)			(3.5	)			(0.5	)
Less: Undeclared and deemed dividends attributable to unitholders prior to restructuring as part of IPO			-				(5.4	)			-				(27.2	)
Less: Net loss attributable to OSH LLC prior to restructuring as part of the IPO			-				(25.7	)			-				(67.5	)
Net loss attributable to OSH Inc. stockholders			(109.3	)			(33.4	)			(270.8	)			(33.4	)
Denominator:
Weighted average common stock outstanding - basic and diluted			223,435,698				218,261,866				221,932,624				218,261,866
Net loss per share – basic and diluted	$		(0.49	)	$		(0.15	)	$		(1.22	)	$		(0.15	)

The Company’s potentially dilutive securities, which included stock options, unvested RSUs, unvested RSAs and shares issuable upon conversion of our Convertible Senior Notes have been excluded from the computation of diluted net loss per share as the effect would reduce the net loss per share. Therefore, the weighted average number of common shares/units outstanding used to calculate both basic and diluted net loss per share was the same. The Company excluded the following potential common shares, presented based on amounts outstanding at each period end, from the computation of diluted net loss per share for the periods indicated:

		Nine-Months Ended September 30, 2021		Nine-Months Ended September 30, 2020
Stock options			14,999,384		14,921,281
RSUs			341,215		148,876
RSAs			16,792,134		22,234,012
Convertible Senior Notes	*		11,622,176		-
			43,754,909		37,304,169

*The Company entered into capped call transactions to mitigate the impact of potential economic dilution to our common stock upon any conversion of our Convertible Senior Notes. The capped call transactions are expected to offset the potential dilution to the Company’s common stock upon any conversion of the Convertible Senior Notes up to a cap price of $138.8750 per share. See Note 8 for further details on the capped call transactions.

NOTE 14. SUBSEQUENT EVENTS

On October 20, 2021, we closed our acquisition of RubiconMD (“Rubicon”), the leading technology platform providing access to specialist expertise for a base purchase price of $130.0 million and up to $60.0 million of contingent consideration. The deal enables Oak Street Health to integrate virtual specialty care into our existing care model, which we expect to significantly streamline the referral process and better manages costs, enhances patient experience, and provides comprehensive care far beyond traditional primary care.

The acquisition of Rubicon was considered a business combination under U.S. GAAP and will be accounted for using the acquisition method. As such, the total consideration will be allocated to Rubicon’s tangible and intangible assets acquired as well as liabilities assumed based on their respective fair values with any excess allocated to goodwill. This allocation is dependent on certain valuations and other fair value analyses that have not yet been completed at the time of the filing.

iTEM 2. Management’s Discussion and Analysis of FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis is intended to help the reader understand our business, financial condition, results of operations, liquidity and capital resources. This discussion should be read in conjunction with our unaudited consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and our audited financial statements and the accompanying notes as well as “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, 2020 (File No. 001-39427). Unless the context otherwise indicates or requires, the terms “we”, “our,” “the Company” and “Oak Street Health” as used herein refer to Oak Street Health, Inc. and its consolidated subsidiaries, including Oak Street Health, LLC, which is Oak Street Health, Inc.’s predecessor for financial reporting purposes for periods presented prior to August 10, 2020.

The discussion contains forward-looking statements about the business, operations and financial performance of the Company based on our current expectations that involves risks, uncertainties and assumptions. Actual results could differ materially from those discussed in or implied by forward-looking statements as a result of various factors, including those discussed above in “Forward-Looking Statements,” and Part II, Item 1A, “Risk Factors” in this Quarterly Report on Form 10-Q as well as those discussed under the “Risk Factors” section in our Annual Report on Form 10-K for the year ended December 31, 2020.

Business Overview

Oak Street Health, Inc. operates primary care centers within the United States serving Medicare beneficiaries. Since our founding in 2012, the Company’s mission has been to build a care delivery platform, built on a chassis of primary care that directly addresses rising costs and poor outcomes, two of the most pressing challenges facing the United States healthcare industry. Our approach shifts the allocation of healthcare resource delivery from traditional acute and specialist care into an enhanced, patient-centered care delivery platform which meaningfully improves the quality of care and outcomes for high-risk populations. Our approach also disrupts the current state of care delivery for Medicare-eligible patients and aims to align the incentives of our patients, our providers and our payors with the goal of simultaneously improving health outcomes and care quality, lowering medical costs and improving the patient experience.

Oak Street Health was designed to provide and manage Medicare-eligible patients’ total healthcare through capitated, value-based payments. We created a new care platform because the then-existing primary care infrastructure was not built with the capacity to drive the significant improvements in cost and quality the current health system needs. We decided to focus on the Medicare market due to its size, growth tailwinds and largely clinically cohesive population. We designed our platform to take risk in managing patients’ health below an agreed-upon baseline cost because we believed there was a meaningful opportunity to produce system-wide cost savings by changing where and how patients’ healthcare is delivered. Our platform’s design has included investments in technology and patient-centered, community-based care delivery to create a different and we believe, better approach to addressing the needs of high risk Medicare-eligible patients.

As of September 30, 2021, the Company operated 110 centers in 31 markets across 18 states, which provided care for approximately 131,500 patients. We, together with our affiliated physician practice organizations, employed approximately 4,000 team members, including approximately 400 primary care providers. Our operations are organized and reported under one segment.

COVID-19 Update on our Business

On March 11, 2020, the World Health Organization designated COVID-19 as a global pandemic. The rapid spread of COVID-19 and variants around the world and throughout the United States has altered the behavior of businesses and people, with significant negative effects on federal, state and local economies, the duration of which is unknown at this time. Various policies were implemented by federal, state and local governments in response to the COVID-19 pandemic that caused many people to remain at home and forced the closure of or limitations on certain businesses, as well as suspended elective procedures by health care facilities through early 2021. While the restrictions have been eased across the U.S. and most states have lifted moratoriums on non-emergent procedures, some restrictions remain in place. The virus disproportionately impacts older adults, especially those with chronic illnesses, which describes many of our patients.

In response to the COVID-19 pandemic, we took the following actions to ensure the safety of our employees and their families and to address the physical, mental and social health of our patients:

•

Created a COVID-19 Response Team in March 2020 that is supported by team members from across our organization to ensure a coordinated response to the pandemic;

•

Re-opened all of our corporate offices as of summer 2021, which were temporarily closed since March 2020, with the expectation that our corporate work force will continue to work remotely at least part-time;

•

Transitioned much of our center-based care to be delivered by our providers virtually through newly developed telehealth capabilities, including video and telephone through June 2020 but have transitioned our business back to a more normal operating cadence as of July 2020, including seeing a larger proportion of our patients via in-center visits (with a corresponding reduction in telehealth visits) while maintaining stringent safety protocols to minimize the potential transmission of COVID-19. For the foreseeable future, we expect to continue to leverage our telehealth capabilities as a means of interacting with our patients to the extent an in-person visit is not required or preferred;

•

Made operational changes to the staffing and operations of our centers, which have remained open as “essential” businesses, to minimize potential exposure to and transmission of COVID-19;

•

Temporarily delayed planned openings of new centers through August 2020 but restarted our growth efforts through patient outreach since then; we resumed opening new centers and are currently opening centers consistent with our pre-COVID operations;

•

Temporarily halted community outreach and other marketing initiatives which drive new patients to our platform through June 2020 but have recommenced marketing initiatives since the third quarter of 2020 through the present;

•

Acquired and deployed significantly greater amounts of personal protective equipment (“PPE”) to ensure the safety of our employees and patients;

•

Created a program called “COVID Care,” which continues to be in full operation, to actively monitor our patients for suspected COVID-19 infections with the goal of managing those symptoms to keep our patients safely out of the hospital unless and until necessary due to the potential infection risks in the hospital environment;

•

Redeployed our contracted and employed drivers, who typically transport patients to our centers, to deliver food from food pantries to our patients to address food supply issues or challenges;

•

Provided free rapid COVID-19 tests to all members of the Chicago community;

•

Launched an effort in January 2021 to vaccinate frontline healthcare workers (both employees of Oak Street Health and non-employees), our patients, and other eligible members of our communities without billing the federal government. While this work is critically important for our communities, we also expect our agile vaccination efforts will result in greater brand awareness and loyalty and incremental patient growth; and

•

Administered more than 180,000 total COVID-19 vaccine doses as of November 1, 2021.

COVID-19 has impacted both our per-patient capitated revenue due to lower risk scores for new patients as compared to historical risk scores and our medical claims expense. Although our risk scores for existing Oak Street Health patients have been consistent with our historical experience, new patients in 2021 have had lower risk scores due to a lack of availability of care in 2020 and inadequate documentation as discussed in more detail below. These lower scores for new patients resulted in lower per-patient capitated revenue for the nine-months ended September 30, 2021. As future patients not served by Oak Street Health in 2020 were unable to access the healthcare system for several months in 2020 due to local COVID-19 restrictions and therefore had fewer interactions with healthcare providers than a typical year, new patients in 2021 had lower risk scores than they had historically. As we are able to more completely and accurately document both current and new patients' health conditions in 2021, we expect that risk scores will increase to reflect the true severity of these patients' conditions, which we would further expect to result in increased revenue for our 2022 fiscal year.

As we are financially responsible for essentially all of the healthcare costs associated with our at-risk patients, whether OSH or a third party provides that care, we suspect that the healthcare costs of patients infected with COVID-19 will be greater than had COVID-19 not occurred. It is impossible, however, to know what other healthcare issues these patients may have encountered in their pre-COVID-19 lives and whether the COVID-19 costs are or will be greater or lesser than the costs these patients would otherwise incur. Additionally, because of the extraordinary measures taken by local governments in our markets particularly in the second quarter of 2020, all of our patients had more limited access to healthcare services, including healthcare specialists such as cardiologists or orthopedists, to schedule both inpatient and outpatient surgeries, and to some extent hospital care. Beginning in late March 2020 and extending through most of the second quarter of 2020, our patients who were not infected with COVID-19, which represented over 96% of our at-risk patients, incurred lower healthcare costs than we would have otherwise expected, which will result in lower medical claims expense that we incur. We expect the vast majority of these costs are just delayed and will be incurred at future points in time. Additionally, we believe it is possible that the deferral of healthcare services could cause additional health problems in our existing patients, which could increase our costs in the future. From the second half of 2020 through the second quarter of 2021, we did experience an increase in medical costs to levels above historical norms. Because of the COVID-19 related volatility in medical cost data in 2020 and the first half of 2021, we do not believe that our 2020 and 2021 medical cost data can serve as a reliable basis for estimating our remaining 2021 and 2022 performance.

We also do not know what the net impact to medical costs will be as a result of the surge in COVID-19 cases at the end of 2020 through 2021. Furthermore, due to the time it takes for medical claims to be submitted to Medicare Advantage (“MA”) plans, adjudicated, and sent to us, we believe it will be several quarters before we will be able to accurately calculate the impact on medical claims expense from the COVID-19 pandemic. We do believe, however, that the impact on per-patient revenue and medical claims related to COVID-19 that we expect to experience will not have a materially detrimental effect on our long-term financial performance. We continue to monitor COVID-19 impacts on medical costs incurred.

The COVID-19 pandemic had a material impact on our results of operations, cash flows and financial position for the three and nine-months ended September 30, 2021. Based upon claims paid to date, our direct costs related to COVID-19 claims was approximately $47.4 million for the period from March 1, 2020 through September 30, 2021. We expect to incur additional COVID-19 related costs given the volume of positive cases present in our markets. Due to the uncertainty of COVID-19 infection and hospitalization rates, we cannot estimate any incremental COVID-19 related costs we may incur.

The full extent to which the COVID-19 pandemic has and will continue to directly or indirectly impact our business, future results of operations and financial condition will depend on future factors that are highly uncertain and cannot be accurately predicted, including new information that may emerge concerning COVID-19, including the impact of new variants of the virus, the actions taken to contain it or treat its impact and the economic impact on our markets. Such factors include, but are not limited to, the scope and duration of stay-at-home practices and business closures and restrictions, rate and effectiveness of vaccinations in the U.S., government-imposed or recommended suspensions of elective procedures, and expenses required for supplies and personal protective equipment. Because of these and other uncertainties, we cannot estimate the length or severity of the impact of the pandemic on our business. Furthermore, because of our business model, the full impact of the COVID-19 pandemic may not be fully reflected in our results of operations and overall financial condition until future periods. We will continue to closely evaluate and monitor the nature and extent of these potential impacts to our business, results of operations and liquidity.

For additional information on the various risks posed by the COVID-19 pandemic, please see “Risk Factors” included in our Annual Report on Form 10-K for the year ended December 31, 2020 and our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2021 and June 30, 2021.

Key Factors Affecting Our Performance

•

Adding New Patients in Existing Centers: Our ability to add new patients is a key indicator of the market’s recognition of the attractiveness of the Oak Street Platform, our technology-enabled, integrated platform which we created to help deliver value-based care focused exclusively on Medicare patients, both to our patients and MA plan partners, and a key growth driver for the business. As we add patients to our existing centers, we expect these patients to contribute significant incremental economics to Oak Street Health as we leverage our fixed cost base at each center. 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 89,500 patients as of September 30, 2020 to approximately 131,500 as of September 30, 2021.

•

Expand our Center Base within Existing and New Markets: We believe that we currently serve less than 2% of the total patients in the markets where we currently have centers. As a result, there is significant opportunity to expand in our existing markets through the acquisition of new patients to existing centers and addition of new centers. For the long term, these strategically developed new sites allow us to access additional neighborhoods while leveraging our established brand and infrastructure in a market. Our existing markets today represent a small fraction of the overall market opportunity. Based upon our experience to date, we believe our care model can scale nationally, and we therefore expect to selectively and strategically expand into new geographies. Additionally, we are hopeful that the Direct Contracting model, which started as of April 1, 2021, will allow us to convert existing fee-for-service patients into at-risk patients. The Direct Contracting model creates a new opportunity for CMS to test an array of financial risk-sharing arrangements in the traditional Medicare fee-for-service population, and it will enable us to assume financial risk for the cost of care for patients covered by traditional Medicare. Through this model, CMS aims to transform risk-sharing arrangements in Medicare fee-for-service (“FFS”), empower and engage beneficiaries (or patients or members) in their own care delivery, broaden participation in CMS Innovation Center models, reduce provider burden and shift providers from FFS to value-based payments in primary care.

•

Contract with Payors: Our economic model relies on our capitated partnerships with payors and CMS, which manage and market MA plans across the United States. In our short history, we have been able to establish strategic value-based relationships with 31 different payors as of September 30, 2021, including each of the top 6 national payors by number of MA patients. These existing contracts and relationships and our partners’ understanding of the value of our model reduces the risk of entering into new markets as we typically have payor contracts before entering a new market. Maintaining, supporting, and growing these relationships, particularly as we enter new geographies, is critical to our long-term success.

•

Effectively Manage the Cost of Care for Our Patients: The capitated nature of our contracting with payors requires us to prudently manage the medical expense of our patients. Our care model focuses on leveraging the primary care setting as a means of avoiding costly downstream healthcare costs, such as acute hospital admissions. Our patients, however, retain the freedom to seek care at emergency rooms or hospitals; we do not restrict their access to care beyond the limits of their MA plan, although we have developed many capabilities to manage and control the associated costs of this care. Therefore, we are liable for potentially large medical claims should we not effectively manage our patients’ health.

•

Center-Level Contribution Margin: We endeavor to expand our number of centers and number of patients at each center over time. Due to the significant fixed costs associated with operating and managing our centers and the increases we experience in patient contribution (defined below) on a per-patient basis the longer a patient is part of the Oak Street Platform, we generate significantly better center-level contribution margins (defined as (i) patient revenue, excluding Medicare Part D revenue minus (ii) the sum of (a) medical claims expense, excluding Medicare Part D related expenses, and (b) cost of care, excluding depreciation and amortization) as the patient base within our centers increases and matures and our costs decrease as a percent of revenue. As a result, the value of a center to our business increases over time.

•

Seasonality to our Business: Our operational and financial results, including at-risk patient growth, per-patient revenue, and medical costs, will experience some variability depending upon the time of year in which they are measured. We typically experience the largest portion of our at-risk patient growth during the first quarter, when plan enrollment selections made during the prior Annual Enrollment Period (“AEP”) from October 15th through December 7th of the prior year take effect. Our per-patient revenue will generally decline over the course of the year. As the year progresses, our per-patient revenue declines as new patients join us typically with less complete or accurate documentation (and therefore lower risk-adjustment scores) and our attrition skews towards our higher-risk (and therefore greater revenue) patients. Finally, medical costs will vary seasonally depending on a number of factors, including the weather which can be a driver of certain illnesses, such as the influenza virus. We would therefore expect to see higher levels of per-patient medical costs in the first and fourth quarters. Medical costs also depend upon the number of business days in a period as periods with fewer business days will have lower medical costs all else equal.

•

Investments in Growth: 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.

Executive Summary

The following table presents key financial statistics for the three and nine-months ended September 30, 2021 and 2020, respectively:

		For the three-months ended								For the nine-months ended
(dollars in millions)		September 30, 2021				September 30, 2020				September 30, 2021				September 30, 2020
Centers			110				67				110				67
Total patients			131,500				89,500				131,500				89,500
At-risk			100,500				59,500				100,500				59,500
Fee-for-service			31,000				30,000				31,000				30,000
Total revenues	$		388.7		$		217.9		$		1,038.5		$		634.1
Loss from operations¹	$		(109.3	)	$		(55.4	)	$		(272.5	)	$		(92.7	)
Net loss¹	$		(109.9	)	$		(59.3	)	$		(274.3	)	$		(101.3	)
Platform contribution (Non-GAAP)²	$		2.7		$		20.2		$		44.0		$		65.3
Patient contribution (Non-GAAP)²	$		67.0		$		57.3		$		223.7		$		174.1
Adjusted EBITDA (Non-GAAP)²	$		(64.3	)	$		(22.8	)	$		(135.3	)	$		(49.0	)

Includes stock and unit-based compensation as shown in the table in the Results of Operations section below.

See “Non-GAAP Reconciliations” below for reconciliations to the most directly comparable financial measures calculated in accordance with GAAP and related disclosures.

Centers

We define our centers as those primary care centers open for business and attending to patients at the end of a particular period. Our centers are leased or licensed by Oak Street Health MSO, LLC or an affiliated entity and, pursuant to the terms of certain contractual relationships between Oak Street Health MSO, LLC and our affiliated medical practices, made available for use by the medical practices in the provision of primary care services.

Total Patients

Total patients includes both at-risk MA and Direct Contracting patients (those patients for whom we are financially responsible for their total healthcare costs) as well as fee-for-service Medicare patients (those patients for whom our affiliated medical groups submit claims to the federal government for direct reimbursement under the Medicare program or to MA plans with which we do not have value-based arrangements). We define our total at-risk patients as at-risk patients who have selected one of our affiliated medical groups as their provider of primary care medical services as of the end of a particular period or have been aligned under the Direct Contracting program. We define our total fee-for-service Medicare patients as fee-for-service Medicare patients who come to one of our centers for medical care at least once per year. A fee-for-service patient continues to be included in our patient count until the earlier to occur of (a) more than one year since the patient’s last visit, (b) the patient communicates a desire to stop receiving care from us or (c) the patient passes away.

Non-GAAP Financial Measures

We utilize certain financial measures that are not calculated based on GAAP. Certain of these financial measures are considered “non-GAAP” financial measures within the meaning of Item 10 of Regulation S-K promulgated by the SEC. We believe that non-GAAP financial measures provide an additional way of viewing aspects of our operations that, when viewed with the GAAP results, provide a more complete understanding of our results of operations and the factors and trends affecting our business. These non-GAAP financial measures are also used by our management to evaluate financial results and to plan and forecast future periods. However, non-GAAP financial measures should be considered as a supplement to, and not as a substitute for, or superior to, the corresponding measures calculated in accordance with GAAP. Non-GAAP financial measures used by us may differ from the non-GAAP measures used by other companies, including our competitors.

To supplement our consolidated financial statements presented on a GAAP basis, we disclose the following Non-GAAP measures: patient contribution, platform contribution and adjusted EBITDA as these are performance measures that our management uses to assess our operating performance. Because patient contribution, platform contribution and adjusted EBITDA facilitate internal comparisons of our historical operating performance on a more consistent basis, we use these measures for business planning purposes and in evaluating acquisition opportunities.

Patient and platform contribution are reconciled to loss from operations as the most directly comparable GAAP measure as set forth in the below tables under “Non-GAAP Reconciliations.” Adjusted EBITDA is reconciled to net loss as the most directly comparable GAAP measure as set forth in the below table under “Non-GAAP Reconciliations.”

Our definitions of patient contribution, platform contribution and adjusted EBITDA may differ from the definition used by other companies and therefore comparability may be limited. In addition, other companies may not publish this or similar metrics. Thus, our Non-GAAP Financial Measures should be considered in addition to, not as a substitute for, or in isolation from, measures prepared in accordance with GAAP, such as net loss and loss from operations.

We provide investors and other users of our financial information with reconciliations of patient contribution, platform contribution and adjusted EBITDA to loss from operations and net loss, respectively. We encourage investors and others to review our financial information in its entirety, not to rely on any single financial measure and to view patient contribution, platform contribution and adjusted EBITDA in conjunction with loss from operations and net loss, respectively.

Patient Contribution

We define patient contribution as capitated revenue less medical claims expense. We view patient contribution as all of the dollars available for us to manage our business, including providing care to our patients, investing in marketing to attract new patients to the Oak Street Platform, and supporting the organization through our central corporate infrastructure. We expect that patient contribution will grow year-over-year in absolute dollars as our at-risk patient base continues to grow. We would also expect that our patient contribution per-patient-per-month economics on our at-risk patients will continue to improve the longer our patients are part of the Oak Street Platform as we better understand their health conditions and the patients better engage with our care model. We would expect, however, that our aggregate patient contribution per-patient-per-month economics on our at-risk patients may decrease at an aggregate level to the extent our patient growth skews our mix of patients towards patients newer to the Oak Street Platform.

We would also expect to experience seasonality in patient contribution per-patient-per-month with the first quarter generally generating the greatest patient contribution per-patient-per-month, decreasing for the rest of the year. This seasonality is primarily driven by our adding new patients to the Oak Street Platform throughout the year, who generally have lower per-patient capitated revenue compared to our existing patient base.

Platform Contribution

We define platform contribution as total revenues less the sum of medical claims expense and cost of care, excluding depreciation and amortization. We believe this metric best reflects the economics of our care model as it includes all medical claims expense associated with our patients’ care as well as the costs we incur to care for our patients via the Oak Street Platform. As a center matures, we expect the platform contribution from that center to increase both in terms of absolute dollars as well as a percent of capitated revenue. This increase will be driven by improving patient contribution economics over time as well as our ability to generate operating leverage on the costs of our centers. Our aggregate platform contribution may not increase despite improving economics at our existing centers should we open new centers at a pace that skews our mix of centers towards newer centers. We would expect to experience seasonality in platform contribution due to seasonality in our patient contribution.

Adjusted EBITDA

We define adjusted EBITDA as net loss excluding other income (expense), income taxes, depreciation and amortization, transaction/offering costs and stock and unit-based compensation. We include adjusted EBITDA in this Quarterly Report because it is an important measure upon which our management assesses and believes investors should assess our operating performance. We also consider adjusted EBITDA to be an important measure because it helps illustrate underlying trends in our business and our historical operating performance on a more consistent basis.

Results of Operations

The following tables set forth our results of operations for the periods presented and as a percentage of our total revenues for those periods.

		For the three-months ended											For the nine-months ended
(dollars in millions)		September 30, 2021				September 30, 2020			% Change				September 30, 2021				September 30, 2020			% Change
Revenues:
Capitated revenue	$		376.7		$		211.8			78	%	$		1,014.6		$		616.4			65	%
Other patient service revenue			12.0				6.1			97	%			23.9				17.7			35	%
Total revenues			388.7				217.9			78	%			1,038.5				634.1			64	%
Operating expenses:
Medical claims expense			309.7				154.5			100	%			790.9				442.3			79	%
Cost of care, excluding depreciation and amortization (1)			76.3				43.2			77	%			203.6				126.5			61	%
Sales and marketing (2)			30.5				15.5			97	%			80.5				37.4			115	%
Corporate, general and administrative (3)			77.0				57.2			35	%			224.3				112.5			99	%
Depreciation and amortization			4.5				2.9			55	%			11.7				8.1			44	%
Total operating expenses			498.0				273.3			82	%			1,311.0				726.8			80	%
Loss from operations	$		(109.3	)	$		(55.4	)		97	%	$		(272.5	)	$		(92.7	)		194	%
Other income/(expense):
Interest expense, net			(0.6	)			(3.9	)		(85	)%			(1.8	)			(8.8	)		(80	)%
Other			-				-			0	%			-				0.2			(100	)%
Total other expense			(0.6	)			(3.9	)		(85	)%			(1.8	)			(8.6	)		(79	)%
Net loss	$		(109.9	)	$		(59.3	)		85	%	$		(274.3	)	$		(101.3	)		171	%
Net loss attributable to noncontrolling interests			0.6				0.1			500	%			3.5				0.5			600	%
Net loss attributable to the Company	$		(109.3	)	$		(59.2	)		85	%	$		(270.8	)	$		(100.8	)		169	%

(1) Includes stock-based compensation, as follows:	$		0.5		$		-		*			$		1.2		$		-		*
(2) Includes stock-based compensation, as follows:			0.8				-		*					2.5				-		*
(3) Includes stock-based compensation, as follows:	$		37.4		$		29.7		*			$		118.2		$		35.6		*

____________

* Percentage not meaningful

	For the three-months ended						For the nine-months ended
	September 30, 2021			September 30, 2020			September 30, 2021			September 30, 2020
Revenues:
Capitated revenue		97	%		97	%		98	%		97	%
Other patient service revenue		3	%		3	%		2	%		3	%
Total revenues		100	%		100	%		100	%		100	%
Operating expenses:
Medical claims expense		80	%		71	%		76	%		70	%
Cost of care, excluding depreciation and amortization		20	%		20	%		20	%		20	%
Sales and marketing		8	%		7	%		8	%		6	%
Corporate, general and administrative		20	%		26	%		22	%		18	%
Depreciation and amortization		1	%		1	%		1	%		1	%
Total operating expenses		128	%		125	%		126	%		115	%
Loss from operations		(28	)%		(25	)%		(26	)%		(15	)%
Other income/(expense):
Interest expense, net		(0	)%		(2	)%		(0	)%		(1	)%
Other		0	%		0	%		0	%		0	%
Total other expense		(0	)%		(2	)%		(0	)%		(1	)%
Net loss		(28	)%		(27	)%		(26	)%		(16	)%
Net loss attributable to noncontrolling interests		0	%		0	%		0	%		0	%
Net loss attributable to the Company		(28	)%		(27	)%		(26	)%		(16	)%

Total Revenues

		For the three-months ended						Change						For the nine-months ended						Change
(dollars in millions)		September 30, 2021			September 30, 2020			$		%				September 30, 2021			September 30, 2020			$		%
Revenues:
Capitated revenue	$		376.7	$		211.8	$		164.9		78	%	$		1,014.6	$		616.4	$		398.2		65	%
Other patient service revenue			12.0			6.1			5.9		97	%			23.9			17.7			6.2		35	%
Total revenues	$		388.7	$		217.9	$		170.8		78	%	$		1,038.5	$		634.1	$		404.4		64	%

Capitated revenue was $376.7 million for the three-months ended September 30, 2021, an increase of $164.9 million, or 78%, compared to $211.8 million for the three-months ended September 30, 2020. This increase was driven primarily by a 69% increase in total patients under capitated arrangements, and an increase of approximately 5% in capitated revenue rates primarily due to increased premiums from patients with a higher average level of acuity. For the three-months ended September 30, 2021, capitated revenue of $15.4 million was recorded related to prior periods, which was an increase of $13.6 million as compared to the prior period amount of $1.8 million recorded during the three-months ended September 30, 2020. This prior period increase was primarily driven by patient retroactivity and increased acuity adjustments.

Capitated revenue was $1,014.6 million for the nine-months ended September 30, 2021, an increase of $398.2 million, or 65%, compared to $616.4 million for the nine-months ended September 30, 2020. This increase was driven primarily by a 69% increase in total patients under capitated arrangements, partially offset by a decrease of approximately -3% in capitated revenue rates primarily due to decreased premiums from new patients with a lower average level of recorded acuity. For the nine-months ended September 30, 2021, capitated revenue of $20.2 million was recorded related to prior periods, which is an increase of $12.8 million as compared to the prior period amount of $7.5 million recorded during the nine-months ended September 30, 2020. This prior period increase was primarily driven by patient retroactivity.

Other patient service revenue was $12.0 million for the three-months ended September 30, 2021, an increase of $5.9 million, or 97%, compared to $6.1 million for the three-months ended September 30, 2020. For the three-months ended September 30, 2021, other patient service revenue of $3.9 million was recorded related to prior periods due to the ACO shared savings program. Other patient service revenue was $23.9 million for the nine-months ended September 30, 2021, an increase of $6.2 million, or 35%, compared to $17.7 million for the nine-months ended September 30, 2020. These increases were driven primarily by higher care coordination and care management services revenue.

Operating Expenses

		For the three-months ended						Change						For the nine-months ended						Change
(dollars in millions)		September 30, 2021			September 30, 2020			$		%				September 30, 2021			September 30, 2020			$		%
Medical claims expense	$		309.7	$		154.5	$		155.2		100	%	$		790.9	$		442.3	$		348.6		79	%
Cost of care, excluding depreciation and amortization			76.3			43.2			33.1		77	%			203.6			126.5			77.1		61	%
Sales and marketing			30.5			15.5			15.0		97	%			80.5			37.4			43.1		115	%
Corporate, general and administrative			77.0			57.2			19.8		35	%			224.3			112.5			111.8		99	%
Depreciation and amortization			4.5			2.9			1.6		55	%			11.7			8.1			3.6		44	%
Total operating expenses	$		498.0	$		273.3	$		224.7		82	%	$		1,311.0	$		726.8	$		584.2		80	%

Medical claims expense was $309.7 million or 80% of total revenues for the three-months ended September 30, 2021, an increase of $155.2 million, or 100%, compared to $154.5 million or 71% of total revenues for the three-months ended September 30, 2020. The increase was primarily due to a 69% increase in total patients under capitated arrangements and an 19% increase in cost per patient. For the three-months ended September 30, 2021, medical claims expense of $9.4 million was recorded as a result of an increase in prior period incurred claims, which is an increase of $9.4 million as compared to no prior period incurred claims in the same period in prior year. These prior period adjustments were driven by patient retroactivity.

Medical claims expense was $790.9 million or 76% of total revenues for the nine-months ended September 30, 2021, an increase of $348.6 million, or 79%, compared to $442.3 million or 70% of total revenues for the nine-months ended September 30, 2020. The increase was primarily due to a 69% increase in total patients under capitated arrangements and a 6% increase in cost per patient. For the nine-months ended September 30, 2021, medical claims expense of $2.9 million was recorded as a result of an increase in prior period incurred claims, which was a decrease of $8.4 million as compared to the same period in prior year of $11.4 million prior period incurred claims. The decrease in the prior period adjustments was driven by favorable prior period development, partially offset by patient retroactivity.

Cost of care, excluding depreciation and amortization was $76.3 million or 20% of total revenues for the three-months ended September 30, 2021, an increase of $33.1 million or 77%, compared to $43.2 million or 20% of total revenues for the three-months ended September 30, 2020. The increase was primarily driven by increases in salaries and benefits of $16.4 million; occupancy costs of $11.3 million; and medical supplies and patient transportation costs of $2.9 million, due to growth in both the number of centers we operate and our patient base.

Cost of care, excluding depreciation and amortization was $203.6 million or 20% of total revenues for the nine-months ended September 30, 2021, an increase of $77.1 million or 61%, compared to $126.5 million or 20% of total revenues for the nine-months ended September 30, 2020. The increase was driven by increases in salaries and benefits of $40.8 million; occupancy costs of $22.6 million; and medical supplies and patient transportation costs of $9.3 million, due to growth in both the number of centers we operate and our patient base. Also, expenses related to our COVID-19 response (including our vaccination efforts) of $5.1 million were incurred for the nine-months ended September 30, 2021, but $3.5 million was offset by the recognition of the CARES Act provider relief funds.

Sales and marketing expense was $30.5 million or 8% of total revenues for the three-months ended September 30, 2021, an increase of $15.0 million or 97%, compared to $15.5 million or 7% of total revenues for the three-months ended September 30, 2020. The increase was driven by greater advertising spend of $9.4 million to drive new patients to our clinics and net headcount growth of $4.4 million. Sales and marketing expense for the three-months ended September 30, 2020 were partially depressed during the COVID-19 pandemic, which included the temporary suspension of community outreach roles and other marketing initiatives through September 2020, which drive new patients to our platform.

Sales and marketing expense was $80.5 million or 8% of total revenues for the nine-months ended September 30, 2021, an increase of $43.1 million, or 115%, compared to $37.4 million or 6% of total revenues for the nine-months ended September 30, 2020. The increase was driven by greater advertising spend of $28.2 million to drive new patients to our clinics and net headcount growth of $13.9 million. Sales and marketing expense for the nine-months ended September 30, 2020 were partially depressed during the COVID-19 pandemic due to the temporary suspension of community outreach roles and other marketing initiatives through September 2020, which drive new patients to our platform.

Corporate, general and administrative expense was $77.0 million or 20% of total revenues for the three-months ended September 30, 2021, an increase of $19.8 million, or 35%, compared to $57.2 million or 26% of total revenues for the three-months ended September 30, 2020. The increase was primarily driven by greater salaries and benefits of $14.5 million, which included an increase in stock and unit-based compensation expense of $7.7 million primarily due to the modification of vesting terms for pre-IPO equity awards that occurred post-IPO (2020 included approximately one and a half months of expense due to the timing of our IPO). As a result of being a public company, the insurance and legal expenses increased $4.0 million, and the remainder of the increases in corporate, general and administrative expense were primarily to support the continued growth of our business.

Corporate, general and administrative expense was $224.3 million or 22% of total revenues for the nine-months ended September 30, 2021, an increase of $111.8 million, or 99%, compared to $112.5 million or 18% of total revenues for the nine-months ended September 30, 2020. The increase was primarily driven by greater salaries and benefits of $97.2 million, which included an increase in stock and unit-based compensation expense of $82.5 million primarily due to pre-IPO equity issuances and the modification of vesting terms for pre-IPO equity awards that occurred post-IPO (2020 included approximately one and a half months of expense due to the timing of our IPO). As a result of being a public company, the insurance and legal expenses increased $10.0 million, and the remainder of the increases in corporate, general and administrative expense were primarily to support the continued growth of our business.

Depreciation and amortization expense was $4.5 million or 1% of total revenues for the three-months ended September 30, 2021, an increase of $1.6 million, or 55%, compared to $2.9 million or 1% of total revenues for the three-months ended September 30, 2020. Depreciation and amortization expense was $11.7 million or 1% of total revenues for the nine-months ended September 30, 2021, an increase of $3.6 million, or 44%, compared to $8.1 million or 1% of total revenues for the nine-months ended September 30, 2020. The increases were primarily due to capital expenditures purchased to support the continued growth of our business.

Other (Expense) Income

		For the three-months ended								Change						For the nine-months ended								Change
(dollars in millions)		September 30, 2021				September 30, 2020				$		%				September 30, 2021				September 30, 2020				$			%
Other income (expense):
Interest expense, net	$		(0.6	)	$		(3.9	)	$		3.3		(85	)%	$		(1.8	)	$		(8.8	)	$		7.0			(80	)%
Other			-				-				-		0	%			-				0.2				(0.2	)		(100	)%
Total other (expense) income	$		(0.6	)	$		(3.9	)	$		3.3		(85	)%	$		(1.8	)	$		(8.6	)			6.8			(79	)%

Interest expense was $0.6 million for the three-months ended September 30, 2021, a decrease of $3.3 million, or 85%, compared to $3.9 million for the three-months ended September 30, 2020. Interest expense was $1.8 million for the nine-months ended September 30, 2021, a decrease of $7.0 million, or 80%, compared to $8.8 million for the nine-months ended September 30, 2020. The decrease was primarily due to the payoff of outstanding debt and related interest from the Hercules Loan Agreement on August 11, 2020, slightly offset by the amortization of debt issuance and offering costs related to the Convertible Senior Notes issued in March 2021 and interest earned on investments made in debt securities from June through September 2021.

Non-GAAP Reconciliations

The following table provides a reconciliation of loss from operations, the most closely comparable GAAP financial measure, to platform contribution:

		For the three-months ended								For the nine-months ended
(dollars in millions)		September 30, 2021				September 30, 2020				September 30, 2021				September 30, 2020
Loss from operations	$		(109.3	)	$		(55.4	)	$		(272.5	)	$		(92.7	)
Depreciation and amortization			4.5				2.9				11.7				8.1
Corporate, general and administrative			77.0				57.2				224.3				112.5
Sales and marketing			30.5				15.5				80.5				37.4
Platform contribution	$		2.7		$		20.2		$		44.0		$		65.3

The following table provides a reconciliation of loss from operations, the most closely comparable GAAP financial measure, to patient contribution.

		For the three-months ended								For the nine-months ended
(dollars in millions)		September 30, 2021				September 30, 2020				September 30, 2021				September 30, 2020
Loss from operations	$		(109.3	)	$		(55.4	)	$		(272.5	)	$		(92.7	)
Other patient service revenue			(12.0	)			(6.1	)			(23.9	)			(17.7	)
Cost of care, excluding depreciation and amortization			76.3				43.2				203.6				126.5
Sales and marketing			30.5				15.5				80.5				37.4
Corporate, general and administrative expenses			77.0				57.2				224.3				112.5
Depreciation and amortization			4.5				2.9				11.7				8.1
Patient contribution	$		67.0		$		57.3		$		223.7		$		174.1

The following table provides a reconciliation of net loss, the most closely comparable GAAP financial measure, to Adjusted EBITDA:

		For the three-months ended								For the nine-months ended
(dollars in millions)		September 30, 2021				September 30, 2020				September 30, 2021				September 30, 2020
Net loss	$		(109.9	)	$		(59.3	)	$		(274.3	)	$		(101.3	)
Interest expense and other income			0.6				3.9				1.8				8.6
Depreciation and amortization			4.5				2.9				11.7				8.1
Stock and unit-based compensation			38.7				29.7				121.9				35.6
Transaction/offering related costs			1.8				-				3.6				-
Adjusted EBITDA	$		(64.3	)	$		(22.8	)	$		(135.3	)	$		(49.0	)

Liquidity and Capital Resources

Overview

We have funded our operations through the issuance of equity and debt. As of September 30, 2021, we had cash, restricted cash and cash equivalents of $258.3 million. Our restricted cash balance was $16.6 million as of September 30, 2021. Our cash and cash equivalents primarily consist of highly liquid investments in money market funds, commercial paper and cash. Since our inception and through September 30, 2021, we have generated significant operating losses from our operations as reflected in our accumulated deficit and negative cash flows from operations.

We expect to continue to incur operating losses and generate negative cash flows from operations for the foreseeable future due to the investments we intend to continue to make in expanding our operations and sales and marketing and due to additional general and administrative costs we expect to incur in connection with operating as a public company. As a result, we may require additional capital resources to execute strategic initiatives to grow our business.

We believe that the proceeds from the convertible debt offering described below are sufficient to satisfy our anticipated cash requirements, which consist of capital expenditures, working capital, and potential acquisition and strategic transactions, for the next twelve months even with the uncertainty arising from the COVID-19 pandemic. Our assessment of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement and involves risks and uncertainties. Our actual results and our future capital requirements could vary because of, many factors, including our growth rate, the timing and extent of spending to open new centers and expand into new markets and the expansion of sales and marketing activities.

We may in the future enter into arrangements to acquire or invest in complementary businesses, services and technologies, including intellectual property rights. We have based this estimate on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect. We may be required to seek additional equity or debt financing. In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us or at all. If we are unable to raise additional capital when desired, or if we cannot expand our operations or otherwise capitalize on our business opportunities because we lack sufficient capital, our business, results of operations, and financial condition would be adversely affected.

Convertible Senior Notes, Capped Call Transactions and Marketable Debt Securities

In March 2021, we issued $920.0 million aggregate principal amount of 0% Convertible Senior Notes (the “Convertible Senior Notes”), including the exercise in full of the initial purchasers’ option to purchase up to an additional $120.0 million, in a private offering exempt from registration under the Securities Act of 1933. The Convertible Senior Notes are governed by an indenture (“Indenture”),

dated as of March 16, 2021, between the Company and U.S. Bank National Association, as trustee. Total proceeds realized from the sale of the Convertible Senior Notes, net of debt issuance and offering costs of $22.1 million, were $897.9 million. The Convertible Senior Notes will not bear regular interest and the principal amount of the Convertible Senior Notes will not accrete. We will pay special interest, if any, as the sole remedy, at our election, relating to the failure to comply with our reporting and certain other obligations under the Indenture for the first 365 days after the occurrence of such an event. The Convertible Senior Notes are general senior, unsecured obligations of the Company and will mature on March 15, 2026, unless earlier redeemed, repurchased or converted. Refer to Note 8, Convertible Senior Notes, of the Notes to Consolidated Financial Statements included in this quarterly report.

We used approximately $123.6 million of the net proceeds to pay the cost of the capped call transactions. We intend to use the remainder of the net proceeds for general corporate purposes, which may include working capital, capital expenditures, and potential acquisitions and strategic transactions.

The Indenture contains customary covenants related to timely filings and reporting, and customary events of default. As of September 30, 2021, we were in compliance with all covenants under the Indenture.

Through September 2021, the Company invested $817.6 million of the proceeds from the Convertible Senior Notes in marketable debt securities.

Changes in Cash Flows

The following table presents a summary of our consolidated cash flows from operating, investing and financing activities for the periods indicated.

		For the nine-months ended
(dollars in millions)		September 30, 2021				September 30, 2020				$ Change			% Change
Net cash used in operating activities	$		(125.9	)	$		(22.3	)	$		(103.6	)		465	%
Net cash used in investing activities			(815.9	)			(12.6	)			(803.3	)		6375	%
Net cash provided by financing activities			780.4				477.7				302.7			63	%
Net change in cash	$		(161.4	)	$		442.8		$		(604.2	)		(136	)%

Operating Activities

For the nine-months ended September 30, 2021, net cash used in operating activities was $125.9 million, an increase of $103.6 million in cash outflows compared to net cash used in operating activities of $22.3 million for the nine-months ended September 30, 2020. The principal contributors to the year-over-year change in the operating cash flows were as follows:

•

A net change of $70.3 million in net loss and non-cash charges and credits, primarily due to an increase in net loss for the business, as noted above under “Results of Operations” offset by increased stock and unit-based compensation, non-cash operating lease charges and depreciation and amortization.

•

An increase of $33.3 million in cash outflows related to operating assets and liabilities primarily resulting from:

Changes in accounts receivable due to the timing of collections and the growth in the number of at-risk patients;

Changes in liability for unpaid claims due to the growth in the number of at-risk patients;

Changes in accounts payable and operating lease liabilities due to the timing of payments to our vendors; and

Changes in accrued compensation and benefits due to the payment of employee bonuses.

Investing Activities

For the nine-months ended September 30, 2021, net cash used in investing activities was $815.9 million, an increase of $803.3 million in cash outflows compared to net cash used in investing activities of $12.6 million for the nine-months ended September 30, 2020 primarily due to the investment of $817.6 million in marketable debt securities and increased capital expenditures for the continued growth in new centers, offset by the proceeds from sales and maturities of marketable debt securities of $43.7 million.

Financing Activities

Cash provided by financing activities for the nine-months ended September 30, 2021 was $780.4 million primarily due to $897.9 million in proceeds from the issuance of the Convertible Senior Notes, partially offset by cash outflows of $123.6 million related to the capped call transactions completed in March 2021. Cash provided by financing activities for the nine-months ended September 30, 2020 of $477.7 million was due to net IPO proceeds of $352.4 million, proceeds of $224.4 million from the issuance of redeemable investor units, partially offset by the payment for repurchases of units of $19.4 million as a result of the completed tender offer in 2020 and $85.6 million in debt payments.

Contractual Obligations and Commitments

As of September 30, 2021, our contractual obligations are summarized in the table below.

(dollars in millions)		Total			Less than 1 Year			1-3 Years			3-5 Years			More than 5 Years
Convertible Senior Notes	$		920.0	$		-	$		-	$		920.0	$		-
Operating Lease Obligations			211.8			23.2			43.1			38.2			107.3
Other Obligations			85.6			5.3			21.1			19.9			39.3
Total	$		1,217.4	$		28.5	$		64.2	$		978.1	$		146.6

Off-Balance Sheet Obligations

As of September 30, 2021, we did not have any significant off-balance sheet arrangements.

Critical Accounting Policies and Estimates

Our condensed consolidated financial statements and accompanying notes have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the amounts reported amounts of assets, liabilities, revenue and expenses, and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances. We evaluate our estimates and assumptions on an ongoing basis. The future effects of the COVID-19 pandemic on our results of operations, cash flows and financial position are unclear, however, we believe we have made reasonable estimates and assumptions in preparing the financial statements. Actual results may differ from these estimates. To the extent that there are material differences between these estimates and our actual results, our future financial statements will be affected.

For a description of our policies regarding our critical accounting policies, see “Critical Accounting Policies” in our Annual Report on Form 10-K for the year ended December 31, 2020. There have been no significant changes in our critical accounting estimate policies or methodologies to our condensed consolidated financial statements other than as referenced in Note 2 of our consolidated financial statements of this Quarterly Report on Form 10-Q.

Recently Adopted Accounting Pronouncements

For a description of recently issued accounting pronouncements, see Note 2 to our consolidated financial statements of this Quarterly Report on Form 10-Q.

Emerging Growth Company Status

We currently meet the definition of an emerging growth company, as defined in the Jumpstart Our Business Startups Act (JOBS Act). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. We elected to use this extended transition period until we are no longer an emerging growth company or until we affirmatively and irrevocably opt out of the extended transition period. Based on the aggregate worldwide market value of our shares of common stock held by our non-affiliate stockholders as of June 30, 2021, we expect that we will become a “large accelerated filer” and lose emerging growth status beginning with our Annual Report on Form 10-K for the year ended December 31, 2021. We will also no longer be exempt from the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002, as amended, and our independent registered public accounting firm will evaluate and report on the effectiveness of internal control over financial reporting.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

For information regarding our exposure to certain market risks, see “Quantitative and Qualitative Disclosures about Market Risk,” in Part II, Item 7A of our Annual Report on Form 10-K for the year ended December 31, 2020. There have been no material changes in our market risk exposures for the nine-months ended September 30, 2021, as compared to those discussed in our Annual Report on Form 10-K for the year ended December 31, 2020, other than as discussed below.

Interest Rate Sensitivity

We had cash and cash equivalents of $258.3 million as of September 30, 2021, compared to $419.7 million as of December 31, 2020, held primarily in cash deposits and money market funds for working capital purposes.

We had marketable debt securities of $771.3 million as of September 30, 2021, compared to $0.0 million as of December 31, 2020, consisting of U.S. Treasury obligations, corporate bonds, available-for-sale securities and others. Our investments are made for capital preservation purposes. We do not enter into investments for trading or speculative purposes. All our investments are denominated in U.S. dollars.

Our cash and cash equivalents, marketable debt securities and debt are subject to market risk due to changes in interest rates. Fixed rate securities may have their market value negatively impacted due to a rise in interest rates, while floating rate securities may produce less income than expected if interest rates fall. Due in part to these factors, our future investment income may fall short of expectation due to changes in interest rates or we may suffer losses in principal if we are forced to sell securities that decline in market value due to changes in interest rates.

We do not believe that an increase or decrease in interest rates of 100 basis points would have a material effect on our business, financial condition or results of operations.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that these disclosure controls and procedures were effective as of September 30, 2021.

Changes to our Internal Controls over Financial Reporting

There were no material changes in our internal control over financial reporting during the nine-months ended September 30, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. As a result of the COVID-19 pandemic, certain employees began working remotely in March 2020. We have not identified any material changes in our internal control over financial reporting as a result of these changes to the working environment, in part because our internal control over financial reporting was designed to operate in a remote working environment. We are continually monitoring and assessing the COVID-19 situation to determine any potential impact on the design and operating effectiveness of our internal controls over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

See Note 10, Commitments – Litigation and Contingencies to Oak Street Health, Inc.’s Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q.

ITEM 1A. RISK FACTORS

There have been no material changes to the risk factors disclosed under Part I, Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2020 and our Form 10-Q for the quarters ended March 31, 2021 and June 30, 2021, other than those noted below.

Risks Related to our Business

We have been in the past and may continue to be subject to legal proceedings and litigation, including intellectual property and privacy disputes, which are costly to defend and could materially harm our business and results of operations.

We have been in the past and may continue to be party to lawsuits and legal proceedings in the normal course of business. These matters are often expensive and disruptive to normal business operations. We may face allegations, lawsuits and regulatory inquiries, audits and investigations regarding data privacy, security, labor and employment, consumer protection and intellectual property infringement, including claims related to privacy, patents, publicity, trademarks, copyrights and other rights. We may also face allegations or litigation related to our acquisitions, securities issuances or business practices, including public disclosures about our business. Litigation and regulatory proceedings may be protracted and expensive, and the results are difficult to predict. Certain of these matters may include speculative claims for substantial or indeterminate amounts of damages and include claims for injunctive relief. Additionally, our litigation costs could be significant. Adverse outcomes with respect to litigation or any of these legal proceedings may result in significant settlement costs or judgments, penalties and fines, or require us to modify our services or require us to stop serving certain patients or geographies, all of which could negatively impact our geographical expansion and revenue growth. We may also become subject to periodic audits, which would likely increase our regulatory compliance costs and may require us to change our business practices, which could negatively impact our revenue growth. Managing legal proceedings, litigation and audits, even if we achieve favorable outcomes, is time-consuming and diverts management’s attention from our business.

The results of regulatory proceedings, litigation, claims, and audits cannot be predicted with certainty, and determining reserves for pending litigation and other legal, regulatory and audit matters require significant judgment. There can be no assurance that our expectations will prove correct, and even if these matters are resolved in our favor or without significant cash settlements, these matters, and the time and resources necessary to litigate or resolve them, could harm our reputation, business, financial condition, results of operations and the market price of our common stock.

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.

For example, on November 1, 2021, the Company received a civil investigative demand (“CID”) from the United States Department of Justice. According to the CID, the Department of Justice is investigating whether the Company may have violated the False Claims Act, 31 U.S.C. §§ 3729-3722. The CID requests certain documents and information related to the Company’s relationships with third-party marketing agents and related to the Company’s provision of free transportation to federal health care beneficiaries and requests information and documents related to such matters. We intend to cooperate with the Department of Justice and produce information and documentation in response to the CID. We are currently unable to predict the outcome of this investigation or whether litigation is probable. Regardless of the outcome, this inquiry has the potential to have an adverse impact on us due to any related defense and settlement costs, diversion of management resources, and other factors. See Note 10, Commitments and Contingencies.

Furthermore, our business exposes us to potential medical malpractice, professional negligence or other related actions or claims that are inherent in the provision of healthcare services. These claims, with or without merit, could cause us to incur substantial costs, and could place a significant strain on our financial resources, divert the attention of management from our core business, harm our reputation and adversely affect our ability to attract and retain patients, any of which could have a material adverse effect on our business, financial condition and results of operations.

Although we maintain third-party professional liability insurance coverage, it is possible that claims against us may exceed the coverage limits of our insurance policies. Even if any professional liability loss is covered by an insurance policy, these policies typically have substantial deductibles for which we are responsible.

Professional liability claims in excess of applicable insurance coverage could have a material adverse effect on our business, financial condition and results of operations. In addition, any professional liability claim brought against us, with or without merit, could result in an increase of our professional liability insurance premiums. Insurance coverage varies in cost and can be difficult to obtain, and we cannot guarantee that we will be able to obtain insurance coverage in the future on terms acceptable to us or at all. If our costs of insurance and claims increase, then our earnings could decline.

Risks Related to Regulation

If we fail to adhere to all of the complex government laws and regulations that apply to our business, we could suffer severe consequences that could have a material adverse effect on our business, results of operations, financial condition, cash flows, reputation and stock price.

Our operations are subject to extensive federal, state and local government laws and regulations, such as:

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Medicare and Medicaid reimbursement rules and regulations;

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federal and state anti-kickback laws, which prohibits the knowing and willful offer, payment, solicitation or receipt of any bribe, kickback, rebate or other remuneration for referring an individual, in return for ordering, leasing, purchasing or recommending or arranging for or to induce the referral of an individual or the ordering, purchasing or leasing of items or services covered, in whole or in part, by any federal healthcare program, such as Medicare and Medicaid;

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the Self-Referral Law and analogous state self-referral prohibition statutes, which, subject to limited exceptions, prohibits physicians from referring Medicare or Medicaid patients to an entity for the provision of certain “designated health services” if the physician or a member of such physician’s immediate family has a direct or indirect financial relationship (including an ownership interest or a compensation arrangement) with an entity, and prohibit the entity from billing Medicare or Medicaid for such “designated health services”;

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the FCA and associated regulations, that imposes civil and criminal liability on individuals or entities that knowingly submit false or fraudulent claims for payment to the government or knowingly making, or causing to be made, a false statement in order to have a false claim paid, including qui tam or whistleblower suits;

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the Civil Monetary Penalty statute and associated regulations, which authorizes the government agent to impose civil money penalties, an assessment, and program exclusion for various forms of fraud and abuse involving the Medicare and Medicaid programs;

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federal and state laws regarding the collection, use and disclosure of patient health information (e.g., HIPAA) and the storage, handling, shipment, disposal and/or dispensing of pharmaceuticals and blood products and other biological materials and many other applicable state and federal laws and requirements;

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state and federal statutes and regulations that govern workplace health and safety;

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federal and state laws and policies that require healthcare providers to maintain licensure, certification or accreditation to enroll and participate in the Medicare and Medicaid programs, to report certain changes in their operations to the agencies that administer these programs and, in some cases, to re-enroll in these programs when changes in direct or indirect ownership occur; and

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federal and state laws pertaining to the provision of services by nurse practitioners and physician assistants certain settings, physician supervision of those services, and reimbursement requirements that depend on the types of services provided and documented and relationships between physician supervisors and nurse practitioners and physician assistants.

In addition to the above laws, Medicare and Medicaid regulations, manual provisions, local coverage determinations, national coverage determinations and agency guidance also impose complex and extensive requirements upon healthcare providers. Moreover, the various laws and regulations that apply to our operations are often subject to varying interpretations and additional laws and regulations potentially affecting providers continue to be promulgated that may impact us. A violation or departure from any of the legal requirements implicated by our business may result in, among other things, government audits, lower reimbursements, significant fines and penalties, the potential loss of certification, recoupment efforts or voluntary repayments.

These legal requirements are civil, criminal and administrative in nature depending on the law or requirement.

We endeavor to comply with all legal requirements. We further endeavor to structure all of our relationships with physicians and providers to comply with state and federal anti-kickback physician and Stark laws and other applicable healthcare laws. We utilize considerable resources to monitor laws and regulations and implement necessary changes. However, the laws and regulations in these areas are complex, changing and often subject to varying interpretations. As a result, there is no guarantee that we will be able to adhere to all of the laws and regulations that apply to our business, and any failure to do so could have a material adverse impact on our business, results of operations, financial condition, cash flows and reputation. For example, if an enforcement agency were to challenge the level of compensation that we pay our medical directors or the number of medical directors whom we engage, or otherwise challenge these arrangements, we could be required to change our practices, face criminal or civil penalties, pay substantial fines or otherwise experience a material adverse impact on our business, results of operations, financial condition, cash flows and reputation as a result. Similarly, we may face penalties under the FCA, the federal Civil Monetary Penalty statute or otherwise related to failure to report and return overpayments within 60 days of when the overpayment is identified and quantified. These obligations to report and return overpayments could subject our procedures for identifying and processing overpayments to greater scrutiny. We have made investments in resources to decrease the time it takes to identify, quantify and process overpayments, and may be required to make additional investments in the future.

Additionally, the federal government has used the FCA to prosecute a wide variety of alleged false claims and fraud allegedly perpetrated against Medicare, Medicaid and other federally funded health care programs. Moreover, amendments to the federal Anti-Kickback Statute in the ACA make claims tainted by anti-kickback violations potentially subject to liability under the FCA, including qui tam or whistleblower suits. The penalties for a violation of the FCA range from $5,500 to $11,000 (adjusted for inflation) for each false claim plus three times the amount of damages caused by each such claim which generally means the amount received directly or indirectly from the government. On June 19, 2020, the DOJ issued a final rule announcing adjustments to FCA penalties, under which the per claim range increases to a range from $11,665 to $23,331 per claim, so long as the underlying conduct occurred after November 2, 2015. Given the high volume of claims processed by our various operating units, the potential is high for substantial penalties in connection with any alleged FCA violations.

In addition to the provisions of the FCA, which provide for civil enforcement, the federal government can use several criminal statutes to prosecute persons who are alleged to have submitted false or fraudulent claims for payment to the federal government.

If any of our operations are found to violate these or other government laws or regulations, we could suffer severe consequences that would have a material adverse effect on our business, results of operations, financial condition, cash flows, reputation and stock price, including:

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suspension or termination of our participation in government payment programs;

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refunds of amounts received in violation of law or applicable payment program requirements dating back to the applicable statute of limitation periods;

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loss of our required government certifications or exclusion from government payment programs;

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loss of our licenses required to operate healthcare facilities or administer pharmaceuticals in the states in which we operate;

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criminal or civil liability, fines, damages or monetary penalties for violations of healthcare fraud and abuse laws, including the federal Anti-Kickback Statute, Civil Monetary Penalties Law, Stark Law and FCA, or other failures to meet regulatory requirements;

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enforcement actions by governmental agencies and/or state law claims for monetary damages by patients who believe their PHI has been used, disclosed or not properly safeguarded in violation of federal or state patient privacy laws, including HIPAA and the Privacy Act of 1974;

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mandated changes to our practices or procedures that significantly increase operating expenses;

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imposition of and compliance with corporate integrity agreements that could subject us to ongoing audits and reporting requirements as well as increased scrutiny of our billing and business practices which could lead to potential fines, among other things;

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termination of various relationships and/or contracts related to our business, including joint venture arrangements, medical director agreements, real estate leases and consulting agreements with physicians; and

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harm to our reputation which could negatively impact our business relationships, affect our ability to attract and retain patients and physicians, affect our ability to obtain financing and decrease access to new business opportunities, among other things.

We are, and may in the future be, a party to various lawsuits, demands, claims, qui tam suits, governmental investigations and audits (including investigations or other actions resulting from our obligation to self-report suspected violations of law) and other legal matters, any of which could result in, among other things, substantial financial penalties or awards against us, mandated refunds, substantial payments made by us, required changes to our business practices, exclusion from future participation in Medicare, Medicaid and other healthcare programs and possible criminal penalties, any of which could have a material adverse effect on our business, results of operations, financial condition, cash flows and materially harm our reputation.

We may in the future be subject to investigations and audits by state or federal governmental agencies and/ or private civil qui tam complaints filed by relators and other lawsuits, demands, claims and legal proceedings, including investigations or other actions resulting from our obligation to self-report suspected violations of law.

Responding to subpoenas, investigations and other lawsuits, claims and legal proceedings as well as defending ourselves in such matters will continue to require management’s attention and cause us to incur significant legal expense. Negative findings or terms and conditions that we might agree to accept as part of a negotiated resolution of pending or future legal or regulatory matters could result in, among other things, substantial financial penalties or awards against us, substantial payments made by us, harm to our reputation, required changes to our business practices, exclusion from future participation in the Medicare, Medicaid and other healthcare programs and, in certain cases, criminal penalties, any of which could have a material adverse effect on us. It is possible that criminal proceedings may be initiated against us and/or individuals in our business in connection with investigations by the federal government.

We, our affiliated physicians and the facilities in which we operate are subject to various federal, state and local licensing and certification laws and regulations and accreditation standards and other laws, relating to, among other things, the adequacy of medical care, equipment, privacy of patient information, physician relationships, personnel and operating policies and procedures. Failure to comply with these licensing, certification and accreditation laws, regulations and standards could result in our services being found non-reimbursable or prior payments being subject to recoupment, requirements to make significant changes to our operations and can give rise to civil or, in extreme cases, criminal penalties. We routinely take the steps we believe are necessary to retain or obtain all requisite licensure and operating authorities. While we have made reasonable efforts to substantially comply with federal, state and local licensing and certification laws and regulations and standards as we interpret them, we cannot assure you that agencies that administer these programs will not find that we have failed to comply in some material respects.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Unregistered Sales of Equity Securities

Information regarding the issuance of the Convertible Senior Notes was previously provided in the Current Report on Form 8-K filed with the SEC on March 16, 2021, and therefore is not required to be furnished herein.

Use of Proceeds

Initial Public Offering

On August 10, 2020, we completed the IPO of our common stock pursuant to a Registration Statement (File No. 333-239818) which was declared effective on August 5, 2020. There have been no material change in the planned use of proceeds from the IPO from those that were described in the final prospectus filed pursuant to Rule 424(b) under the Securities Act and our Annual Report on Form 10-K for the year ended December 31, 2020.

ITEM 3. DEFAULT UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS


Exhibit No.		Description
31.1		Certification of the Chief Executive Officer pursuant to Exchange Act Rules Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2020, filed herewith.
31.2		Certification of the Chief Financial Officer pursuant to Exchange Act Rules Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2020, filed herewith.
32.1*		Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, filed herewith.
32.2*		Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, filed herewith.
101.INS		Inline XBRL Instance Document
101.SCH		Inline XBRL Taxonomy Extension Schema Document
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document
104		Cover Page Interactive Data File (formatted in Inline XBRL)

The certifications furnished in Exhibit 32.1 and Exhibit 32.2 hereto are deemed to accompany this Quarterly Report on Form 10-Q and will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, except to the extent that the registrant specifically incorporates it by reference.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	Oak Street Health, Inc. (Registrant)

Date: November 8, 2021	By:	/s/Timothy Cook
		Timothy Cook
		Chief Financial Officer (Principal Financial Officer)