Less than three years after CVS Health (NYSE: CVS) acquired Oak Street Health for $10.6 billion, the health care giant plans to shutter some Oak Street locations and temper its growth over the next few years.

CVS will close 16 of Oak Street’s locations in 2026, reports say. The change in its Oak Street strategy is because of an evolving marketplace, Brian Newman, executive vice president and chief financial officer, said on the company’s third-quarter earnings call. 

“We made the difficult decision to close underperforming clinics where we do not see a reasonable path to sustainable margins,” Newman said. “To be clear, we view value-based care as a critical component to our Medicare strategy and expect the actions we are taking to support improved financial performance beginning next year.”

Woonsocket, Rhode Island-based CVS acquired Oak Street, a value-based primary care provider serving Medicare-eligible patients, in 2023. Chicago-based Oak Street is a primary care provider that does some work in the home, and the acquisition represented a trend toward primary care and home-based services. 

Last year, Oak Street agreed to pay $60 million to the U.S. Department of Justice (DOJ) to resolve claims that the provider paid kickbacks to third-party insurance agents in exchange for the recruitment of patients to its primary care clinics. In August, company leaders said that Oak Street had experienced persistently elevated medical costs during Q2. 

The company’s decision to put a damper on Oak Street’s growth trajectory resulted in a goodwill impairment charge of approximately $5.7 billion during the third quarter, Newman said on the Q3 call.

CVS saw increased patient growth from Oak Street and increased volumes at its dedicated home-based care play, Signify Health (NYSE: SGFY). Signify has been a bright spot for CVS over previous quarters and has previously offset pressures experienced by Oak Street.

Dallas-based Signify is a value-based platform that offers home health risk assessments and other services. CVS acquired the company in 2023 for $8 billion. 

Oak Street and Signify bolstered the company’s health care delivery revenue, according to Newman. He reported that health care delivery revenues grew 25% year-over-year, excluding the impact of the company’s exit from its CVS Accountable Care business earlier in the year.