News | April 19, 2017

Hospital Merger And Acquisition Activity Continues To Climb, According To Kaufman Hall Analysis

Three Large-scale Mergers Announced in First Quarter

The number of hospital and health system partnership transactions continued an upward trajectory in the first quarter of 2017, with an 8 percent increase from 25 to 27 transactions compared to the first quarter of 2016, according to the latest analysis by Kaufman, Hall & Associates, LLC, a leading provider of strategic, capital, financial, and transaction advisory services and software tools. The increase follows another year of continued growth, with transactions climbing from 66 announced deals in 2010 to 102 in 2016. The overall trend illustrates that healthcare organizations across the country continue to seek new efficiencies and capabilities for a transforming industry.

The first quarter was particularly notable for an uptick in transactions among large organizations, with three announced deals targeting organizations with nearly $1B or more in revenues. 2016 saw four such deals announced in 12 months. The four announced deals in the first quarter all involved not-for-profit organizations, with the largest of the three being the merger of Beth Israel Deaconess Medical Center and Lahey Health in Massachusetts. Also announced were affiliations between PinnacleHealth System and the University of Pittsburgh Medical Center (UPMC), and Fairview Health Services and HealthEast Care System.

More transactions among larger and like-sized organizations likely will be seen in the coming months, according to Anu Singh, Managing Director at Kaufman Hall. "Hospitals and health system executives are looking for strategic opportunities to ensure the continued growth and success of their organizations amongst disruptive forces, including innovative competitors, declining payments, flat or decreasing inpatient volumes, and increasing price sensitivities among consumers," said Mr. Singh. "As the number of independent hospitals declines, organizations are seeking to build new capabilities and economies of scale through partnerships."

Of the transactions announced in the first quarter of 2017, six involved for-profit acquirers and 21 involved not-for-profit acquirers. In addition to the deal with UPMC, PinnacleHealth announced its acquisition of four Community Health Systems hospitals, and an affiliation with Hanover Hospital. In addition to HealthEast, Fairview Health Services also announced its acquisition of Grand Itasca Clinic & Hospital. Of all states, Pennsylvania saw the most activity, with five announced transactions in the first quarter.

About Kaufman Hall
Kaufman Hall provides management consulting and software to help organizations realize sustained success amid changing market conditions. Since 1985, Kaufman Hall has been a trusted advisor to boards and executive management teams, helping them incorporate proven methods into their strategic planning and financial management processes, and quantify the financial impact of their plans and strategic decisions to consistently achieve their goals.

Kaufman Hall services use a rigorous, disciplined, and structured approach that is based on the principles of corporate finance. The breadth and integration of our advisory services are unparalleled, encompassing strategy; financial and capital planning; debt and derivatives-related financial transactions; capital allocation and decision making; and mergers, acquisitions, partnerships, and joint ventures.

Kaufman Hall's Axiom Software provides sophisticated, flexible performance management solutions that empower finance professionals to analyze results, model the future, and optimize organizational decision making. Solutions for long-range planning, budgeting and forecasting, reporting and analytics, consolidations, capital planning, and profitability and cost management are delivered on a single integrated software platform. Kaufman Hall's Peak Software empowers healthcare organizations with clinical benchmarks, data, and analytics to provide a higher quality of care for optimized performance and improved patient outcomes.

SOURCE: Kaufman Hall