News | July 19, 2017

Hospital Merger And Acquisition Activity Rising Among Larger Organizations, According To Kaufman Hall Analysis

Six Large-scale Mergers Announced in First Half of 2017

Partnership transactions among hospitals and health systems rose 15 percent in the second quarter of 2017, from 27 to 31 transactions compared to the second quarter of 2016. Fifty-eight transactions have been announced so far this year, up from 52 this time last year, according to the latest analysis by Kaufman, Hall & Associates, LLC, a leading provider of strategic, capital, financial, and transaction advisory services and software tools.

Transactions among large organizations with nearly $1 billion or more in revenues are on the rise, with a total of six such transactions announced in the first half of 2017. Only four such deals were announced in all of 2016. The three announced in the second quarter include the merger of Steward Health Care and IASIS Healthcare, a deal that would make Steward the country’s largest private for-profit hospital operator with 36 hospitals in 10 states. Also announced were the acquisition of Providence, Rhode Island-based Care New England Health System by Boston-based Partners HealthCare, and the merger of Greenville Health System with Palmetto Health in South Carolina.

The uptick in transactions among larger and like-sized organizations is likely to continue in the months ahead, says Patrick Allen, Managing Director at Kaufman Hall. “As the field of potential partners evolves, leaders of many larger health systems are thinking strategically about how best to build the scale and capabilities needed to remain competitive in a rapidly changing healthcare environment,” he said. “Traditional providers face an array of uncertainties, from changing federal healthcare policies to shifting payment and care delivery models. Health systems across the country are looking to grow and transform their operations to ensure stability in the face of turbulent times.”

Of the transactions announced in the second quarter of 2017, eight involved for-profit acquirers, 22 involved not-for-profit acquirers, and one was a for-profit/not-for-profit combination. Pennsylvania and Texas saw the most activity, with four announced transactions each in the second quarter. Tennessee-based Community Health Systems was involved in four transactions, and HCA was involved in three. In Massachusetts, five hospitals have announced plans to merge as one large, regional system. The hospitals involved are Anna Jaques Hospital, Beth Israel Deaconess Medical Center, Lahey Health, New England Baptist Hospital, and Mount Auburn Hospital.

SOURCE: Kaufman, Hall & Associates, LLC