Dive Brief:
- Hospital and health system merger and acquisition activity remained consistent in the first quarter of 2023 with 15 healthcare industry transactions, a slight drop from 17 in the fourth quarter of 2022, according to a new report from hospital consultancy Kaufman Hall. The 15 transactions comprised $12.4 billion in total transacted revenue, down from the high of $12.7 billion in 2018.
- Mergers and acquisitions are trending toward cross-regional partnerships, and the size of the smaller party in mergers is increasing to between $250 million and $750 million in annual revenue, according to the report.
- Realignment of for-profit health system portfolios continued in the first quarter of 2023, particularly for high financial and operational performing health systems.
Dive Insight:
Kaufman Hall predicted a “new wave of transaction activity” as operational and financial headwinds are increasingly cited in announced transactions.
The report highlighted a trend of larger hospital mergers, which could be affected by hospital “operational and financial headwinds,” including frontline staff stress and post-pandemic inflation as well as a growing number of cross-regional partnerships.
“What is increasingly clear is that a new type of post-pandemic activity is taking shape, as mid-sized regional health systems seek partners while they remain in a position of financial strength, with some looking to balance their desire to influence local healthcare delivery with utilizing the capabilities and resources of larger health systems,” Kaufman Hall said.
The report also noted that partnerships will play a key role in future growth for health systems, with healthcare organizations seeking complementary partnerships as they analyze merger prospects.
“As organizations seek a path to long-term sustainability in this new environment, we anticipate that partnerships between health systems will be an important component of that effort,” according to the report.
Nonprofit organizations are also ramping up deal activity, with 14 out of 15 buyers in announced Q1 transactions classified as a nonprofit health system.
Meanwhile, for-profit health systems are realigning their portfolios.
For example, Community Health System announced earlier this year that it would sell two hospitals and a regional medical center to Novant Health and Vandalia Health, respectively.
The report also noted failed mergers in the first quarter of 2023, including SUNY Upstate Medical University and Crouse Health System’s proposed merger, which was called off after the Federal Trade Commission warned that the two were close competitors.
