Health System M&A Up 55% Since 2010
The number of hospital and health system mergers and acquisitions per year has soared since 2010, according to a recent analysis from Skokie, Illinois-based management consulting services firm Kaufman Hall. The increase, the firm notes, is likely related to the implementation of the Affordable Care Act (ACA) in 2010.
Specifically, there were 66 announced hospital and health system partnership transactions in 2010 and 102 announced deals in 2016, the analysis revealed. That’s a 55% increase in seven years.
The biggest jump over the seven-year period, meanwhile, took place between 2010 and 2011, when the number of hospital and health system transactions rose from 66 to 88.
For the analysis, Kaufman Hall drew from its database of reported combinations of acute-care hospitals in the United States, including mergers, acquisitions, member substitutions and joint ventures.
The primary reason behind hospital and health system partnerships has changed in recent years.
In years past, larger hospitals and health systems looking to expand through acquisitions typically targeted smaller organizations that were experiencing financial difficulty, the analysis notes. In recent years, however, hospital and health system mergers, acquisitions and partnerships have been driven primarily by the national transition to value-based care.
“Decisions about whether to pursue partnerships increasingly are strategic in nature, rather than purely financial,” Patrick Allen, managing director at Kaufman Hall, said in a press release.
Today’s hospitals and health systems are confronted by a variety of disruptive forces, including flat-to-declining inpatient utilization, increasing demand for virtual and ambulatory care, rising price sensitivity and consumerism, and the emergence of non-traditional competitors, Allen explained.
“As the pool of smaller, independent hospitals and health systems shrinks, we are seeing more transactions among larger, more stable organizations that are opting to partner to help meet evolving demands and bolster market essentiality for the new health care era,” he added.
Between 2010 and 2016, Texas experienced the most hospital and health system partnership transactions at 17; New York came in second with six.
The largest deal announced during the seven-year analysis period was the potential merger of San Francisco-based Dignity Health and Englewood, Colorado-based Catholic Health Initiatives. The merger, if completed, would result in the country’s biggest not-for-profit health system, according to Kaufman Hall.
Kaufman Hall did not include long-term acute-care hospital, specialty hospital or surgical center transactions; affiliations or management service agreements; minor asset sales from closed hospitals; or international transactions in its analysis.
Written by Mary Kate Nelson