Irving Levin finds decline in healthcare merger and acquisition activity

Contradicting other analysts’ findings, as well as popular expectations, Irving Levin Associates of Norwalk, Connecticut, has concluded that merger and acquisition activity in the healthcare sector was actually down last year.

What made 2013 such a difficult year to crunch the numbers on was the impact of two unusually large public company acquisitions — Community Health Systems’ $7.6 billion purchase of Health Management Associates and Tenet Healthcare’s $4.3 billion purchase of Vanguard Health Systems — which together totaled more than one third of all the hospitals sold in 2013. Because of these deals, how an analyst chose to measure activity would determine if transactions were up or down for the year.

If one measured either in terms of total dollar value or in terms of licensed hospital beds, merger and acquisition activity was up. By Irving Levin’s measures, a 1.8 percent increase in total dollar value of deals and a five-year high in terms of total number of beds. However, when counting just the number of individual deals, merger and acquisition activity was down. By Irving Levin’s measures, the hospital sector declined 21.5 percent in deal volume and the managed care sector declined 46 percent. The number of 2013 deals in the behavioral health and physician medical group sectors were similar to the number of deals in 2012. The only sectors that were up in numbers of deals were long-term care and home health/hospice.

“Without the strong performance of the long-term care sector, which had a 20 percent increase in transaction volume in 2013, health care services would have had a less robust year,” concluded Lisa Phillips, editor of the 2014 Health Care Services Acquisition Report, in a press release.

Irving Levin’s numbers contradict those found by Skokie, Illinois-based consulting firm Kaufman Hall in a report it released a month ahead of the Irving Levin report. Kaufman Hall counted a dozen more deals than Irving Levin did in the hospital and healthcare system sector, and came to the opposite conclusion on merger and acquisition activity. Read more here.