The number of hospital mergers and acquisitions declined in 2021, however the size of the transactions were larger, according to a new analysis from Kaufman Hall.
Among the factors behind the changes: fewer independent, unaffiliated community hospitals seeking partnerships.
“Organizations are focused on partnerships with a strong strategic rationale and have become increasingly selective in identifying potential partners,” Kaufman Hall said in the report. “They seek partnerships that will have a transformative impact through the addition of new capabilities, enhanced intellectual capital, and access to new markets or services.”
Last year had the largest percentage of “mega merger” transactions in the last six years at 16.3%, nearly double the 8.9% in 2020. The eight so-called mega transactions involved sellers or smaller partners with more than $1 billion in annual revenue, according to KH.
In more than 1 out of every 10 transactions, the smaller partner had a credit rating of A- or higher in 2021, according to KH. In that same year, the average annual revenue of these smaller partners was significantly higher compared to 2020 ($619 million vs. $388 million, respectively).
Meanwhile, the role of not-for-profit health systems as both buyers and sellers grew as a percentage of total transactions in 2021, representing 87% of announced transactions, compared with 81% in 2020.
Overall, transactions involving rural or urban/rural sellers increased to 31% of deals, compared to 24% in 2020.
Finally, the number of financially troubled sellers remained flat year-over-year, comprising 16% of announced transactions.
Read the entire analysis here.