Healthcare deals stall in second quarter of 2022
Healthcare deals stalled during the second quarter of 2022, but the baker’s dozen transactions recorded during the three-month period were offset by a high percentage of mega deals.
That’s according to the latest from Kaufman Hall, which characterized mega deals as those in which the smaller party or seller has annual revenues in excess of $1 billion. During the second quarter this year, the average size of the smaller party reached a record-setting $1.5 billion this quarter, Kaufman Hall reported.
There were 13 deals recorded during the second quarter of 2022, which is consistent with the second quarter of 2021 (14 transactions), but below the years leading up to 2020. There were two mega deals during the quarter –– Advocate Aurora Health/Atrium Health (smaller party revenue of $12.9 billion) and MercyOne/Trinity Health (smaller party revenue of $3.0 billion) –– and two other transactions that involved a smaller party with annual revenues in excess of $500 million –– Bellin Health System/Gundersen Health System (smaller party revenue of $800 million) and George Washington University Hospital/Universal Health Services (smaller party revenue of $600 million).
One mega deal –– the planned merger of Advocate Aurora Health and Atrium Health –– more than doubled the size of 2021’s recording-setting year-end average size of $619 million. For the second quarter of 2022, average size of the smaller party approached $1.5 billion. In addition, total transaction value reached a new historic high for the quarter, at $19.2 billion.
The number of healthcare deals since 2020 is well below trends in the prior years before the COVID-19 pandemic. For example, there were 27 transactions in the second quarter of 2016, 31 in 2017, 21 in 2018 and 19 in 2021. That’s compared to 14 in both 2020 and 2021 in the same three-month period.
Skilled nursing and long-term care deals are in the spotlight as of late thanks to payment model changes from the Centers for Medicare and Medicaid Services (CMS), ongoing impact from the COVID-19 pandemic, consumer preferences for aging in place and workforce challenges. As a result, many healthcare companies are rethinking their skilled nursing strategies, according to Kaufman Hall. Two recent transactions underscore this trend: Hackensack Meridian Health announced the majority of its long-term care facilities would be acquired by Complete Care in March 2022, and Virtua Health announced the sale of its two skilled nursing facilities to Tryko Partners in April.
Looking ahead, Kaufman Hall expects the trend of fewer, but larger healthcare deals to continue.
“We expect continued activity in this space, but believe that the emphasis on transformative combinations, strategic rationale, and heightened selectivity will only grow,” the latest report stated. “At the same time, as noted in our 2021 year-end report, ‘we anticipate a greater willingness to engage with specialty providers to complement the traditional inpatient/outpatient services that have been the core offering of hospitals and health systems.’”
Amy joined TriMed Media as a Senior Writer for HealthExec after covering home care for three years. When not writing about all things healthcare, she fulfills her lifelong dream of becoming a pirate by sailing in regattas and enjoying rum. Fun fact: she sailed 333 miles across Lake Michigan in the Chicago Yacht Club "Race to Mackinac."