Healthcare M&A slows 38% in third quarter
Mergers and acquisition activity among hospitals and health systems is showing signs of a slowdown, according to the latest findings from financial consulting firm Kaufman, Hall & Associates.
Just 18 transactions were recorded during the third quarter of 2018—a drop of 38 percent from the same three months in 2017. Year-to-date transactions reached 68 through the third quarter of 2018, compared to 87 deals last year.
While the total number of deals declined, total revenue of the transactions through the third quarter of 2018 was $10.7 billion. Texas stood out as the state with the most transactions, with five announced deals so far in 2018, two of which came during the third quarter. By comparison, Texas was the third most active state for healthcare transactions in 2017, with eight deals.
"While there is a moderate drop in M&A activity, we are continuing to see providers engage in larger, more strategic partnerships needed to develop, access, or combine the resources required to transform legacy business models and support innovation," Anu Singh, managing director at Kaufman Hall, said in a statement. "We expect to continue to see large-scale organizations pursue partnerships because they realize that while their ability to remain independent may exist, the path to long-term relevance and growth may require broader partnerships and collaborations."
One major deal in the space that will contribute to 2018 M&A levels is the $7.2 billion merger between LifePoint Health and RCCH HealthCare Partners, which was announced in July. The new entity would include 84 non-urban hospitals across 30 states, as well as regional health systems, physician practices and ambulatory care and post-acute care sites.
Another major transaction ongoing is the merger between Dallas-based nonprofit system Baylor Scott & White Health and Memorial Hermann Health System, Houston’s largest nonprofit hospital system.
During the third quarter, for-profit companies continued to sell off assets, including Tenet Healthcare, which announced the sale of several hospitals. Community Health Systems also announced it would sell off two Arkansas hospitals to Baptist Health, based in Little Rock, Arkansas.
"Following eight years of increasing M&A activity, we are seeing that for-profit and nonprofit systems, which often grew rapidly and opportunistically, are re-evaluating which markets are the ones where there is a strong strategic rationale to remain," Singh said.
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."