Despite Drop in Healthcare Mergers and Acquisitions, Revenue Rises

By Jill McKeon

July 12, 2021 – Healthcare merger and acquisition (M&A) activity was minimal in the second quarter, but total revenue rose as health systems focused on acquiring smaller hospitals and strengthening regional partnerships, according to Kaufman’s quarterly M&A report Hall.

The second quarter of 2021 saw 14 healthcare M&A deals and total revenue of $ 8.5 billion. Since the beginning of the year, the total revenue for 2021 is the second highest in recent years, despite the low total number of transactions.

“For-profit healthcare systems continue to focus on building strong regional markets and divesting hospitals outside of their core business regions,” the report said.

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Transactions in the second quarter were mostly concentrated in the southeast. Three of the 14 transactions came from Georgia alone and generated sales of $ 1.5 billion.

Although there were fewer transactions than in pre-pandemic times, a large number of transactions came from high-profile sellers with sales over $ 500 million. The average seller size by revenue for the second quarter was $ 604 million, a significant increase over previous years.

Spectrum Health and Beaumont Health of Michigan announced that they will combine into a system with annual sales of approximately $ 13 billion. In addition, Tenet Healthcare plans to sell five Florida hospitals to Steward Health Care System and Piedmont Healthcare plans to acquire four Georgia hospitals from HCA Healthcare. The university’s health system will also join Piedmont Health.

Two of the acquirers were for-profit health systems, three were academic medical centers, and one was a religiously affiliated health system. The remaining eight transactions were in nonprofit healthcare systems.

“Many of the most significant deals of the quarter reflect the trend towards regionalization, with an emphasis on building depth within local markets and breadth by expanding into neighboring regions,” the report concludes.

“The steps of for-profit systems to sell hospitals in markets where they do not have a strong presence are complemented by transactions that build on their strengths in regional core markets.”

The Piedmont Healthcare transactions solidified its presence in Georgia, and the merger of Spectrum Health and Beaumont Health connected the markets of west and southeast Michigan. A regional focus enables health systems to share resources and form partnerships to support nationwide public health initiatives.

Kaufman Hall pointed out that COVID-19 has effectively demonstrated the value of sharing resources within a defined region and collaboration between local markets can expand local knowledge and lead to greater efficiency.

The report expected a period of stabilization in healthcare in the coming quarters as healthcare systems continue to recover from COVID-19. The long-term impact of the pandemic on health systems is still unknown, but researchers expect an increase in strategic regional partnerships in the near future.

Despite a positive increase in collaboration and a focus on local partnerships, a recent study found that providers who merge or acquire healthcare providers are more likely to suffer from burnout with doctors, less trusting their colleagues, and their employer less likely to trust their families Recommend and friends for health services. This is likely due to the uncertainty and workflow disruptions often associated with organizational changes.

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