Banner

Article

Regional partnerships drive hospital M&A revenue

Author(s):

Fewer deals, but more money due to strategy shift

Total revenue remains high as health systems have changed their focus from acquisitions of small independent hospitals to regional partnerships, according to an analysisfrom Kaufman Hall. This is despite the fact that there were significantly fewer M&A deals.

Through the second quarter of 2021, total revenue is the second highest in recent years at $17.2 billion with 27 transactions. In 2020, revenue for the same period was $17 billion with 43 transactions.

Activity in the second quarter was below pre-pandemic historical averages with 14 announced transactions, though this was consistent with second quarter, 2020 levels. The smaller number of transactions was offset by a high number of transactions with seller revenue above $500 million, including one large merger involving two companies with more than $1 billion in annual revenue.

Strategies focus on regional partnerships

During the pandemic, health systems focused on partnerships to share resources within a defined geography, which proved valuable.

Strong regional market presence allowed health systems to partner with health plans and local employers by offering the necessary scale for population-health-focused initiatives. By partnering with well-established organizations, health systems can preserve and leverage local knowledge within a newly combined organization.

The Southeastern portion of the U.S. accounted for much of the second quarter activity, with Georgia accounting for three transactions involving eight hospitals and approximately $1.5 billion in transacted revenue. The most significant transactions for the second quarter of 2021 include:

Spectrum Health and Beaumont Health’s intention to form a combined system that would have approximately $13 billion in annual operating revenue.

Tenet Healthcare’s plans to sell five hospitals in south Florida’s Miami-Dade and Broward Counties to Steward Health Care System.

Piedmont Healthcare’s plans to acquire four Georgia hospitals from HCA Healthcare; in a separate announcement, University Health Care System in Augusta, Ga., stated its intention to join Piedmont Health.

HCA Healthcare’s plans to sell a fifth north Georgia hospital—Redmond Regional Medical Center in Rome, Ga.—to Florida-based AdventHealth.

Rush Health Systems’ plans to merge with Louisiana-based Ochsner Health.

The Medical University of South Carolina’s plans to purchase three hospitals in Richland County and adjacent Kershaw County from LifePoint Health.

Related Videos
Monica Verduzco-Gutierrez, MD, FAAPMR, gives expert advice
Claire Ernst, JD, gives expert advice
stock market