10 of the most interesting healthcare transactions of 2017

Written by Ayla Ellison (Twitter | Google+)  | January 08, 2018 | Print  |

From major nonprofit health systems coming together for market power and population health to health insurance companies seeking growth in other business areas, 2017 was an exciting year for mergers and acquisitions in the healthcare industry.

Here are 10 of the most interesting healthcare industry transactions in 2017.

1. CVS Health to acquire Aetna

The players: The deal involves Woonsocket, R.I.-based CVS Health and Hartford, Conn.-based Aetna.

The deal in a sentence: CVS Health inked a definitive agreement in December 2017 to acquire all outstanding shares of Aetna for roughly $69 billion in cash and stock.

What makes it interesting: The combination of CVS Health and Aetna would bring a giant drugstore chain, pharmacy benefit manager, clinic operator and insurer together under one roof. The deal could lead other healthcare industry players to join forces. Ana Gupte, PhD, a senior healthcare services analyst at Leerink Partners, told CNBC the threats posed by the CVS-Aetna deal could push Walmart to consider buying Louisville, Ky.-based Humana.

2. UnitedHealth's Optum to buy 300 medical clinics

The players: The deal involves Minnetonka, Minn.-based United Health Group's Optum unit and DaVita Medical Group, a subsidiary of Denver-based DaVita.

The deal in a sentence: Under an agreement inked in December 2017, UnitedHealth Group's Optum will acquire DaVita Medical Group for approximately $4.9 billion in cash, adding nearly 300 medical clinics, 35 urgent care centers and six outpatient surgery centers to its network.

What makes it interesting: UnitedHealth Group is known for its giant health insurance arm, UnitedHealthcare, but this deal combined with other acquisitions announced last year show the company is serious about expanding outside of insurance. In addition to the proposed deal with DaVita Medical Group, Optum inked two other major transactions in 2017. In January, it agreed to acquire Deerfield, Ill.-based Surgical Care Affiliates for approximately $2.3 billion in cash and stock. In November, Optum finalized a deal to acquire Advisory Board's healthcare consulting business for $1.3 billion.

3. Ascension, Providence St. Joseph in talks to merge

The players: The deal involves St. Louis-based Ascension and Renton, Wash.-based Providence St. Joseph Health.

The deal in a sentence: Ascension and Providence St. Joseph Health are reportedly discussing a merger, which would result in a 191-hospital, $44.8 billion operation.

What makes it interesting: The Ascension-Providence merger would create the largest hospital system in the U.S. The combined nonprofit entity, would outsize Nashville, Tenn.-based HCA Healthcare, which is the largest for-profit hospital operator today with 177 hospitals.

4. Walgreens pursues smaller deal with Rite Aid

The players: The deal involves Deerfield, Ill.-based Walgreens Boots Alliance and Camp Hill, Pa.-based Rite Aid.

The deal in a sentence: Under an agreement that received regulatory approval in September 2017, Walgreens is buying 1,932 Rite Aid stores, three distribution centers and inventory for $4.38 billion.

What makes it interesting: The companies' deal replaced a $6.8 billion purchase agreement, which Walgreens walked away from in June 2017. The Federal Trade Commission was reportedly preparing to block the full buyout due to antitrust concerns when Walgreens terminated the proposed transaction. In October of last year, Walgreens said it plans to close 600 stores, mostly Rite Aids, within 1 mile of another Rite Aid or Walgreens. Walgreens will spend $750 million over three years to rebrand the remaining Rite Aid stores.

5. CHI, Dignity Health to combine

The players: The deal involves Englewood, Colo.-based Catholic Health Initiatives and San Francisco-based Dignity Health.

The deal in a sentence: After more than a year of talks, CHI and Dignity signed a definitive agreement in December 2017 to combine into a single Catholic health system.

What makes it interesting: The deal shows nonprofit health systems' appetite to grow. The proposed transaction will create a massive nonprofit, Catholic health system, comprising 139 hospitals across 28 states and controlling more than $28 billion in revenue.

6. CHS' hospital divestiture spree

The players: The deal involves Franklin, Tenn.-based Community Health Systems and more than 30 hospitals across the nation.

The deal in a sentence: As part of a turnaround plan put into place in 2016, CHS sold off 30 hospitals.

What makes it interesting: CHS, one of the largest for-profit hospital operators in the nation, carries a heavy debt load and has seen its stock price plummet over the past year, but the company is taking steps to improve its financial picture. As part of its turnaround plan, the company completed a 30-hospital divestiture spree Nov. 1, 2017, and it plans to sell another group of hospitals with combined revenue of $2 billion. However, the downsizing may not be enough to solve CHS' troubles. In a report issued in December, Goldman Sachs said CHS' heavy debt load could land it in bankruptcy in 2018.

7. Advocate, Aurora Health Care to merge into $11B health system

The players: The deal involves Downers Grove, Ill.-based Advocate Health Care and Milwaukee-based Aurora Health Care.

The deal in a sentence: Under an agreement reached in December 2017, Advocate and Aurora would merge, creating the 10th largest nonprofit health system in the U.S.

What makes it interesting: The deal is a strategic move by the systems to cross state lines. The combined system, called Advocate Aurora Health, would include 27 hospitals, have annual revenues of approximately $11 billion and serve nearly 3 million patients each year. The proposed transaction may not face the same antitrust obstacles as Advocate's failed merger with Evanston, Ill.-based NorthShore University HealthSystem.

8. Advisory Board finalizes $1.3B deal with UnitedHealth's Optum

The players: The deal involves The Advisory Board Company and UnitedHealth Group's Optum division.

The deal in a sentence: In November 2017, Advisory Board sold its healthcare consulting business to Optum for $1.3 billion.

What makes it interesting: UnitedHealth Group, which is already one of the nation's largest health insurers, pursued several transactions last year to establish and grow new business divisions. Under this deal, Optum will become an even bigger player in the healthcare consulting arena.

9. Steward Health Care acquires Iasis

The players: The deal involves Boston-based Steward Health Care and Franklin, Tenn.-based Iasis Healthcare.

The deal in a sentence: Steward acquired Iasis Healthcare, an 18-hospital system in Franklin, Tenn., in September 2017.

What makes it interesting: Steward became the largest private hospital operator in the U.S. with the acquisition of Iasis' hospitals. Steward currently operates 36 hospitals across 10 states.

10. Blackstone closes $6.1B deal to acquire TeamHealth

The players: The deal involves Blackstone, a New York City-based private equity, investment banking and asset management corporation, and TeamHealth Holdings, a Knoxville, Tenn.-based physician services organization.

The deal in a sentence: In February 2017, Blackstone acquired TeamHealth for $6.1 billion, including debt.

What makes it interesting: TeamHealth's board unanimously approved the $6.1 billion buyout in October 2016. Less than two months later, shareholders of TeamHealth filed a class-action lawsuit alleging TeamHealth passed over a more lucrative bid from Nashville, Tenn.-based AmSurg to accept Blackstone's offer. In late 2015, AmSurg offered a stock-and-cash deal worth $7.8 billion, or $71.47 per share, which TeamHealth rejected. The shareholders dismissed their lawsuit Jan. 27, 2017, less than two weeks before the transaction with Blackstone closed.

More articles on healthcare industry transactions:

Tenet, Baylor Scott & White restructure joint venture: 4 things to know
5 biggest healthcare deals of all time
Proposed hospital mega-deals put pressure on CHS, Tenet and HCA

 

 

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