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Cross-market health system mergers to pick up steam

Some of the largest healthcare mergers and acquisitions over the last year were cross-market transactions, a trend that is expected to pick up steam despite the Federal Trade Commission taking a firmer stance on deals that could potentially violate federal antitrust laws.

Health systems are expected to continue to identify cross-market mergers with like-minded systems as they aim to generate economies of scale as a tool to fight elevated expense pressures, according to a July 20 report from Fitch Ratings. 

"Cross-market" mergers are between health systems that operate in separate geographic areas and do not eliminate competition to attract patients since the systems provide services to distinct patient populations. However, these types of deals can lead to competitive effects when the merging systems have common payer and employer customers and are competing to be in the same payer and employer networks.

Recent examples of such transactions include Charlotte, N.C.-based Advocate Health and Salt Lake City-based Intermountain Health. Albuquerque, N.M.-based Presbyterian Healthcare Services is exploring a potential merger with West Des Moines, Iowa-based UnityPoint Health and Kansas City, Mo.-based Saint Luke's Health is doing the same with St. Louis-based BJC HealthCare. 

Oakland, Calif.-based Kaiser Permanente also recently launched Risant Health, which is in talks to acquire Danville, Pa.-based Geisinger Health.

Cross-market deals spread combined organizations' operating risks across multiple markets while also expanding access to an academic medical center or widening the opportunity to experiment with innovative approaches because of more diverse markets resulting, according to a recent Kaufman Hall report. With regulators increasingly clamping down on proposed transactions in similar geographic regions, cross-market deals are likely to be at the helm of future healthcare M&A.

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