Sponsored by VMG Health | info@vmghealth.com | 214.369.4888

For-profit and big systems are shedding hospitals. Who is stepping up?

As the financial challenges for hospitals mount, big systems have become sellers.

For-profit large health systems are trimming the number of hospitals despite some turning a profit last year. Cain Brothers reported 81 deals in the last 12 months, including a "significant number" of for-profit divestitures joining nonprofit systems. HCA Healthcare posted $5.2 billion net income in 2023 and Tenet Healthcare reported $1.3 billion net income, and both have forged multiple deals in the last several months.

Large nonprofit systems are also downsizing, including St. Louis-based Ascension and Chicago-based CommonSpirit Health's Dignity arm, both of which reported a loss last year. The Cain's Brothers report also noted a high volume of national systems selling to regional systems.

So who is stepping in to purchase these hospitals? In many cases, its academic health systems.

"This quarter saw transformative deals that may reshape how healthcare is delivered, reflecting creative partnerships that continue to form in a changing healthcare environment. Academic medical centers continue to make investments in assets of high strategic value to expand their clinical, teaching and research capabilities," according to Cain Brother's.

Transactions in the last three months include:

  • UCLA Health acquiring a 260-bed Los Angeles hospital from HCA Healthcare 
  • UCI Health in Orange, Calif., purchasing four hospitals from Tenet Healthcare
  • UCSF Health signed an agreement to acquire two Dignity hospitals for $100 million
  • MyMichigan Health in Midland announced plans to add Ascension Michigan, which includes 16 hospitals 

Academic medical centers have been transforming into more traditional health systems over the last several years, with a network of clinics and surgery centers across the community. Now, they're also adding hospitals to support more local healthcare in surrounding communities. For example, Penn Medicine revealed plans to purchase Doylestown Health, a single hospital system based in Bucks County, Pa., and Philadelphia-based Jefferson Health is nearing completion of Allentown, Pa.-based Lehigh Valley Health Network.

Kaufman Hall noted an uptick in academic health system acquisitions in the third quarter of 2023, with seven of 14 transactions with nonprofit buyers being academic systems. Academic health systems are hoping that by keeping local hospitals afloat, they'll be able to better serve those communities and avoid further straining capacity issues at the flagship hospital.

When community hospitals close, people have to travel further for care at the academic medical centers, which then see an influx of patients they may not be prepared to serve.

"Occupancy rates at academic health systems have been substantially higher than the median occupancy rate for hospitals and health systems overall, and a strong community hospital network allows academic health systems to ease some of the occupancy constraints at the academic medical center flagship by utilizing available space in high-quality community hospitals for lower acuity patients," wrote Anu Singh, managing director and practice leader of partnerships, mergers and acquisitions at Kaufman Hall.

Mr. Singh predicts more academic health system acquisitions in the coming months.

Copyright © 2024 Becker's Healthcare. All Rights Reserved. Privacy Policy. Cookie Policy. Linking and Reprinting Policy.


Featured Whitepapers

Featured Webinars