Nonprofit and for-profit health systems and providers will continue to see more mergers and acquisitions in 2021, according to a Moody's Investor Services report released April 21.
Moody's estimates that larger health systems will pursue M&A to boost market share and diversify services, while smaller providers will look to partner for financial stability.
The credit rating agency said that although provider relief funding and Medicare accelerated payments have somewhat offset financial disruption, the relief will likely be temporary for smaller hospitals, as they must repay Medicare advanced payments while facing lower volumes, Moody's said.
"Smaller systems may find it more difficult to repay the Medicare funds, given lower liquidity and less financial flexibility than larger health systems. And partnerships provide an opportunity to lessen financial challenges, such as an increasingly more expensive workforce," Moody's wrote.
For larger nonprofit health systems, Moody's said consolidation and partnerships will remain "widespread" as they look to offset a weakening payer mix as more patients turn to government insurers that typically reimburse less.
Moody's also noted that M&A is set to increase for for-profit hospitals as well, as they are facing unprecedented liquidity levels. Moody's said to expect these for-profit providers to pursue deals that enhance services provided outside of the hospital.