The number of hospital transactions increased 8 percent from 25 transactions in the first quarter of 2016 to 27 transactions in Q1 2017, according to a recent analysis by advisory firm Kaufman, Hall & Associates.
The analysis was comprised of reported combinations of acute care hospitals in the U.S., including mergers, acquisitions, joint ventures and member substitutions. The total number of transactions reported in Q1 2017 does not include specialty hospital, long-term acute care hospital or surgical center transactions, minor asset sales from closed hospitals, affiliations or management services agreements or international transactions.
Here are seven things to know about hospital transactions in Q1.
1. The increased number of transactions announced in Q1 2017 follows another year of continued growth in the industry. From 2010 to 2016, the number of acute care hospital transactions grew from 66 to 102.
2. Three deals targeting healthcare organizations with approximately $1 billion in total revenues were announced in Q1, according to the report. Four such deals were reported in 2016.
3. Of those three deals, all involved nonprofit organizations. The three deals include the proposed merger of Boston-based Beth Israel Deaconess Medical Center and Burlington, Mass.-based Lahey Health; an affiliation between Harrisburg, Pa.-based PinnacleHealth System and Pittsburgh-based UPMC; and an affiliation between Minneapolis-based Fairview Health Services and St. Paul, Minn.-based HealthEast Care System.
4. Of the 27 transactions announced in Q1 2017, six involved for-profit acquirers and 21 involved nonprofit acquirers.
5. Excluding joint ventures, affiliations and partnerships where there was not a real change in governance, there were 19 hospital acquisitions publicly announced in Q1, according to data from HealthCareMandA.com.
6. Some of the major for-profit hospital operators are divesting hospitals to improve financial performance and drive down debt, and this trend is likely to continue across the hospital sector. Lisa Phillips, editor of the Health Care M&A Report, said most of the hospital deals in Q2 will be driven by finances.
7. Kaufman Hall analysts expect more transactions among larger and like-sized organizations will occur during the coming months.
"Hospitals and health system executives are looking for strategic opportunities to ensure the continued growth and success of their organizations amongst disruptive forces, including innovative competitors, declining payments, flat or decreasing inpatient volumes and increasing price sensitivities among consumers," said Anu Singh, managing director of Kaufman Hall. "As the number of independent hospitals declines, organizations are seeking to build new capabilities and economies of scale through partnerships."