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Kaufman Hall releases Q2 report on hospital M&A: 8 things to know

Kaufman Hall released its second-quarter report following hospital mergers and acquisitions July 13. 

Eight things to know: 

  1. The average size of the smaller party in the second quarter of 2022 nearly doubled from 2021's year-end value, to nearly $1.5 billion, driven in part by the merger between Milwaukee and Downers Grove, Ill.-based Advocate Aurora Health and Charlotte, N.C.-based Atrium Health. The smaller average party value in the 2021 year-end report was $619 million. 

  2. The number of announced transactions remained similar to numbers shown in the second quarter of 2021, totaling 13 announced transactions. Overall, there have been fewer announced transactions during the pandemic. 
     
  3. "Mega" transactions — in which the smaller party or seller's revenue exceeds $1 billion — continued to offset the smaller number of transactions, leading to the average size of the smaller party reaching $1.5 billion in the second quarter. This was dissimilar to the first quarter, where no "mega" transactions occurred.

  4. Transactions where the smaller party had revenue in excess of $500 million included Advocate Aurora Health/Atrium Health with a smaller-party revenue of $12.9 billion; West Des Moines, Iowa-based MercyOne and Livonia, Mich.-based Trinity Health with a smaller-party revenue of $3 billion; Green Bay, Wis.-based Bellin Health System and La Crosse, Wis.-based Gundersen Health System with a smaller-party revenue of $800 million; and Washington, D.C.-based George Washington University Hospital and King of Prussia, Pa.-based Universal Health Services with a smaller-party revenue of $600 million. 

  5. Making history, total transacted revenue totaled $19.2 billion in the second quarter, doubling numbers from the same period last year with a close number of announced transactions. 

  6. Following last year's annual review, Kaufman Hall pledged to call attention to new, up-and-coming hospital and health system relationships. For this quarter, it focused on the development of skilled nursing facilities. Kaufman Hall found that SNFs faced a number of challenges, including staffing shortages, the pandemic, growth in at-home care, and CMS implementing its Patient-Driven Payment Model. Kaufman Hall identified two recent transactions involving SNFs. Edison, N.J.-based Hackensack Meridian Health announced in March that its long-term care facilities were acquired by Bridgeton, N.J.-based Complete Care. Hackensack Meridian said the decision "was made in line with industry trends and best practices" after major changes in the past few years. Similarly, Marlton, N.J.-based Virtua Health sold two of its SNFs to Brick, N.J.-based Tryko Partners. Virtua Health believes that entrusting Tryko Partners with its SNFs will allow Virtua to refocus needed funds to other areas of its system while still offering quality nursing staff. 

  7. The results of the second quarter revealed that fewer, yet larger hospital and health system mergers and acquisitions may become the new norm. 

  8. Kaufman Hall expects further nontraditional transactions and healthcare strategies overall, but noted it also expects stronger enthusiasm for traditional healthcare services.

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