Hospital mega-mergers continue to drive near-historic M&A activity

TARA BANNOW  / July 22, 2019

Health system mega-mergers continue to push deal activity to near-historic levels, evidenced by the fact that the amount of revenue tied up in such deals was nearly four times higher in the second quarter of 2019 compared with the prior-year period.

That’s according to Kaufman Hall’s latest healthcare M&A report, which tallied $11.3 billion in total transacted revenue in the recently ended quarter. That also approaches 2017’s historically high figure of $12.6 billion in the second quarter, the report said.

Despite the eye-popping revenue figures, the number of hospital and health system transactions—19—wasn’t far from the 21 transactions announced in the prior-year period. The 46 transactions announced so far this year closely tracks the 50 announced at the halfway point of 2018, Kaufman Hall found.

It’s the continuation of a trend that surfaced around 2010: The sellers are getting bigger, said Anu Singh, a managing director with Kaufman Hall and author of the report.

Before 2010, health systems whose revenue was in the ballpark of $750 million to $1 billion were largely satisfied serving one or two cities. Now, those systems are gunning to serve entire counties or even larger regions, Singh said.

“If that’s the path, many will be looking to uplink with organizations with comparable cultures or strategic initiatives,” he said.

Even so, Singh said he doesn’t view the deals taking place as being defensive. Rather, he sees them as straight-forward efforts to be more successful in their markets.

Kaufman Hall’s report included the proposed Charlotte, N.C.-based Atrium Health and Winston-Salem, N.C.-based Wake Forest Baptist Health merger announced in April. That deal would create a 49-hospital with combined operating revenue exceeding $9 billion.

It also cited the proposed merger announced in May between two Wisconsin-based systems: Gundersen Health System and Marshfield Clinic Health System. Kaufman Hall’s report noted the two systems have little overlap in their existing markets, which combined will stretch from southwestern to north central Wisconsin with locations in Iowa and Minnesota.


Chris J. Stewart

Chris currently serves as President and CEO of Surgio Health. Chris has close to 20 years of healthcare management experience, with an infinity to improve healthcare delivery through the development and implementation of innovative solutions that result in improved efficiencies, reduction of unnecessary financial & clinical variation, and help achieve better patient outcomes. Previously, Chris was assistant vice president and business unit leader for HPG/HCA. He has presented at numerous healthcare forums on topics that include disruptive innovation, physician engagement, shifting reimbursement models, cost per clinical episode and the future of supply chain delivery.

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