Report: Healthcare Mergers and Acquisitions Move Towards Regional Partnerships
M&A activity in the healthcare sector is shifting from buying small independent hospitals to regional partnerships between healthcare systems, according to a new report by health consultancy firm Kaufman Hall.
In the second quarter of 2021, 14 deals were announced, which is lower than recent historical averages before the pandemic. But, like the trends seen in the first quarter of the year, the smaller number of deals was offset by a larger number of deals with seller revenues above $ 500 million.
In fact, the average seller size by revenue was $ 604 million for the second quarter of 2021, well above historical averages for the same quarter of previous years as well as year-end averages since. 2015, which remained between 250 and 400 million dollars.
In addition, the second quarter of 2021 saw the fourth highest total processed revenue compared to the second quarters of previous years, totaling $ 8.5 billion.
As mergers and acquisitions turned to regionalization, second-quarter activity was concentrated in the southeast, with Georgia alone accounting for three deals involving eight hospitals and around $ 1.5 billion in revenue processed.
There has been a “mega merger” – that is, a merger in which the smallest partner or vendor has average annual revenues in excess of $ 1 billion – announced this quarter: the combination of Beaumont Health System based in Southfield, Michigan and Grand Rapids, Michigan-based Spectrum Health, which will create a system with around $ 13 billion in annual operating revenue if the deal is approved. Additionally, there were three deals with seller revenues ranging between $ 500 million and $ 1 billion.
Other regional partnerships announced this quarter include Mississippi-based Rush Health Systems, which plans to merge with New Orleans-based Ochsner Health, and Atlanta-based Piedmont Healthcare. plans to acquire four Georgian hospitals in Nashville, Tennessee, HCA Healthcare.
â€œFor health systems, regionalization strategies often focus on creating alternative services, capacities and sites in a defined geography – a capacity that has proved particularly important for many communities during the height of the pandemic. of Covid-19, â€said Anu Singh, Managing Director and Leader. of Kaufman Hall’s practice partnerships, mergers and acquisitions, in an email. â€œA strong regional market presence can also help health systems deliver the scale needed to partner with health plans and employees on population health initiatives.
In addition to scale, regionalization provides systems with local knowledge, which is essential in healthcare.
Even in neighboring markets, local conditions can vary widely, Singh said. Partnerships with well established organizations can be used to leverage this very important local knowledge within a newly combined organization or business.
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