2017 hospital M&A activity outpacing 2016

The number of hospital mergers and acquisitions (M&A) has reached 87 through the end of the third quarter, according to an analysis from consulting firm Kaufman Hall, putting 2017 M&A activity in the sector on pace to surpass the 102 deals that were completed in 2016.

There was a slight dip in the third quarter, with 29 deals announced compared to 31 in the second quarter. Eight of the transactions announced in the third quarter involved acquisitions by for-profit organizations, and 19 by non-profit organizations. Those 29 deals included:

  • Eight acquisitions involving nonprofit, publicly-owned hospitals
  • Five involving a religious-affiliated hospital
  • Two involving joint non-profit and for-profit transactions.
  • Two transactions involving academic medical centers partnering with for-profit entities

Illinois, New York and Pennsylvania saw the most merger activity in the third quarter, with three transactions each announced in the third quarter.

Two transactions exceeding $1 billion in revenue were announced during the quarter. Ascension Health—already the largest integrated health system in the U.S. by number of facilities—announced it will acquire the 12-hospital Presence Health system based out of Chicago. The other was the proposed merger between Charlotte’s Carolinas HealthCare System and University of North Carolina Health Care.

Eight transactions which surpass the $1 billion mark have been announced so far in 2017, already doubling the four completed in all of 2016.

“These transactions are driven primarily by strategic imperatives and less so, by financial drivers,” Anu Singh, managing director of Kaufman Hall, said in a statement. “Organizations are pursuing partnerships and collaborations in order to remain competitive and strengthen their market offerings, so that they can continue serving the healthcare needs of their communities. We're also seeing an uptick in creative affiliations, with partnerships using non-traditional models to achieve their strategic goals in response to a new set of market factors that were not present a decade ago.”

Singh has previously spoken with HealthExec about these non-traditional partnerships and how they can help with the transition to value-based care and population health. Examples he cited included the 2015 joint venture between Tenet Healthcare, Dignity Health and Ascension to operate Carondelet Health Network. This involved a financial arrangement, unlike the Vivity partnership between Anthem Blue Cross and several southern California hospitals, where no organization was required to cede control.