Health Care M&A Surged in 2017 Among Providers Big and Small
Mergers and acquisitions dominated the hospital and health system landscape in 2017, and the deals indicate the growth of strategic transactions.
That’s the takeaway from a new health care M&A report from Kaufman Hall, a Skokie, Ill.-based consulting firm.
Last year, 115 health care deals with transacted revenue of $63.19 trillion were announced, the highest number of transactions in recent history, the report said. By contrast, transacted revenue in 2016 was at almost half that amount, at $31.29 trillion over 102 deals.
Eleven of the 115 transactions in 2017 involved sellers with net revenue of $1 billion or more, for the largest amount of so-called “mega-deals” ever recorded.
But despite the striking size of the revenue involved in last year’s deals, the composition of transacting organizations is shifting, with growth in the number of transactions involving organizations with revenue between $500 million and $1 billion. Sixteen deals involved hospitals in this range in 2017 compared with one in 2009.
“This change illustrates the emerging strategic rationale of partnership activity,” the report said. “Most organizations with a revenue base approaching $1 billion are likely market leaders or at least market differentiators. Their increasing pursuit of a larger solution supports the industry-wide trend to realize scale.”
Services across the care continuum were one of the most commonly cited benefits in the deals, and momentum along these lines is expected to continue in 2018, including in long-term care, according to the report.
While mega-deals such as the $28.4 billion merger of Dignity Health and Catholic Health Initiatives are expected to dominate legacy hospitals and health systems at the national level this year, regional and local deals are also expected to grow. Systems are seeking greater scope and access to greater populations, which could also lead to multi-state activity in this space, the report said.
As for skilled nursing facility M&A specifically, it is being driven by some of the same considerations as hospital and health system activity, according to Mark Kulik, managing director at the Pittsburgh-based advisory firm The Braff Group.
Specifically, long-term care providers are also looking to diversify their holdings across the continuum, including by purchasing home health or hospice agencies. Buyers by and large are not national companies, many of which are in rough straits financially, but are more likely to be regional or local players making one-time purchases, Kulik told Skilled Nursing News.
“There’s more collaboration locally, more sharing of personnel, with local buyers, rather than: I’m just a location on a map for a national company,” he said.
Written by Maggie Flynn