Twenty-seven mergers involving hospitals and health systems were announced in the first quarter of 2019, according to the latest analysis by Kaufman Hall, a leading provider of enterprise performance management software, and data and management consulting services, including a vibrant mergers and acquisitions practice. While down slightly from 30 transactions announced in the first quarter of 2018, activity generally was consistent with levels seen in recent years, which have been among the most active on record.
Total revenue for announced transactions in the first quarter was $4.9 billion, down from a very high $12.7 billion in the first quarter of 2018. The quarter saw fewer large-scale transactions, but a significant number of transactions involving a seller with annual revenues of $100 million or less, resulting in an average size of seller (by revenue) of approximately $196 million. This is down from the record-setting $409 million average size of seller in 2018, noted in Kaufman Hall’s 2018 year-end report, but likely will increase as the year progresses.
“2019 got off to an active start, with about half of the first-quarter transactions announced in January,” said Anu Singh, managing director at Kaufman Hall. “To construct improved models of care, many hospitals and health systems are pursuing less than fully integrated partnerships, including joint ventures, management services agreements, minority investment models, and other structures. These strategic structures are desirable because they can provide opportunities for organizations to maintain local influence and improve the benefits they offer to their communities, while also exploring the possibility of deeper alignment in the future.”
Many of the most significant transactions announced in the first quarter involved academic medical centers (AMCs). These included UPMC (University of Pittsburgh Medical Center)/Western Maryland Regional Medical Center, Loyola Medicine/Palos Health, and Dartmouth-Hitchcock Health/GraniteOne Health.
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Announced in March, the transaction involving UPMC and Western Maryland Regional Medical Center represents UPMC’s first expansion into the state of Maryland, and its second expansion outside of Pennsylvania (UPMC acquired UPMC Chautauqua—formerly WCA Hospital—in southwestern New York in 2016). UPMC’s expansion beyond Pennsylvania is consistent with the trend toward growth of regional health systems, described in the 2018 year-end report. UPMC and Western Maryland entered into a clinical affiliation agreement in 2018.
In addition, Loyola Medicine and Palos Health announced in January a plan to fully integrate Palos Health with the Loyola Medicine health system (which is a member of Trinity Health), building upon an affiliation agreement begun in 2015. Anchored by the Loyola University Medical Center, Loyola Medicine is one of several AMC-based systems in the Chicago market that have expanded their networks to community hospitals in recent years.
AMCs were acquirers in seven of the 27 transactions announced in the first quarter. Religiously affiliated health systems were acquirers in five of the 27 announced transactions. All of the sellers in these transactions were non-affiliated. For-profit systems were acquirers in seven of the 27 announced transactions.
Date: April 29, 2019
Source: Yahoo Finance