Dive Brief:
- Healthcare ranks as the top industry for U.S. targeted M&A, with the highest annual volume on record, $454.9 billion, this year, according to a new report from Dealogic.
- Hospitals and insurance companies have been consolidating in big numbers over the past few years as pressure increases for better quality care at lower costs. Morningstar analyst Vishnu Lekraj told the Los Angeles Times, "Healthcare firms, in general, I believe will need to get bigger."
- One of the top 10 healthcare M&A deals on record announced this year, is Anthem's pending $55.2 billion acquisition of Cigna Corporation.
Dive Insight:
Despite what seems to be an endless stream of healthcare megamergers and acquisitions, Assistant Attorney General Bill Baer, head of the U.S. Department of Justice's Antitrust Division, recently voiced doubts about the benefits of consolidation in the healthcare industry. This may be a red flag for leading insurance companies proposing future megamergers, according to Law360.
Baer, speaking at a conference, criticized one of the main arguments behind the big insurer megamergers - health insurers should merge to negotiate rates more effectively with hospitals and physicians. "Consumers do not benefit when sellers - or buyers - merge simply to gain bargaining leverage. Consumers benefit when there is entry, expansion, innovation, and competition," he said.
He also raised concerns about how the big mergers would affect ACA insurance exchanges, stating competition provides lower premiums. But, as previously reported in Healthcare Dive, some analysts are pointing to the ACA as a driving force for healthcare M&A with funding cuts and pricing transparency squeezing profit margins.
The Department of Justice is still reviewing the Aetna-Humana and Anthem-Cigna mergers, which could take until sometime next year before a decision is finalized, according to Law360.