Correction: In a previous version of this article, the headline misidentified Steward as the largest for-profit hospital system in the US. It is the largest private for-profit system.
Dive Brief:
- Steward Health Care completed its $1.9 billion acquisition of IASIS Healthcare, Becker’s Hospital Review reports.
- With IASIS’ 18 hospitals in Arizona, Arkansas, Colorado, Louisiana and Texas, Steward becomes the largest private for-profit hospital system in the country, with a total of 36 hospitals across 10 states.
- Revenues for the combined health system are projected at close to $8 billion in 2018, the first full year of consolidated operations, according to a Steward news release.
Dive Insight:
The deal is the latest in a steady stream of M&A in the industry in recent years. Since the 2010 implementation of the Affordable Care Act brought new pressures on hospitals, like payment cuts, the rate of M&A activity has increased by 70%, according to ProMarket.
Hospitals and health systems see consolidation as a way to deal with declining admissions, rising costs and lower reimbursement. It also provides a vehicle for geographic or brand expansion.
Mergers can help health systems manage their bottom lines, but there are a variety of potential downsides as well. Studies have shown that healthcare M&A can lead to unhealthy market concentration and stagnant wages while preventing innovation. The trend hasn't been shown to reliably produce better care coordination, but there is potential for improvement in that area.
With its newest deal, Steward will also gain managed care operations in Arizona, Utah and Massachusetts with the merger. The new system includes 37,000 employees, 1,400 employed physicians and 4,700 integrated network physicians, according to the company. The move expands Steward’s managed risk platform, Health Choice, which provides managed care and health insurance services to more than 680,000 patients.
Boston-based Steward signed a definitive agreement to acquire IASIS in May. The move followed Steward’s purchase of eight hospitals in Ohio, Pennsylvania and Florida in April — its first out-of-state acquisitions.
M&A deals are coming quickly throughout the country. In August, Baptist Healthcare System snapped up Hardin Memorial Health for an undisclosed sum, expanding its footprint in Kentucky. And in Georgia, Northside Hospital and Gwinnet Health System wrapped up two years of negotiations with a deal to merge operations — creating a 1,479 bed, 21,000 employee and 3,500 system.
Other recent deals include Cleveland Clinic’s plan to acquire Dover, Ohio-based Union Hospital and the planned merger of Fairview Health and HealthEast Care System, which will control about 34% of the Minneapolis/St. Paul metropolitan market.
UPMC has also been active in the M&A space, snagging Harrisburg-based PinnacleHealth. The deal marks UPMC’s largest and first acquisition of an entire health system and allows it to grow its market share in central Pennsylvania, where it will compete with a University of Pennsylvania Health System hospital, among others.