- Provider M&A activity in the third quarter was up significantly from the previous quarter but largely on par with recent Q3s, meaning the COVID-19 pandemic has not produced a dramatic decline in deals, according to a Tuesday report from Kaufman Hall.
- The third quarter saw 19 transactions announced, up from 14 in Q2. Of those, 17 were among nonprofit systems. Five of the acquirers were religiously sponsored and another five were academic.
- The average size of sellers by annual revenue was just under $400 million, a historically high level. Four transactions took place in which the seller had annual revenue above $1 billion, tying the record for such transformational transaction in a single quarter, according to the analysis.
As patient volumes remain depressed and amid fears of a harsh flu season on top of a still rampaging pandemic, health systems are bracing for the long haul.
While many were kept from drastic measures by an injection of federal relief funds, it seems the chances of another round from Congress are basically nil after President Donald Trump said he would not approve more legislation until after the election, despite later conflicting tweets.
Providers have been asking for at least $100 billion in new funding for months, saying that especially rural and smaller facilities will struggle to keep up if volumes are slow to return.
Without the aid, some struggling hospitals could turn to M&A to keep themselves afloat, Kaufman Hall predicts. "We anticipate that the ongoing financial pressures of the pandemic will only strengthen the need for partnerships, with new opportunities emerging in the months ahead," according to the report.
One major deal was derailed recently, though. Late last week, Beaumont Health and Advocate-Aurora called off plans to form a system that would have had about $17.5 billion in annual revenue after Beaumont doctors reportedly pushed back on the merger plans. That followed Beaumont's decision to pull out of talks with Summa Health in May.
But other data suggest the pandemic is, if anything, likely to accelerate strategic M&A. Nearly 30% of executives in a May survey from Guidehouse said the COVID-19 crisis has made it more likely they will seek out a deal.