- Hospital and health system M&A was down slightly in the first quarter of 2019 at 27 deals, compared to 30 in the first quarter of 2018, according to an analysis released Tuesday from financial consultancy Kaufman Hall.
- Total revenue for the transactions, however, was down sharply — at nearly $5 billion from $12.7 billion the year prior. Fewer large-scale transactions took place, with the average size of seller by revenue at about $196 million, down from a record-setting $409 million in 2018.
- Seven of the transactions, and some of the most significant, involved academic medical centers. Of note were UPMC's linkup with Western Maryland Regional Medical Center, Loyola University Medical Center's integration of Palos Health and Dartmouth-Hitchcock Health's merger with GraniteOne Health.
Mergers and acquisitions may be top of mind for healthcare executives, but the frenetic pace of consolidation that defined 2017 and 2018 seems like it's beginning to decelerate. A Ponder & Co. report found the first quarter of 2019 had the lowest volume of acute hospital M&A in almost a decade.
Larger health systems taking time to digest their purchases and integrate them into the wider organization is responsible in part for the slowdown, as is the lack of tempting purchases, Ponder & Co. found.
That doesn't mean interest in consolidation is abating, however. Another Kaufman Hall report from earlier this year found that M&A is becoming less about opportunistic growth or throwing struggling facilities a life vest and more about strategy. Health systems are looking for new ways to weather strong industry headwinds like lowering inpatient revenue, expense inflation and shaky reimbursements.
Anu Singh, managing director at Kaufman Hall, said the Q1 numbers showed "an active start" and noted that many health systems are looking toward deals that stop short of full integration, including management service agreements, joint ventures or minority investment models that allow hospitals to maintain independence.
"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," Singh said in a statement.
Academic medical centers were particularly flirtatious in the first quarter of this year. UPMC forayed into Maryland for the first time with its integration of Western Maryland Regional Medical Center, announced in March as an expansion of an existing clinical affiliation solidified in 2018.
Two other significant AMC transactions are Trinity Health-subsidiary Loyola's January grab of Palos Health in Illinois and Dartmouth-Hitchcock Health's integration of GraniteOne Health in New Hampshire to form a $2.7 billion system.
Beyond AMCs, religious systems were acquirers in five of the 27 transactions, and for-profit systems were acquirers in seven.