Hospital M&A activity up 6.1% so far against last year
- Kaufman, Hall and Associates identified 52 hospital and health systems transactions in the first half of this year.
- This represents a year-over-year increase by 6.1% against 49 transactions in the first half of 2015, the organization stated.
- Of the 52 deals in the first half of 2016, 39 involved acquisitions by nonprofits and 12 involved acquisitions by for-profit organizations.
The flourish of M&A represents the strategy to partner, buy and sell across the country to reduce cost and strengthen business portfolios. For example, just last week a partnership talks occurred between MD Anderson Cancer Center and Scripps Health was reported.
The largest deal announced in Q2 2016 was Universal Health Services’ $445 million acquisition of the remaining interest in Valley Health System, according to Kaufman Hall.
“The continuing uptick in mergers and acquisitions is not surprising,” said Anu Singh, Managing Director at Kaufman, Hall & Associates said in a prepared statement. “The industry is rapidly changing and many organizations are not optimally positioned to navigate the transition to value-based care on their own. Healthcare leaders should thoroughly evaluate the partnership options to help ensure strong, competitive positioning for their organizations into the future.”
"Looking just at the second quarter of 2016, there were 27 announced transactions, up 3.8% from 26 transactions recorded in the second quarter of 2015," Kaufman Hall stated.
While the activity may look good or promising to an executive in a providers' C-suite, some question whether all the consolidation is a good trend. Last week, Aledade CEO Dr. Farzad Mostashari wrote in The Hill's Congress Blog that CMS needs to put a stop to the trend towards consolidation. He noted the preference toward monopolies and the idea that "bigger is better" lent itself to help explain why there were 112 hospital mergers in 2015 (an increase of 18% from 2014).
"Yet, there is no evidence that consolidation of hospitals and physician practices leads to better clinical outcomes or cost reductions," he wrote. "In fact, recent studies suggest that small, physician-owned practices have a lower average cost per patient, fewer preventable hospital admissions, and lower readmission rates than hospital-owned practices."
Stumping for preserving smaller provider practices to "halt the march to healthcare gigantism," Mostashari outlined three suggestions to CMS for MACRA: Compare practices of similar size, cap small providers' losses "as a percentage of revenue received", and reduce administrative burden by allowing them to join in virtual networks to report on quality, IT use, and improvements as a group.
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