- The pace of hospital and health system mergers and acquisitions slowed somewhat in the third quarter of this year, but not the value of transactions, according to the latest Kaufman Hall analysis.
- The quarter saw a total of 18 deals, 38% fewer than the 29 transactions in the same period the prior year.
- For the year, the number of transactions totals 68, down from 87 in the first nine months of 2017. Despite the slowdown, the value of year-to-date transactions totals $10.7 billion, according to the report.
The drop-off in volume suggests that hospitals and health systems are exploring options other than mergers and acquisitions to survive and thrive in today's value-based healthcare environment.
"While there is a modest drop in M&A activity, we are continuing to see providers engage in larger, more strategic partnerships needed to develop, access, or combine the resources required to transform legacy business models and support innovation," Anu Singh, managing director at Kaufman Hall, said in a statement. "We expect to continue to see large-scale organizations pursue partnerships because they realize that while their ability to remain independent may exist, the path to long-term relevance and growth may require broader partnerships and collaborations."
Leading deals in the third quarter was private equity giant Apollo's $7.2 billion acquisition of LifePoint Health. Apollo plans to merge LifePoint with RCCH HomeCare Partners, a 16-hospital system. The combined system will operate 84 hospitals across 30 states in mostly rural areas, along with physician practices and outpatient clinics.
Also during the quarter, Tenet Healthcare announced plans to sell its last three Chicago-area hospitals — Westlake Hospital, West Suburban Medical Center and Louis A. Weiss Memorial Hospital — to Pipeline Health and TWG Partners. That deal is expected to close in the fourth quarter of this year.
Tenet signaled its intent to exit the Windy City last October with the sale of MacNeal Hospital and related operations to Loyola Medicine. In August, Tenet completed the sale of London-based Aspen Healthcare to NMC Healthcare UK Limited, as it continues to work down debt and focus on strong markets.
Texas has scored the most deals in 2018, with five so far — two in the third quarter, according to Kaufman Hall. And one day into the fourth quarter, Houston's Memorial Herman Health System and Dallas-based Baylor Scott & White Health announced plans to merge.
The group also points to creative approaches to M&A. For example, an arrangement between Geisinger and Evangelical Community Hospital in Lewisburg, Pennsylvania, calls for Geisinger to invest $265 million over five years in their shared service areas while allowing Evangelical to remain independent. Meanwhile, Evangelical will benefit from Geisinger's IT advances and improved status in Geisinger's health plan, Kaufman Hall said.