- Hospital and health system M&A was steady in the third quarter of this year with 25 announced transactions, bringing the year-to-date total to 71 deals. That's slightly ahead of last year's pace, which saw 68 announcements through the third quarter, according to a report released Tuesday by Kaufman Hall.
- The number is up from 19 in the second quarter of this year, although the deal value this past quarter of $8.14 billion lagged behind the second quarter's near-record $11.3 billion. The number of deals for the third quarter exceeds the 18 transactions announced in this reporting period last year, but deal value was again behind last year's $10.7 billion.
- Kaufman Hill highlighted two significant transactions of the quarter: the combination of Ohio-based Summa Health and Michigan-based Beaumont Health into a combined system with about $6.1 billion in annual revenue, and a nearly $1.6 billion investment by Medical Properties Trust through a sale-leaseback of Prospect Medical Holdings' real estate assets in three states to pay down long-term debt.
Following a quarter marked by a high number of deals at lower dollar figures, another smaller transaction was announced this week. Hackensack Meridian Health and Englewood Health announced Tuesday they had signed a definitive agreement to merge.
Hackensack Meridian is a nonprofit system of 17 hospitals. Englewood includes a physician network and hospitals. Both are based in New Jersey.
The Beaumont-Summa deal is expected to close by the end of this year, the companies said in July when they signed a letter of intent. The transaction gives Beaumont its first foothold in Ohio but it will have to compete with the massive nonprofit Cleveland Clinic.
Summa officials had been looking for a partner after reporting a $40 million turnaround following a series of 2017 losses that forced cuts and consolidations.
The Kaufman Hall report called out Summa's health plan, which covers about 46,000 members. The plan's "expertise and claims processing capabilities may provide a growth opportunity and are expected to support Beaumont's efforts in direct contracting with Michigan employers," according to Kaufman Hall, which represented Summa in the merger.
The report comes as a California jury prepares to hear arguments in an antitrust lawsuit that has implications for provider M&A across the country. Sutter Health, the 24-hospital system that dominates acute care in the northern part of the state, faces allegations its all-or-nothing negotiation style has allowed it to drive up prices in the region.
A decision against Sutter could force it to break up into components although experts have said it's more likely the system will end up being required to ease its contract terms. Opening arguments scheduled for last week have been postponed.
Despite high-profile cases like Sutter, hospital groups contend M&A cuts costs and improves health outcomes. The American Hospital Association released a report last month making that argument but health policy experts (and the payer lobby) disagreed with the findings and were quick to point to research that refutes those claims.
Kaufman Hall found religiously affiliated health systems were in the acquirer role for four of the 25 announced transactions in the third quarter followed by for-profit systems in three of the deals and academic medical centers in two. The average size of seller by revenue was $326 million, close to the year-to-date average size of $337 million.