Private equity giant Apollo has acquired Brentwood, Tennessee-based hospital system LifePoint Health in a deal valued at $5.6 billion. The deal includes $2.9 billion of LifePoint debt and minority interest.
Apollo plans to merge LifePoint with RCCH HealthCare Partners, a 16-hospital system also based in Brentwood. The combined company will be led by LifePoint CEO William Carpenter and operate under the name LifePoint Health.
- The combined hospital system will operate 84 hospitals in largely rural areas across 30 states, with a portfolio including physician practices and outpatient clinics and pro forma 2017 revenues of over $8 billion.
Early reports on the acquisition began to surface late last week, resulting in LifePoint's shares spiking 33% in premarket trading Monday. The transaction is expected to be completed over the course of the next several months.
LifePoint reported a net loss of $5.3 million for the first quarter of 2018, with revenues totaling $1.61 billion compared to $1.63 billion for the same quarter in 2017. The first quarter loss followed its Q4 2017 loss of $27 million. The hospital system began shedding hospitals to pay off its debt, including three divestitures in Louisiana in Q1 of this year.
"LifePoint and RCCH are aligned in our missions and commitment to ensuring that non-urban communities across the country have access to quality care, close to home," Carpenter said in a statement. "Together, we can extend this shared focus while generating new opportunities for growth and partnerships that will help us navigate the changing healthcare industry dynamics."
One of LifePoint's biggest headaches has been its dependence on Medicare and Medicaid, specifically regarding those programs' shifting payment rules. The hospital system attributed Q1 revenue decreases to $3.2 million less in Medicare and Medicaid EHR incentive payments year-over-year.
Mizuho analyst Ann Hynes writes that "the underlying operational headwinds for non-urban providers are real," adding that downward-trending admissions have been difficult as rural providers "have not been able to stop the out-migration of services, coupled with the low population and economic growth in rural markets."
The healthcare industry has been a hotbed of M&A activity for more than a year now. The value of healthcare sector deals for the first half of 2018 jumped to $315.74 billion, compared with $154.87 billion in the same period last year. Low patient admissions, reduced reimbursements and pressure to improve outcomes while reducing costs are just a few of the factors fueling the trend.
Recent deals include the proposed merger of Sanford Health and Good Samaritan Society, two of Sioux Falls, South Dakota's largest employers, and Catholic health systems Bon Secours and Mercy Health which, if approved, would create the nation's fifth-largest Catholic health system with 43 hospitals across seven states.