Financial efficiency drives healthcare M&A up 21%

Healthcare saw mergers and acquisitions jump 21 percent in 2012 from the prior year, according to a new report from New York-based finance firm Berkery Noyes.

There were 380 total transactions last year, up from 315 in 2011. The total transaction value was $11.96 billion, up slightly from the $11.36 billion recorded in 2011, according to the report.

"The robust level of M&A activity shows that there are plenty of desirable, fast growing companies ... that are attracting very high multiples and appealing to both strategic and financial acquirers,"  Berkery Noyes Managing Director Tom O'Connor said last week in a statement. "In addition, the expiring favorable tax treatment on capital gains helped push some sellers to complete transactions this year."

A lot of the M&A activity is being fueled in part by hospitals acquiring physician practices, O'Connor told FierceHealthFinance.

"The physicians have resisted (modernization), but now they have to be more efficient because it is getting too expensive to provide care in the old-fashioned way," O'Connor said. He added that hospitals also are modernizing their IT infrastructures as a way to get a handle on transactional costs.

"If you ask a hospital what a surgery actually costs them, they have no idea. It's all about goosing the billings," he said. "There is a lot of change necessary in that space."

The past year also saw a considerable increase in mergers and acquisitions in the healthcare IT sector especially, with smaller deals yielding big returns on investment, FierceHealthIT previously reported.

To learn more:
- read the Berkery Noyes report
- here's the Berkery Noyes statement