Hospital M&A was strong in first quarter

Industry experts say hospital mergers and acquisitions will continue to be strong this year, with for-profit systems driving many deals.

There were 23 deals that closed during the first quarter of 2015, according to the Kaufman Hall & Associates LLC. That's tracking fairly close to the 95 deals that were consummated during 2014.

"2015 should be very close or match what occurred in 2014," Heather Delgado, a partner in the Chicago-based law firm Barnes & Thornburg LLP, said in an exclusive interview with FierceHealthFinance.

Both officials with Kaufman Hall and Delgado concur that there are many more deals involving for-profit hospitals or chains acquiring not-for-profit institutions. A 35 percent of the deals that were consummated during the first quarter involved for-profit providers, according to the Kaufman Hall data.

Finances drive such deals: The not-for-profits needs the resources for-profits have in order to make needed infrastructure improvements such as installing electronic health records systems or building new facilities, according to Delgado. Such deals often lead to an enhanced financial position after the merger is completed.

Industry observers have noted that the requirements of the Affordable Care Act have led to a tectonic shift in the way hospitals, do business, ultimately driving many of them together in a way that was not seen prior to the passage of the landmark healthcare reform law.

"Achieving the new and expanded capabilities for success in a value-based system is a significant challenge for many organizations," Kaufman Hall Managing Director Anu Singh said in the statement. "Mergers and acquisitions, as well as affiliations and collaborations, will continue to be important ways for organizations to advance their strategic objectives within a rapidly changing environment."

Delgado suggested that states attorney generals allow many deals to go through that they may have not in past years, and that if they draw any scrutiny, it is usually from the Federal Trade Commission. 

To learn more:
- read the Kaufman Hall statement