Hospital M&As decline in the second quarter

Mergers and acquisitions in the hospital sector tumbled during the second quarter of this year, according to a new report from PwC.

The healthcare arm of the accounting and consulting giant reported a total of seven hospital deals during the quarter, compared to 22 during the second quarter of 2013. That represents a drop of 68 percent. Since virtually all of the deals involved a not-for-profit entity, the value of such transactions were not available. Among the bigger transactions were Northwestern Memorial Healthcare of Chicago acquiring Cadence Health of Winfield, Illinois and Duke LifePoint Healthcare of Brentwood, Tennessee acquiring Rutherford Regional Health System of Rutherfordton, North Carolina. 

PwC suggested that the drop in volumes don't necessarily indicate a specific trend.

"There are many active discussions across the U.S. regarding consolidations/mergers among hospitals and health systems, which are not reflected in the figures based on the stage of the potential deal," stated the report, which was authored by PwC's "Deals" practice. "Activity in this sector will continue for the foreseeable future as consolidation continues in all aspects of the hospital space regardless of the for profit or not-for profit status of a facility or system."

Overall, hospital deals fell last year, according to data from Irving Levin and Associates, although the number of beds involved in deals rose dramatically, suggesting that larger deals would be a fact in the years to come. Two of the biggest deals involved acquisitions by for-profit giants Tenet Healthcare Corp. (NYSE: THC) and Community Health Systems (NYSE: CYH). Industry observers say the Affordable Care Act and mandatory healthcare IT upgrades will compel many more organizations to consolidate.

Meanwhile, deals in the managed care, post-acute care and medical practice niches were either stable or gained ground, according to PwC.

Altogether, there were a total of 18 deals involving private equity firms, more than doubling the eight that were announced during the second half of 2013. PwC noted its focus has been on segments of healthcare delivery outside of hospitals and payers.

To learn more:
- download the report (.pdf) (registration may be required)

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