Mergers and acquisitions (M&A) increased among hospitals and health systems in 2013, according to a new analysis by Kaufman Hall.
Last year, hospitals and health systems announced 98 new combinations, a 3 percent increase from the previous year and a 51 percent increase from 2010, the analysis found. The acquired organizations' total operating revenue was $32.3 billion. "The level of activity shows consolidation continuing to occur among not-for-profit hospitals and health systems as they position themselves for value-based payment and population health management," the analysis states.
In 87 of the transactions, buyers acquired a not-for-profit organization--70 of buyers were non-profits and 17 were for-profit organizations. The acquired organizations in non-profit deals generated $18.5 billion in total revenue. The 11 remaining for-profit mergers generated a total of $13.8 billion. Of that sum, more than 90 percent--about $12.7 billion--came from just two transactions: Dallas-based Tenet Healthcare's acquisition of 28-hospital Vanguard Health Systems and Tennessee-based Community Health Systems' acquisition of Florida's Health Management Associates.
"Our analysis confirms that hospitals and health systems are continuing to pursue partnership arrangements as one approach to accessing the enhanced infrastructure necessary to provide care successfully in the changing environment," said Kaufman Hall Managing Director Michael Finnerty.
Kaufman Hall based the analysis on its U.S. acute-care hospital database. It did not incorporate data on specialty hospital, long-term acute care center or surgical center M&A.
A previous analysis found that M&A in the healthcare sector increased sharply in 2013's fourth quarter, with 267 new transactions and 16 percent more in deal volume, FierceHealthFinance previously reported. Healthcare finance experts predict M&A will continue to grow in the future. "The hospital market [remains] very fragmented, and there are long tails of hospitals to be consolidated," Cecilia Gonzalo, managing director of the Essex Woodlands venture capital firm, said at a video webinar in March.
To learn more:
- here's the analysis