Hospital transactions continued at brisk clip in 2014

The need for the hospital sector to prepare for value-based payments and population health management--among other factors--continued to drive an above-average number of mergers last year, according to the consulting firm Kaufman Hall LLC.

Altogether, 95 deals involving acute care facilities were consummated in 2014, slightly lower than the 98 deals completed in the year prior. However, it remains the third consecutive year when at least 95 transactions were completed. The survey does not include specialty or long-term-care hospitals.

By comparison, there were just 66 transactions in 2010, meaning the trend is running about 50 percent higher than in years past.

There were 29 transactions completed in the fourth quarter of 2014, suggesting that momentum for deals was picking up as the year came to a close. That compares to 25 deals in the fourth quarter of 2013.

"We are seeing more transactions designed to form large, fully integrated health systems, as well as more partnerships being explored between strong community hospitals and small health systems," Patrick Allen, a Kaufman Hall managing director, said in a statement accompanying the data. "We are also seeing more innovative types of partnership arrangements and more cases in which traditional lines of organizational types--hospitals, insurers and physician organizations--are being blurred."

Data from the PwC consulting firm also suggests that mergers and acquisitions in the hospital space are occuring at a healthy pace in part to help change how healthcare is delivered, FierceHealthFinance previously reported.

The number of mergers may cause a concern about rising hospital prices. That's the conclusion of University of Arizona economics prodessor Gautam Gowrisankaran, according to the Phoenix Business Journal. Gowrisankaran recently co-published with scholars from Northwestern University and the Wharton School of Business at the University of Pennsylvania a study in the American Economic Review that concluded hospital prices typically increase 3.1 percent after a merger.

"One of the ways that a hospital can achieve better bargaining leverage (with payers) is by merging with a competitor," he told the Phoenix Business Journal, removing a potential threat of insurers sending their patients to another hospital in the service area.

To learn more:
- read the Kaufman Hall statement 
- check out the Phoenix Business Journal article
- here's the American Economic Review study