Navigant Predicts a “Heat Wave” of Hospital M&A Activity Enabled by More Lenient Consolidation Guidelines

Firm Identifies Cities Apt To Experience More Hospital and Health System Consolidation

CHICAGO--(BUSINESS WIRE)-- Today, Navigant reported that it expects more hospital merger and acquisition (M&A) activity in specific areas of the country as a result of revised Horizontal Merger Guidelines issued by the Department of Justice (DOJ) and Federal Trade Commission (FTC) last month. The Guidelines, which haven’t been updated since 1992, assist the Agencies to focus their efforts on competitively harmful mergers while avoiding unnecessary interference with mergers that are beneficial to the market. By raising the threshold of the Herfindahl-Hirschman Index (HHI) used to classify a market as un-concentrated, moderately concentrated or concentrated the federal government created an environment where more mergers are likely to occur in markets where the concentration threshold does not warrant further Agency scrutiny.

“Given multiple factors – economic struggles, soft demand, declining reimbursement and healthcare reform – the environment is ripe for more hospital M&A activity,” says Chris Myers, director in the Healthcare Practice at Navigant. “More hospitals are looking to join larger systems in an effort to gain access to capital, scale economies and specialized expertise, as well as to help respond to reform and lay the groundwork for becoming an Accountable Care Organization (ACO).”

Applying the new HHI thresholds to the 87 largest Metropolitan Statistical Areas (MSAs) in the U.S. indicates the following concentration levels for hospitals:

  • 41 percent of these MSAs are considered to be concentrated for health systems
  • 37 percent are moderately concentrated
  • 22 percent are un-concentrated

According to Navigant’s analysis comparing the new HHI definitions to the old, 23 MSAs that were considered concentrated for hospitals are now considered moderately concentrated, and 11 MSAs that were considered moderately concentrated are now un-concentrated. The table below indicates the level of hospital and commercial payer concentration for each of the 87 largest MSAs, applying the new HHI definitions. Navigant believes the 19 MSAs – including many of the largest MSAs– that are now un-concentrated for hospitals are those that are most poised for additional M&A activity.

“The new mandate driving the next heat wave of hospital consolidation is sheer survival,” says Myers. “In the new economy, the case for hospital consolidation has shifted from the revenue side of the equation to improved efficiency and reduction of expenses. Health systems that historically relied heavily on investment income to bolster operating income are now forced to confront the stark reality of expenses accelerating faster than revenue.”

Health Systems   Concentrated   Moderately Concentrated   Un-concentrated
Commercial Payers            

• Austin


• Madison

• Baton Rouge


• Minneapolis

• Atlanta


• New Orleans

• Columbia

• Memphis

• Birmingham

• Nashville

• Baltimore

• Northern New Jersey

• Dayton

• Norfolk

• Dallas

• Phoenix

• Boston

• Oklahoma City

• Des Moines

• Omaha

• Greenville

• Providence

• Chicago

• Philadelphia

• El Paso

• Orlando

• Hartford

• San Antonio

• Detroit

• Seattle

• Fresno

• Portland, ME

• Honolulu

• St. Louis

• Houston

• Grand Rapids

• Raleigh

• Indianapolis

• Southern New Jersey

• Harrisburg

• Richmond

• Jacksonville

• Syracuse

• Knoxville

• Rochester

• Little Rock

• Tampa

• Lansing

• Salt Lake City

• Louisville

• Tulsa

• Las Vegas

• Spokane

• Milwaukee

• Lexington

• Springfield

• Tucson

• Wilmington

• Worchester


Moderately Concentrated

• Charlotte

• Albany

• Portland, OR

• Kansas City

• Riverside


• Colorado Springs

• Cincinnati

• Sacramento

• Lost Angeles

• San Francisco

• Columbus

• Cleveland

• San Diego

• New York City

• Washington, DC

• Dayton

• Denver

• Southern CT

• Orange County

• Toledo

• Pittsburgh

• West Palm Beach


• None

• Scranton

• Miami


For the hospitals and health systems in any market to successfully prepare for M&A conversations, according to Navigant, they must first:

  • Consider the pros and cons of the status quo vs. partnering with another health system.
  • Gain an understanding of the entire M&A process, including definition of key terms, typical phases, activities, issues, the regulatory process and key decision points in each phase.
  • Develop criteria against which to evaluate potential partners.
  • Identify and evaluate potential partners against those criteria to select a preferred partner.
  • Get an agreement among key leaders on the organization’s preferred position on all critical deal terms.

“As one would expect, there will be winners and losers in the next wave of consolidation,” says Jim Langenfeld, a Managing Director with Navigant’s Economics practice and former Director for Antitrust at the FTC. “To position hospitals and health systems for success in the marketplace, their leaders should evaluate their partnership options before a declining financial position or other consolidations pin them into a corner.”

About Navigant

Navigant Consulting, Inc. (NYSE: NCI) is a specialized, global expert services firm dedicated to assisting clients in creating and protecting value in the face of critical business risks and opportunities. Through senior level engagement with clients, Navigant professionals combine technical expertise in Disputes and Investigations, Economics, Financial Advisory and Management Consulting, with business pragmatism in the highly regulated Construction, Energy, Financial Services and Healthcare industries to support clients in addressing their most critical business needs. "Navigant" is a service mark of Navigant International, Inc. Navigant Consulting, Inc. (NCI) is not affiliated, associated, or in any way connected with Navigant International, Inc. and NCI's use of "Navigant" is made under license from Navigant International, Inc. More information about Navigant Consulting can be found at


Erin Bowler, 312-583-3659
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Jose Maldonado, 312-729-4029
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