Mergers on the rise as hospitals optimize for value-based care

By Jeff Lagasse
02:19 PM
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The first half of 2016 has seen more healthcare organization M&A activity than the same timeframe in 2015 as providers are figuring out how to navigate rapid industry change and emerging payment models, Kaufman Hall said. 

Hospital mergers and acquisitions rose by 6.1 percent when compared to 2015, Kaurman Hall and Associates said, with 52 transactions during the first half of 2016.

That’s up from the 49 deals recorded during that same timeframe last year, the firm said. And looking just at the second quarter of 2016, there were 27 transactions announced, up 3.8 percent from the 26 recorded in the second quarter of last year.

Sustained growth demonstrates that hospital and health system leaders across the country continue to turn to mergers, acquisitions and other forms of partnerships as a means of reducing costs, enhancing competitive positioning and pivoting to a value-based business model, the analysis found.

The largest deal announced in the second quarter of 2016, for instance, was Universal Health Services' $445 million acquisition of the remaining interest in Valley Health System, which encompasses six acute care hospitals in Las Vegas, the analysis found. Kaleida Health, meanwhile, was involved in four transactions, while HCA Healthcare was involved in three; and Texas was the most active state with 11 transactions.

Kaufman Hall said the deals that were identified occurred across the acute care spectrum, including nonprofit, for-profit, rural, urban and academic health centers. Of the 52 transactions, 39 involved acquisitions by nonprofits and 12 were acquisitions by for-profit organizations; one transaction involved a nonprofit/for-profit combination.

A total of 11 publically owned, nonprofit hospitals were acquired during that time. Twelve transactions involved partnerships with faith-based organizations.

"The continuing uptick in mergers and acquisitions is not surprising," Kaufman Hall managing director Anu Singh said in a statement. "The industry is rapidly changing and many organizations are not optimally positioned to navigate the transition to value-based care on their own. Healthcare leaders should thoroughly evaluate the partnership options to help ensure strong, competitive positioning for their organizations into the future."