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Large health systems pursue more M&A in 2017

July 20, 2017
  • Hospital and health systems mergers and acquisitions increased 15% in the second quarter of 2017 compared to the previous year’s second quarter, according to a new analysis by Kaufman, Hall & Associates, LLC.
  • Large health systems have been especially active. Through the first half of 2017, there were six transactions of health systems with nearly $1 billion or more in revenues announced during the first half of the year. There were only four in all of 2016.
  • One of the three deals in the second quarter was a $2 billion merger of Steward Health Care with IASIS Healthcare, which would make the former system the largest private for-profit hospital operator with 36 hospitals in 10 states.

Health system mergers and acquisitions aren’t just contained to for-profit systems. The 31 total transactions announced in the second quarter included eight for-profits, 22 nonprofits and one for-profit/nonprofit combination.

Healthcare has seen plenty of M&A activity over the past couple of years, but what’s surprising about the first half of this year is the size of the mergers and acquistions. In addition to the Steward deal, Partners HealthCare in Boston announced it is buying Providence, R.I.-based Care New England Health System and Greenville Health System and Palmetto Health are looking to merge.

The Partners deal would allow Massachusetts’ biggest health system to expand to a neighboring state. Meanwhile, the Greenville/Palmetto merger would create the largest South Carolina health system with 13 hospitals, 1.2 million patients and $3.9 billion in annual net revenue.

Patrick Allen, managing director at Kaufman Hall said M&A activity among large organizations will continue. Just last week, Beth Israel Deaconess Memorial Center and Lahey Health signed a merger agreement that would create Massachusetts’ second largest health system with 13 hospitals.

Allen said the uptick in activity is because large health systems are trying to build the scale and capabilities to remain competitive in a changing healthcare industry. “Traditional providers face an array of uncertainties, from changing federal healthcare policies to shifting payment and care delivery models. Health systems across the country are looking to grow and transform their operations to ensure stability in the face of turbulent times,” said Allen.

Pennsylvania and Texas were the busiest states for M&A activity in the second quarter. Both saw four announced transactions in the second quarter. Community Health Systems was involved in four transactions and HCA in three deals. That might just be the start for HCA, which recently announced it will offer senior secured notes to fund hospital purchases.


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