Which Traits Dominated Hospital M&A Exercise Final 12 months?



Merger and acquisition exercise amongst hospitals and well being methods picked up final 12 months after 2021’s current historic low. Key developments included cross-market mega-deals and educational medical facilities increasing their neighborhood hospital networks. Regardless of powerful financial circumstances, Kaufman Corridor consultants count on this exercise to proceed rising in 2023, in line with a report launched Thursday. 

In 2022, 53 M&A offers have been introduced amongst hospitals and well being methods, leading to greater than $45 billion in whole transacted income, the report stated. This is a rise from the 49 offers introduced in 2021.

Final 12 months, the typical annual income among the many smaller social gathering was $852 million. For the bigger social gathering, the typical annual income was $4.13 million. Fifteen % of 2022’s offers fell into the class of mega merger, which implies the smaller social gathering’s annual revenues exceeded $1 billion. 

A number of the greatest M&A offers in 2022 have been cross-market transactions (offers that mix well being methods situated in numerous areas, with little or no market overlap). The mega-merger between Atrium Well being and Advocate Aurora Well being took the highest spot — the deal created the fifth-largest nonprofit built-in well being system within the U.S. 

There are additionally some main cross-market transactions introduced final 12 months that will shut within the coming months, together with College of Michigan Well being’s plan to mix with Sparrow Well being System, Essentia Well being’s proposed merger with Marshfield Clinic Well being System, and the merger plan introduced by Sanford Well being and Fairview Well being.

Cross-market mergers have been a serious pattern within the offers introduced final 12 months as a result of they unfold the mixed system’s working dangers throughout completely different markets and infrequently enable organizations to play in each city and rural markets. These mergers don’t truly change the aggressive construction of the markets concerned within the merger as a result of they don’t improve the focus of native hospitals, in line with the report. 

One other key pattern in 2022’s hospital M&A exercise was educational medical facilities’ deal with increasing their neighborhood hospital networks. College of Michigan Well being’s deliberate merger with Sparrow Well being, which serves rural Michigan communities, is an instance of this. Different examples embrace UChicago Drugs’s acquisition of a controlling curiosity in AdventHealth’s Nice Lakes Area (which incorporates 4 hospitals within the Chicago suburbs) and Thomas Well being’s integration into WVU Well being System in West Virginia.

Kaufman Corridor’s analysts stated that M&A exercise will stay sturdy as a result of many hospitals really feel they should restructure amid a bevy of challenges. For starters, hospitals are competing with extremely capitalized well being plans, retail giants and digital well being firms. They’re additionally coping with a sweeping workforce scarcity, and plenty of sufferers are delaying care as a consequence of monetary pressures. 

Earlier this month, Kaufman Corridor analyst Erik Swanson instructed MedCity Information that hospitals’ median working margins are nonetheless under zero on a cumulative foundation. To treatment their bleak monetary scenario, many hospitals are attempting to construct a extra sustainable group by looking for economies of scale, the report stated.

Picture: Kritchanut, Getty Photographs



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