‘Mega-mergers’ dominated in 2021, analysis finds
Fewer hospital mergers and acquisitions so far in 2021 is offset by a high percentage of “mega-merger” transactions, according to a new analysis.
Seven transactions involving 20 hospitals took place during the third quarter of 2021, with transacted revenue totaling $5.2 billion, according to a quarterly report released Wednesday by consulting firm, Kaufman Hall.
This year’s transactions have involved large health systems that have merged or were acquired by other large systems. The average revenue of selling organizations was $659 million in 2021, more than double the average of $329 million between 2015 and 2020.
Noted transactions include the planned merger of Utah-based Intermountain Healthcare and Colorado-based SCL Health, which would create a $11 billion system with 33 hospitals across six states.
So far, 34 transactions have been announced this year compared to 62 during the same period in 2020. The number of deals this year were less than half the annual average of 73 that took place between first and third quarters over the past six years.
Yet the decline in transaction volume has not resulted in much lower total transacted revenue. That amount for 2021 is currently at $22.4 billion, compared to $24.3 billion during the same period in 2020. That’s largely been the average in previous years. This year’s transaction volume decrease was more of an anomaly than a sign of a lasting trend, said report co-author Anu Singh, managing director and leader of Kaufman Hall’s partnerships, mergers & acquisitions practice. He expects transaction activity to return to previous levels.
There is a desire among large health systems to form strategic partnerships with other large stakeholders in and outside the industry, Singh said, adding that was likely to continue in the coming years, especially as organizations recover from the pandemic.
Kaufman Hall reported last February that U.S. hospitals could lose between $53 billion and $122 billion in revenue this year as they return inpatient volume and deal with added expenses from treating COVID-19 cases.
But Singh felt the findings highlighted a trend he has observed for several years of organizations looking less to acquire smaller hospitals in favor of striking partnerships that have a more of a “transformative impact.”
“It’s more about accessing intellectual capital and resources, about growth, or about complimentary offerings and capabilities across health systems,” Singh said.