Hospital Merger and Acquisition Activity Increases in Third Quarter of 2015, According to Kaufman Hall Analysis
Number of Transactions in First Three Quarters Grows 18.2 Percent Compared with 2014
Skokie, IL, November 10, 2015—Hospital merger and acquisition activity accelerated in the third quarter of 2015, according to the latest analysis by Kaufman, Hall & Associates, LLC, a leading provider of strategic, capital, financial, and transaction advisory services and software tools. Kaufman Hall identified 29 hospital and health system transactions in the third quarter of 2015, up from 26 transactions announced in the second quarter. A total of 78 transactions were announced in the first three quarters of 2015, an 18.2 percent increase compared with the 66 transactions announced in the first three quarters of 2014.
The number of transactions in 2015 is on pace to surpass that of 2012 (95), 2013 (98), and 2014 (95), demonstrating providers’ continued use of mergers, acquisitions, and other forms of partnerships to strengthen capabilities for an increasingly value-based system.
More observations of note from transactions in the third quarter of 2015 include:
- The transactions occurred across a broad range of acute-care segments, including not-for-profit, for-profit, rural, urban, and academic health centers.
- 10 of the 29 transactions in the third quarter of 2015 involved acquisitions by for-profit organizations—a higher number than in previous quarters.
- The largest deal announced was the merger of two not-for-profit Catholic healthcare systems: Renton, Washington-based Providence Health & Services and Irvine, California-based St. Joseph Health System, which will form one of the largest not-for-profit health systems in the country.
- Another large deal announced in the third quarter was Community Health Systems spinning off 38 of its hospitals in smaller communities into a new public company called Quorum Health Corporation.
- The total operating revenue of acquired organizations acquired for the third quarter of 2015 was more than $5.8 billion (excluding the Providence/St. Joseph merger and the spinoff of hospitals to form Quorum).
“The changing basis of competition in healthcare places a premium on factors such as efficiency, care management, network scope and scale, and physician relationships,” said Mike Finnerty, Managing Director, Kaufman Hall. “Our analysis of hospital transactions suggests that organizations are turning to partners to strengthen those capabilities, and we anticipate this trend will continue as macro forces continue to drive health system change.”
About Kaufman Hall
Kaufman Hall provides management consulting services and enterprise performance management software that help organizations realize sustained success amid changing market conditions. Since 1985, we have been a trusted advisor to hospitals and health systems, helping them incorporate proven methods into their strategic planning and financial management processes and quantify the financial impact of their plans to consistently achieve their goals. Kaufman Hall helps clients identify and execute strategic initiatives that drive market and financial performance; provides financial advisory services to clients seeking capital; prepares and implements integrated strategic, financial, and capital plans; designs comprehensive capital allocation processes; and assists in the evaluation, structuring, and negotiation of partnership and divestiture opportunities. Additionally, we provide sophisticated, integrated, and intuitive software solutions for long-range planning, budgeting, forecasting, reporting, capital planning, profitability, and cost management on a single platform.