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Hospital Merger and Acquisition Activity Continues to Climb, According to Kaufman Hall Analysis

Three Large-scale Mergers Announced in First Quarter

SKOKIE, Ill., April 19, 2017 — The number of hospital and health system partnership transactions continued an upward trajectory in the first quarter of 2017, with an 8 percent increase from 25 to 27 transactions compared to the first quarter of 2016, according to the latest analysis by Kaufman, Hall & Associates, LLC, a leading provider of strategic, capital, financial, and transaction advisory services and software tools. The increase follows another year of continued growth, with transactions climbing from 66 announced deals in 2010 to 102 in 2016. The overall trend illustrates that healthcare organizations across the country continue to seek new efficiencies and capabilities for a transforming industry.

The first quarter was particularly notable for an uptick in transactions among large organizations, with three announced deals targeting organizations with nearly $1 billion or more in revenues. 2016 saw four such deals announced in 12 months. The four announced deals in the first quarter all involved not-for-profit organizations, with the largest of the three being the merger of Beth Israel Deaconess Medical Center and Lahey Health in Massachusetts. Also announced were affiliations between PinnacleHealth System and the University of Pittsburgh Medical Center (UPMC), and Fairview Health Services and HealthEast Care System.

More transactions among larger and like-sized organizations likely will be seen in the coming months, according to Anu Singh, Managing Director at Kaufman Hall. “Hospitals and health system executives are looking for strategic opportunities to ensure the continued growth and success of their organizations amongst disruptive forces, including innovative competitors, declining payments, flat or decreasing inpatient volumes, and increasing price sensitivities among consumers,” said Mr. Singh. “As the number of independent hospitals declines, organizations are seeking to build new capabilities and economies of scale through partnerships.”

Of the transactions announced in the first quarter of 2017, six involved for-profit acquirers and 21 involved not-for-profit acquirers. In addition to the deal with UPMC, PinnacleHealth announced its acquisition of four Community Health Systems hospitals, and an affiliation with Hanover Hospital. In addition to HealthEast, Fairview Health Services also announced its acquisition of Grand Itasca Clinic & Hospital. Of all states, Pennsylvania saw the most activity, with five announced transactions in the first quarter.

About Kaufman Hall

Kaufman Hall provides management consulting and software to help organizations realize sustained success amid changing market conditions. Since 1985, Kaufman Hall has been a trusted advisor to boards and executive management teams, helping them incorporate proven methods into their strategic planning and financial management processes, and quantify the financial impact of their plans and strategic decisions to consistently achieve their goals.

Kaufman Hall services use a rigorous, disciplined, and structured approach that is based on the principles of corporate finance. The breadth and integration of our advisory services are unparalleled, encompassing strategy; financial and capital planning; debt and derivatives-related financial transactions; capital allocation and decision making; and mergers, acquisitions, partnerships, and joint ventures.

Kaufman Hall’s Axiom Software provides sophisticated, flexible performance management solutions that empower finance professionals to analyze results, model the future, and optimize organizational decision making. Solutions for long-range planning, budgeting and forecasting, reporting and analytics, consolidations, capital planning, and profitability and cost management are delivered on a single integrated software platform. Kaufman Hall’s Peak Software empowers healthcare organizations with clinical benchmarks, data, and analytics to provide a higher quality of care for optimized performance and improved patient outcomes.

April 19, 2017 I Written By

John Lynn is the Founder of the HealthcareScene.com blog network which currently consists of 5 blogs containing over 11,000 articles with John having written over 5500 of the articles himself. These EMR and Healthcare IT related articles have been viewed over 18 million times. John also manages Healthcare IT Central and Healthcare IT Today, the leading career Health IT job board and blog. John is co-founder of InfluentialNetworks.com and Physia.com. John is highly involved in social media, and in addition to his blogs can also be found on Twitter: @techguy and @ehrandhit and LinkedIn.

Hospital Merger and Acquisition Activity Up Sharply in 2015, According to Kaufman Hall Analysis

112 Transactions Announced in 2015—18 Percent Increase over 2014

Skokie, IL, January 21, 2016 — The number of hospital transactions announced in 2015 grew 18 percent compared with 2014 and 70 percent compared with 2010, according to the latest analysis by Kaufman, Hall & Associates, LLC, a leading provider of strategic, capital, financial, and transaction advisory services and software tools. In 2015, 112 hospital transactions were announced compared with 95 transactions in 2014 and 66 in 2010. The pace of transactions was especially strong in the second half of 2015.

Hospital Mergers, Acquisitions, Joint Ventures in 2015

The rising number of transactions demonstrates that mergers, acquisitions, and other forms of partnership are an increasingly critical strategy as hospitals seek to enhance competencies and scale to provide coordinated, cost-effective care across the continuum.

Other key findings from the analysis include:

  • 28 transactions were announced in the 4th quarter of 2015, compared with 29 in the 4th quarter of 2014
  • Operating revenue of acquired organizations in 2015 was greater than $33 billion
  • Transactions included a variety of forms and structures, including mergers, acquisitions, joint ventures, and joint operating agreements
  • Transactions occurred across a broad range of acute-care segments, including not-for-profit, for-profit, rural, urban, and academic health centers
  • In 28 of the 112 transactions announced in 2015, the acquiring entity was for-profit; in 83 transactions, the acquiring entity was not-for-profit; and in one transaction, a not-for-profit and for-profit organization jointly acquired an organization
  • A faith-based organization was the acquiring entity in 19 transactions and the acquired entity in 14 transactions
  • Three hospital-management companies were involved in a significant number of transactions:
    • Franklin, TN-based Community Health Systems was a party to eight transactions
    • Brentwood, TN-based LifePoint Health, or the joint venture Duke LifePoint Healthcare, was a party to six transactions
    • Ontario, CA-based Prime Healthcare was a party in five transactions
    • The largest deal announced was the merger of two not-for-profit, Catholic healthcare systems: Renton, WA-based Providence Health & Services ($12 billion in revenue) and Irvine, CA-based St. Joseph Health System ($5.6 billion in revenue); the merger will form one of the largest not-for-profit healthcare systems in the country
    • Community Health Systems is spinning off 38 hospitals in communities of less than 50,000 residents into a new public company called Quorum Health Corporation ($2.1 billion in revenue) that will begin trading in early 2016; Community Health Systems will focus on larger hospitals in urban areas, while Quorum will focus on hospitals in smaller communities

“Hospitals and health systems are facing extraordinary pressure to reduce costs, manage care more effectively across the continuum, and improve patient engagement and experience,” said Patrick Allen, Managing Director at Kaufman Hall. “To achieve these goals, hospitals and health systems will continue to pursue strategic partnerships designed to achieve clinical alignment, network breadth and depth, operational efficiency, and other critical capabilities.”

Using Kaufman Hall’s database, the analysis includes reported combinations of acute-care hospitals in the U.S., including mergers, acquisitions, joint ventures, and member substitutions. The total number does not include specialty hospital, long-term acute-care hospital, or surgical center transactions; minor asset sales from closed hospitals; affiliations or management service agreements; or international transactions.

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, Kaufman Hall provides sophisticated, integrated, and intuitive software solutions for long-range planning, budgeting, forecasting, reporting, capital planning, profitability, and cost management on a single platform. kaufmanhall.com

January 21, 2016 I Written By

John Lynn is the Founder of the HealthcareScene.com blog network which currently consists of 5 blogs containing over 11,000 articles with John having written over 5500 of the articles himself. These EMR and Healthcare IT related articles have been viewed over 18 million times. John also manages Healthcare IT Central and Healthcare IT Today, the leading career Health IT job board and blog. John is co-founder of InfluentialNetworks.com and Physia.com. John is highly involved in social media, and in addition to his blogs can also be found on Twitter: @techguy and @ehrandhit and LinkedIn.

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.

November 10, 2015 I Written By

John Lynn is the Founder of the HealthcareScene.com blog network which currently consists of 5 blogs containing over 11,000 articles with John having written over 5500 of the articles himself. These EMR and Healthcare IT related articles have been viewed over 18 million times. John also manages Healthcare IT Central and Healthcare IT Today, the leading career Health IT job board and blog. John is co-founder of InfluentialNetworks.com and Physia.com. John is highly involved in social media, and in addition to his blogs can also be found on Twitter: @techguy and @ehrandhit and LinkedIn.

Number Of Hospital Transactions Down Slightly In First Half Of 2014 According To Kaufman Hall Analysis

Skokie, IL, August 13, 2014—Hospital merger and acquisition activity was down slightly in the first half of 2014, compared with the first half of 2013, according to the latest analysis by Kaufman Hall. In the first two quarters of 2014, 43 transactions were announced, compared with 46 in the first half of 2013.

Kauffman Hall Chart

Of the 43 transactions so far in 2014, 40 involved acquisition of not-for-profit organizations—33 by other not-for-profit organizations and 7 by for-profit organizations. The total operating revenue of the acquired organizations was $10.0 billion. The transactions occurred across a broad range of acute-care segments, including not-for-profit, for-profit, rural, urban, and academic health centers.

“Mergers and acquisitions continue to be an important method for healthcare organizations to achieve the economies, infrastructure, geographic coverage, and other attributes needed for a value-based delivery system,” says Michael Finnerty, Managing Director of Kaufman Hall.

About Kaufman Hall

Kaufman Hall is an independent management consulting firm that offers integrated strategic, capital, and financial advisory services and software tools to healthcare organizations of all types and sizes. Our goal is to help hospitals and health systems achieve best-practice strategic financial management that produces tangible, measurable, and improved financial results. To learn more, visit kaufmanhall.com

August 13, 2014 I Written By

John Lynn is the Founder of the HealthcareScene.com blog network which currently consists of 5 blogs containing over 11,000 articles with John having written over 5500 of the articles himself. These EMR and Healthcare IT related articles have been viewed over 18 million times. John also manages Healthcare IT Central and Healthcare IT Today, the leading career Health IT job board and blog. John is co-founder of InfluentialNetworks.com and Physia.com. John is highly involved in social media, and in addition to his blogs can also be found on Twitter: @techguy and @ehrandhit and LinkedIn.