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Hospital M&A revenue rises with shift to regional partnerships

Press releases may be edited for formatting or style | July 08, 2021 Business Affairs
Despite significantly fewer deals, total revenue remains high as health systems shift focus from acquisitions of small, independent hospitals to regional partnerships, according to a new analysis from Kaufman Hall. Year to date (first and second quarters combined), total revenue in 2021 is the second highest in recent years at $17.2 billion with 27 transactions. In 2020, revenue for the same period was $17 billion with 43 transactions.

Activity in the second quarter, 2021, was below pre-pandemic historical averages with 14 announced transactions, though this was consistent with second quarter, 2020 levels. The smaller number of transactions was offset by a high number of transactions with seller revenues above $500 million, including one "mega merger" involving two companies with over $1 billion in annual revenue.

A SHIFT TO REGIONAL PARTNERSHIPS

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For health systems, partnerships focused on resource sharing within a defined geography proved valuable during the heights of the COVID-19 pandemic. Strong regional market presence allowed health systems to partner with health plans and local employers by offering the necessary scale for population-health-focused initiatives. By partnering with well-established organizations, health systems can preserve and leverage local knowledge within a newly combined organization.

Much of the second quarter activity was concentrated in the Southeast, with Georgia accounting for three transactions involving eight hospitals and approximately $1.5 billion in transacted revenue. The most significant transactions for the second quarter of 2021 included:

Spectrum Health and Beaumont Health's intention to form a combined system that would have approximately $13 billion in annual operating revenue.
Tenet Healthcare's plans to sell five hospitals in south Florida's Miami-Dade and Broward Counties to Steward Health Care System.
Piedmont Healthcare's plans to acquire four Georgia hospitals from HCA Healthcare; in a separate announcement, University Health Care System in Augusta, Ga., stated its intention to join Piedmont Health.
HCA Healthcare's plans to sell a fifth north Georgia hospital—Redmond Regional Medical Center in Rome, Ga.—to Florida-based AdventHealth.
Rush Health Systems' plans to merge with Louisiana-based Ochsner Health.
The Medical University of South Carolina's plans to purchase three hospitals in Richland County and adjacent Kershaw County from LifePoint Health.


About Kaufman Hall
Kaufman Hall provides management consulting 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.

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