With fewer independent hospitals and smaller systems, M&A activity is limited. Bungled integration plans, diluted returns and rising regulatory scrutiny in highly concentrated markets may also be contributors to this decrease. While President Joe Biden and federal antitrust agencies are being tougher on horizontal deals like hospital acquisitions of physician practices, the law and regulatory guidelines are not as strict on vertical integration, say industry experts. As a result, outpatient acquisitions are becoming more commonplace.

Still, despite lower hospital transactions, those taking place consist of large transactions and helped buoy deal values in 2021. Some were even considered to be megamergers, in which the smaller party or seller had average annual revenues surpassing $1 billion. A recent one was that of NorthShore University HealthSystem and Edward Elmhurst Health into a nine-hospital system in Chicago with $4 billion in revenue. Announced back in September, the deal was completed just this month.


And for-profit hospital chains are also divesting some inpatient facilities in their smaller markets, like HCA, which announced this month that it acquired MD Now Urgent Care. The deal gives it 59 urgent care centers that will expand the reach of its network in Florida.

While low right now, M&A activity among hospitals is expected to rebound in the second half of 2022 and into 2023.

"The majority of Q4 announcements were from distressed sellers who had no choice but to go to market during the height of the pandemic. As financially strong sellers get to the other side of omicron at the end of Q1 and beginning of Q2 2022 and ask themselves if they might have better served their communities from a larger platform, we will see more announcements in the second half of 2022,” said Jordan Shields, a partner at Juniper Advisory, in a statement.

Ponder & Co. did not respond to HCB News’ request for comment.

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