Hospitals and health systems experienced significantly fewer mergers and acquisitions (M&A) in 2021, but deals involved notably larger health systems and higher revenues, according to a new analysis from industry consultant Kaufman Hall. Eight of the 49 transactions announced in 2021 (16.3%) were "mega mergers," in which the smaller partner or seller has average annual revenues over $1 billion. This was nearly double the percentage from 2020 (8.9%) and the highest in six years.
Other notable trends include hospitals' greater focus on core markets and assets, strengthening intellectual capital resources, and addressing societal issues and underserved populations. These trends are expected to continue into 2022, and healthcare systems' strategies going into the new year are expected to be influenced by three key lessons from the pandemic:
Realize the imperatives of scale. Larger health systems were better positioned to respond to the pandemic and weather its impacts.
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Focus on core markets and services. Pandemic disruptions and financial pressures made non-core assets and markets less attractive, prompting a shift to more core markets and services.
Seek innovative partnerships. Health systems are increasingly seeking opportunities to offer new services to consumers or enhance delivery for specialized services.
Researchers say these trends point to a larger process of transformation in the industry, as the pandemic continues to reshape the healthcare system.
About Kaufman Hall
Kaufman Hall provides management consulting solutions to help society's foundational institutions 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, rigorous analytics, and industry-leading solutions into their strategic planning and financial management processes, with a focus on achieving their most challenging 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 Kaufman Hall advisory services are unparalleled, encompassing strategy; financial and capital planning; performance improvement; treasury and capital markets management; mergers, acquisitions, partnerships, and joint ventures; and real estate.
