Twenty-seven hospital merger and acquisition transactions were announced in the third quarter, the highest Q3 volume since 2017, according to Kaufman Hall's latest M&A report.
Nearly half the activity in the quarter came from Dallas-based Steward Health Care's bankruptcy, including one of four mega-mergers. Total transacted revenue for Q3 reached a high of $13.3 billion.
Many health systems are expanding into new geographic areas to diversify their portfolios, strengthen bargaining power and pursue further economies of scale. Kaufman Hall expects large systems to continue adjusting their portfolios to support investments and meet changing community needs.
"While the increasing number of transactions in Q3 2024 is getting us back to a normal level of activity, we are observing various challenges and opportunities in the market," Anu Singh, managing director and M&A practice leader with Kaufman Hall, said. "The motivations for entering into transactions and partnerships vary. As we are seeing the number of strategic transactions accelerate, we are also seeing some organizations that face financial challenges are struggling to find a partner."
Hospital financial performance remained relatively stable in August, and despite higher patient volume, revenue and expenses declined on a volume-adjusted basis, according to Kaufman Hall's latest "National Hospital Flash Report." The median year-to-date operating margin index reflecting actual margins for August was 4.2%.
"Patients are spending less time in the hospital and are requiring less intensive care," Erik Swanson, senior vice president and data and analytics group leader with Kaufman Hall, said. "High-performing hospitals are also making strides in streamlining their patient discharge process for more efficient care transitions."