Hospital M&A turns to strategy over scale

Health systems put an emphasis on strategy over scale in hospital transactions announced in the second quarter of 2024, according to a July 9 report from Kaufman Hall.

"As pressure intensifies to transform the current healthcare system to bring greater value to patients and communities, the impetus for M&A activity will rely less on seeking capital in traditional ways and instead move toward new, strategic partnership models," Anu Singh, managing director and mergers & acquisitions practice leader with Kaufman Hall, said in a July 9 news release. "Many of these M&A transactions enable hospitals to sustain and enhance access to care, launch new services, or strengthen and stabilize systems, which allows for future growth."

Five things to know:

1. There were 11 hospital transactions announced in the second quarter of 2024, below historic Q2 averages. There were 20 hospital transactions announced in the second quarter of 2023.

2. Despite fewer overall deals, total transacted revenue in the quarter remained near historic highs at $10.8 billion.

3. Three of the 11 announced transactions involved religiously affiliated acquirers. Two involved academic or university-affiliated acquirers. The other six involved not-for-profit health system acquirers.

4. For the first time since Kaufman Hall tracked this data, there were no for-profit health system acquirers in the quarter. Kaufman Hall said in the report that this continues a trend of low for-profit buy-side activity. In the first quarter of 2024, just one of the 20 announced transactions involved a for-profit acquirer.

5. The emphasis on strategy over scale "characterized the most significant transactions of Q2 2024 and built upon trends we have been commenting on in recent past reports," Kaufman Hall said.

Those trends are:

  • Pursuit of intellectual capital and new or complementary capabilities through a strategic partnership, often involving an innovative partnership model.
  • Focus of large regional or national systems on market reorganization and strategic realignment of their system portfolios.
  • The development of networks involving academic health systems and community hospital partners to sustain and enhance access to care.

Read the full report here.

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