It's gearing up to be another big year for health system mergers and acquisitions. Here's what Becker's has gathered on the transactions scene as we settle into 2024:
1. A Jan. 2 Cain Brothers report found that hospital and health system merger and acquisition activity was up 27% in 2023 compared to 2022, with 75 transactions announced throughout the year.
2. Health systems carried that momentum into 2024, inking a number of deals in the early weeks of January. Six entities signed letters of intent to explore acquisitions and combinations — including the University of Pennsylvania Health System in Philadelphia and Doylestown (Pa.) Health — and four deals announced in 2023 were solidified, three of them in the state of Missouri.
3. Despite a hot January, different firms offered varying predictions for the year ahead. Grant Thornton reported that 2024 would be a "vigorous season for M&A activity in healthcare," anticipating accelerated interest in physician practices as rising costs and flat reimbursement rates make it harder for independent clinics to thrive.
4. But Bain & Co. gave a slightly different outlook, suggesting that amid rising threats — high interest rates, regulatory probes and "macroeconomic uncertainty" — deals would need to be more thoughtful in 2024. Indeed, Becker's has covered 25 called-off hospital deals over the past 24 months amid heightening scrutiny from state regulatory reviews and the Federal Trade Commission. In 2022, the FTC and Justice Department filed 50 merger enforcement actions.
5. Despite a reported "shrinking margin for error" in M&A deals, 80% of healthcare executives surveyed by Bain said they plan to complete the same amount of deals in 2024, or more.
6. As smaller community hospitals seek partners to weather financial struggles, academic health systems are poised to step up, according to Kaufman Hall. A robust network of community hospitals can help academic systems to ease high occupancy rates in urban centers; in the third quarter of 2023, academic health systems accounted for half of the 14 transactions with a nonprofit acquirer.
7. Among the major for-profit players, sales and acquisitions are a mixed bag. In February, Dallas-based Tenet Healthcare inked three deals to sell a collective nine hospitals (and some outpatient locations) across South Carolina and California. In total, these sales will yield approximately $3.9 billion for Tenet.
8. Franklin, Tenn.-based Community Health Systems has also been on a selling spree. In 2023, the system sold hospitals in West Virginia, Arkansas and Florida. This year, it is evaluating interest for sales that could yield more than $1 billion in additional proceeds, CEO Tim Hingtgen said on a Feb. 21 earnings call.
9. Nashville, Tenn.-based HCA Healthcare, on the other hand, is scooping up facilities — particularly in Texas. Among the recent purchases are 11 Houston-area freestanding emergency departments; the three-hospital Wise Health System in Decatur, Texas; and the bankrupt Trinity Regional Hospital Sachse (Texas), which it bought for $41 million. The system has also shared plans to acquire 41 urgent care centers from FastMed in Texas.
10. Though the year is young, a number of notable mergers have emerged. On Feb. 28, Northwell Health and Nuvance Health entered a strategic agreement to combine, forming a 28-hospital network across New York and Connecticut. Two days later, Duluth, Minn.-based St. Luke's and Wausau, Wis.-based Aspirus Health finalized their merger, forming a 19-hospital system with almost 14,000 employees.