University of Pittsburgh Medical Center
The number of hospital and health system mergers and acquisitions continued their upward trend in the first quarter of 2017, with an eight percent increase from 25 to 27 transactions compared to the first quarter of 2016, according to the latest analysis by Kaufman Hall and Associates.
That increase follows another year of continued growth, with transactions climbing from 66 announced deals in 2010 to 102 in 2016. The overall trend illustrates the drive for healthcare organizations across the country to seek new efficiencies and capabilities for a transforming industry, said Kaufman Hall.
The first quarter was especially notable for an uptick in transactions among large organizations, with three announced deals targeting organizations with nearly $1 billion or more in revenues. In 2016, there were four such deals announced in 12 months.
The four announced deals in the first quarter all involved nonprofit organizations, with the merger of Beth Israel Deaconess Medical Center and Lahey Health in Massachusetts representing the largest of the three. Also announced were affiliations between PinnacleHealth System and the University of Pittsburgh Medical Center, and Fairview Health Services and HealthEast Care System.
More transactions among larger and like-sized organizations likely will be seen in the coming months, according to Anu Singh, managing director at Kaufman Hall.
"Hospitals and health system executives are looking for strategic opportunities to ensure the continued growth and success of their organizations amongst disruptive forces, including innovative competitors, declining payments, flat or decreasing inpatient volumes, and increasing price sensitivities among consumers," he said in a statement. "As the number of independent hospitals declines, organizations are seeking to build new capabilities and economies of scale through partnerships."
Of the transactions announced in the first quarter of 2017, six involved for-profit acquirers and 21 involved nonprofits. In addition to the deal with UPMC, PinnacleHealth announced its acquisition of four Community Health Systems hospitals, as well as an affiliation with Hanover Hospital. In addition to HealthEast, Fairview Health Services also announced its acquisition of Grand Itasca Clinic and Hospital.
Of all states, Pennsylvania saw the most activity, with five announced transactions in the first quarter.