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Hospital mergers swell in 2016 with nonprofits leading the surge, analysis shows

Largest deal for second quarter 2016 was Universal Health Services' $445 million acquisition of Valley Health System in Las Vegas.

Jeff Lagasse, Associate Editor

Hospital merger and acquisition activity swelled by 6.1 percent over 2015, according to a new analysis from strategic and financial services firm Kaufman Hall and Associates. It identified 52 hospital and health system transactions during that time, compared to 49 transactions recorded during the same period in 2015.

Looking just at the second quarter of 2016, there were 27 transactions announced, up 3.8 percent from the 26 recorded in the second quarter of last year.

The transactions that were identified occurred across the acute care spectrum, including nonprofit, for-profit, rural, urban and academic health centers. Of the 52 transactions, 39 involved acquisitions by nonprofits and 12 were acquisitions by for-profit organizations; one transaction involved a nonprofit/for-profit combination.

[Also: Merger and acquisition trend in healthcare fueled by physician practices, Cascade says]

A total of 11 publically owned, nonprofit hospitals were acquired during that time. Twelve transactions involved partnerships with faith-based organizations.

The sustained growth demonstrates that hospital and health system leaders across the country continue to turn to mergers, acquisitions and other forms of partnerships as a means of reducing costs, enhancing competitive positioning and pivoting to a value-based business model, the analysis found.

[Also: Standard and Poor's says Providence Health, St. Joseph Health ratings unaffected by looming merger]

The largest deal announced in the second quarter of 2016 was Universal Health Services' $445 million acquisition of the remaining interest in Valley Health System, which encompasses six acute care hospitals in Las Vegas, the analysis found. Kaleida Health, meanwhile, was involved in four transactions, while HCA Healthcare was involved in three; and Texas was the most active state with 11 transactions.

"The continuing uptick in mergers and acquisitions is not surprising," said Anu Singh, managing director at Kaufman Hall and Associates, in a statement. "The industry is rapidly changing and many organizations are not optimally positioned to navigate the transition to value-based care on their own. Healthcare leaders should thoroughly evaluate the partnership options to help ensure strong, competitive positioning for their organizations into the future."

Twitter: @JELagasse

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