The number of hospital and health system partnership transactions continued an upward trajectory in the first quarter of 2017, with an 8 percent increase from 25 to 27 transactions compared to the first quarter of 2016, according to the latest analysis by Skokie, Illinois-based Kaufman, Hall & Associates.
Kaufman Hall, a management consulting firm, released its first quarter report and found that the increase follows another year of continued growth, with transactions climbing from 66 announced deals in 2010 to 102 in 2016. The overall trend illustrates that healthcare organizations across the country continue to seek new efficiencies and capabilities for a transforming industry, according to Kaufman Hall’s analysis.
“The first quarter was particularly notable for an uptick in transactions among large organizations, with three announced deals targeting organizations with nearly $1 billion or more in revenues. 2016 saw four such deals announced in 12 months,” the report stated.
The four announced deals in the first quarter all involved not-for-profit organizations, with the largest of the three being the merger of Beth Israel Deaconess Medical Center and Lahey Health in Massachusetts. Also announced were affiliations between PinnacleHealth System and the University of Pittsburgh Medical Center (UPMC), 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,” Singh said. “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 not-for-profit acquirers. In addition to the deal with UPMC, PinnacleHealth announced its acquisition of four Community Health Systems hospitals, and an affiliation with Hanover Hospital. In addition to HealthEast, Fairview Health Services also announced its acquisition of Grand Itasca Clinic & Hospital. Of all states, Pennsylvania saw the most activity, with five announced transactions in the first quarter, the report found.