M&A activity in the healthcare sector is shifting from buying smaller independent hospitals to regional partnerships between health systems, according to A new report Provided by Kaufman Hall, a healthcare consulting company.
In the second quarter of 2021, 14 transactions were announced, which is lower than the recent historical average before the pandemic.However, similar to The first quarter of this year, The fewer transactions were offset by more transactions with sellers’ revenue exceeding $500 million.
In fact, the average seller size by revenue in the second quarter of 2021 was $604 million-much higher than the historical average of the same quarter in previous years.
In addition, compared with the second quarter of the past few years, the total transaction revenue figures for the second quarter of 2021 ranked fourth, totaling $8.5 billion.
As mergers and acquisitions shifted to regionalization, activities in the second quarter were concentrated in the Southeast. Georgia alone had three transactions involving eight hospitals, with transaction revenues of approximately $1.5 billion.
A “major merger” was announced this quarter—a merger in which the average annual revenue of a smaller partner or seller exceeds $1 billion: The combination Beaumont Health System of Southfield, Michigan, and Spectrum Health of Grand Rapids, Michigan, will create a system with annual revenue of approximately $13 billion, if the transaction is approved. In addition, there are three transactions with seller income between 500 million and 1 billion U.S. dollars.
Other regional partnerships announced this quarter include Rush Health Systems in Meridian, Mississippi Intend to merge Ochsner Health in New Orleans and Piedmont Healthcare in Atlanta Planned acquisition From four Georgia hospitals from HCA Healthcare in Nashville, Tennessee.
“For the health system, regionalization strategies usually focus on establishing services, capabilities, and alternative locations within a defined geographic area — this capability has proven to be particularly important for many communities during the peak of the Covid-19 pandemic,” the director General Manager and Leader Anusinger said in an email that he introduced Kaufman Hall’s partnership and M&A practices. “A strong regional market presence can also help the health system provide the scale needed to work with health plans and employees to develop population health plans.”
In addition to scale, regionalization also provides local knowledge for the system, which is essential in healthcare.
Singh said that even in neighbouring markets, local conditions can vary greatly. Partnerships with established organizations can be used to leverage very important local knowledge in newly merged organizations or new enterprises.
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