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Hospital and health system mergers jumped 13% last year to record levels as medical care providers look to grab scale to compete with national health insurers and outpatient medical care providers entering their markets.
An unprecedented 115 hospital and health system transactions were announced in 2017 , according to a new report by consulting firm Kaufman, Hall & Associates shows. The report shows 11 transactions involve hospital and health system sellers with $1 billion or more in annual revenues, Kaufman Hall said.
Kaufman Hall managing director Anu Singh said the deals “are a universal effort among health systems at strategic repositioning to come with industry transformation, including competing with extremely large-scale companies that are targeting specific segments of the traditional health system business.”
Hospital systems that have historically done battle with their own are now facing new rivals like the Optum medical care provider unit of UnitedHealth Group, the nation’s largest health insurer, which last year said it would spend $5 billion to get DaVita Medical Group and its clinics and urgent care centers that treat 1.7 million patients annually in a half dozen states. And hospitals will face new competition from drugstore giant CVS Health, which hopes to close its $69 billion purchase of Aetna, the nation’s third largest health insurer later this year. The larger CVS is planning to expand beyond its pharmacies and retail clinics into new areas, executives have said.
“The implications reach far beyond the unprecedented number of individual transactions,” Kaufman Hall’s report said. “Organizational size and scale have mattered for decades—but today, they are proving to be imperatives. “
The number of announced health system transactions hit its highest level since 2000 , the first year documented in the Kaufman Hall report when there 84 mergers and acquisitions. The numbers have risen and fallen since 2000, but have consistently been around 100 deals annually for the last four years. And those are still impressive numbers of transactions given healthcare systems are getting bigger and bigger all of the time.
The 2017 deals included some of the nation’s largest for-profit hospital operators such as Community Health Systems, Quorum Health Corp. and Tenet Healthcare among for-profit companies that accounted for about one-third of transactions.
But increasingly, nonprofit hospital operators are getting even larger than the investor-owned giants.
California-based Dignity Health and Colorado-based Catholic Health Initiatives late last year said they would form a new company based in Chicago that will control 139 hospitals. Nonprofit health systems are also coming together across state and regional lines never seen before with Chicago-based Advocate Health Care and Wisconsin’s largest hospital operator, Aurora Health Care announcing a merger.
