As I reported a few days ago, hospital mergers and acquisitions hit a historic high last year. This is shaping up to be a pretty frenzied year for hospital M&A as well. In fact, this may be the year that hospitals see a historic change in how they’re managed and they define themselves.
How much merger activity will we see? At the HIMSS11 event earlier this year, John Reiboldt of Coker Capital Advisers suggested that the single stand-alone hospital may be a “concept of the past.”
While the comment by Reiboldt may have been a bit tongue-in-cheek, it’s clear that many smaller hospitals and health systems are giving up long-held independence in an effort to survive.
What’s more, such deals seem to be getting a friendlier reception from the Department of Justice and the FTC, which revised its Horizontal Merger Guidelines in August of last year.
A few randomly chosen examples of regional mergers underway:
* The merger between Albany-based St. Peter’s Health Care Services, Northeast Health and Seton Health/St. Mary’s Hospital is should close shortly. After three years of talks, the three entities have gotten the FTC’s blessing to move ahead.
*Alongside of its massive effort to acquire Tenet, Community Health Systems has signed a definitive agreement to acquire Mercy Health Partners, a three-hospital system based in northern Pennsylvania.
* Peoria, IL-based OSF Healthcare may absorb Rockford (IL) Healthcare System, despite some degree of public hostility to the proposal (and complaints from rival SwedishAmerican Health System.
I see no reason why this consolidation should slow down this year, particularly as reform deadlines grow closer. And I fully anticipate that hospital mergers will create a ripple effect that tips other industries into new formers of cooperation. Fasten your seat belts — this year is proving to be a wild ride.