112 Transactions Announced in 2015—18 Percent Increase over 2014
Skokie, IL, January 21, 2016 — The number of hospital transactions announced in 2015 grew 18 percent compared with 2014 and 70 percent compared with 2010, according to the latest analysis by Kaufman, Hall & Associates, LLC, a leading provider of strategic, capital, financial, and transaction advisory services and software tools. In 2015, 112 hospital transactions were announced compared with 95 transactions in 2014 and 66 in 2010. The pace of transactions was especially strong in the second half of 2015.
The rising number of transactions demonstrates that mergers, acquisitions, and other forms of partnership are an increasingly critical strategy as hospitals seek to enhance competencies and scale to provide coordinated, cost-effective care across the continuum.
Other key findings from the analysis include:
- 28 transactions were announced in the 4th quarter of 2015, compared with 29 in the 4th quarter of 2014
- Operating revenue of acquired organizations in 2015 was greater than $33 billion
- Transactions included a variety of forms and structures, including mergers, acquisitions, joint ventures, and joint operating agreements
- Transactions occurred across a broad range of acute-care segments, including not-for-profit, for-profit, rural, urban, and academic health centers
- In 28 of the 112 transactions announced in 2015, the acquiring entity was for-profit; in 83 transactions, the acquiring entity was not-for-profit; and in one transaction, a not-for-profit and for-profit organization jointly acquired an organization
- A faith-based organization was the acquiring entity in 19 transactions and the acquired entity in 14 transactions
- Three hospital-management companies were involved in a significant number of transactions:
- Franklin, TN-based Community Health Systems was a party to eight transactions
- Brentwood, TN-based LifePoint Health, or the joint venture Duke LifePoint Healthcare, was a party to six transactions
- Ontario, CA-based Prime Healthcare was a party in five transactions
- The largest deal announced was the merger of two not-for-profit, Catholic healthcare systems: Renton, WA-based Providence Health & Services ($12 billion in revenue) and Irvine, CA-based St. Joseph Health System ($5.6 billion in revenue); the merger will form one of the largest not-for-profit healthcare systems in the country
- Community Health Systems is spinning off 38 hospitals in communities of less than 50,000 residents into a new public company called Quorum Health Corporation ($2.1 billion in revenue) that will begin trading in early 2016; Community Health Systems will focus on larger hospitals in urban areas, while Quorum will focus on hospitals in smaller communities
“Hospitals and health systems are facing extraordinary pressure to reduce costs, manage care more effectively across the continuum, and improve patient engagement and experience,” said Patrick Allen, Managing Director at Kaufman Hall. “To achieve these goals, hospitals and health systems will continue to pursue strategic partnerships designed to achieve clinical alignment, network breadth and depth, operational efficiency, and other critical capabilities.”
Using Kaufman Hall’s database, the analysis includes reported combinations of acute-care hospitals in the U.S., including mergers, acquisitions, joint ventures, and member substitutions. The total number does not include specialty hospital, long-term acute-care hospital, or surgical center transactions; minor asset sales from closed hospitals; affiliations or management service agreements; or international transactions.
About Kaufman Hall
Kaufman Hall provides management consulting services and enterprise performance management software that help organizations realize sustained success amid changing market conditions. Since 1985, we have been a trusted advisor to hospitals and health systems, helping them incorporate proven methods into their strategic planning and financial management processes and quantify the financial impact of their plans to consistently achieve their goals. Kaufman Hall helps clients identify and execute strategic initiatives that drive market and financial performance; provides financial advisory services to clients seeking capital; prepares and implements integrated strategic, financial, and capital plans; designs comprehensive capital allocation processes; and assists in the evaluation, structuring, and negotiation of partnership and divestiture opportunities. Additionally, Kaufman Hall provides sophisticated, integrated, and intuitive software solutions for long-range planning, budgeting, forecasting, reporting, capital planning, profitability, and cost management on a single platform. kaufmanhall.com