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News | Strategic Partnerships Mergers and Acquisitions

Healthcare M&A activity for Q3 remains low in volume but high in impact, firms report

News | Strategic Partnerships Mergers and Acquisitions

Healthcare M&A activity for Q3 remains low in volume but high in impact, firms report

  • The number of transactions involving hospitals and health systems remained at historically low levels in the just-completed quarter.
  • Among announced transactions, the average revenue involved was far higher than in recent years.
  • The forecast for upcoming quarters is uncertain, but partnership activity likely will remain strong even if change-of-control transactions don’t ramp up in the short term.

Hospital merger-and-acquisition activity remained slow in Q3, according to tracking firms, but deal size was robust.

Kaufman Hall reported seven transactions involving 20 hospitals and $5.2 billion in revenue. Year-to-date (YTD) average seller revenue is $659 million, or twice as much as the average for 2015-20.

The dual trends of lower volume and higher revenue stem from several factors, Kaufman Hall wrote in an analysis, including:

  • Fewer independent hospitals
  • A desire for transformative impact, such as access to new capabilities or new markets

H2C’s quarterly tracker likewise lists only seven transactions. The reported total through three quarters of 2021 is 43 transactions, representing a 30% decrease from the same period in 2020 and a significant drop-off from the 10-year YTD average of 65.

Ponder & Co. reported 12 transactions, which the firm said was the lowest total since Q4 2009. In keeping with the trend toward larger deals, Q3 2021 was the first on record that included no acquisitions of hospitals with revenues between $50 million and $150 million. Such transactions have amounted to 28% of deal volume since 2009 and surpassed 50% in some calendar quarters.

Notable transactions in Q3

Three planned transactions reported by at least one firm qualified as mega-mergers, with the revenue of the smaller or selling entity exceeding $1 billion:

  • Beaumont Health and Spectrum Health plan to combine to form Michigan’s largest private employer, with joint revenue exceeding $12 billion.
  • Intermountain Healthcare and Colorado-based SCL Health announced a merger that would result in an $11 billion, 33-hospital system spanning six states.
  • Edward-Elmhurst Health and NorthShore University Health System would combine for a $4 billion system in the Chicago area, with nine hospitals in the northern and western suburbs and more than 6,000 employed and independent clinicians.

Among transactions involving a for-profit entity, HCA Healthcare acquired five Utah hospitals from Steward Health Care, giving HCA a 16-hospital network in the state. “Steward Health Care will exit Utah and look to reinvest in different states,” H2C wrote.

The outlook for M&A

Kaufman Hall noted that activity remains busy in contexts that don’t qualify as formal transactions, including partnerships between hospitals and post-acute facilities.

“Health systems have explored creative arrangements to enhance their post-acute care capabilities and footprint to ensure alignment along the continuum of care and to improve quality of care after a patient leaves the hospital, particularly to ensure success within value-based arrangements,” the analysis states.

“In at least one case, the goal is to avoid hospital inpatient stays altogether for certain conditions,” the analysis adds, referring to a hospital-at-home venture between UNC Health and Medically Home Group, Inc.

Ponder said the financial support offered through the Provider Relief Fund and other government programs has boosted the balance sheets of many health systems amid the pandemic. Organizations thus “have not been forced to make tough decisions. They continue to study and evaluate options, but the urgency is not there, and the focus has been COVID-19.”

Long-term pressures such as volume challenges, rising costs and spending, and changes ushered in by value-based payment (VBP) arrangements will remain after the pandemic subsides. Still, the question of when M&A activity will regain momentum is unclear, Ponder added, especially with regulators planning to take a stricter view of potential mergers in keeping with a Biden administration executive order.

H2C said hospitals and health systems are striving to respond to trends accelerated by the pandemic, including the spread of VBP arrangements, investments in asset-light models and primary care, and a focus on consumerism.

In the current environment, organizations can't just look for ways to increase volume or market share. Financial constraints resulting from factors such as increased labor costs and ongoing repayments of Medicare advance payments make operational excellence an “increasingly important” consideration in strategic planning. H2C added.

About the Author

Nick Hut

is a senior editor with HFMA, Westchester, Ill. (

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