Despite Drop in Healthcare Mergers and Acquisitions, Revenue Rises


Analysis from Kaufman Hall reveals a historically low number of healthcare mergers and acquisitions in Q2, but revenue continues to rise.

Healthcare merger and acquisition (M&A) activity was minimal in Q2, but total transacted revenue rose as health systems focused on acquiring smaller hospitals and strengthening regional partnerships, according to Kaufman Hall’s quarterly M&A report.

The second quarter of 2021 brought 14 healthcare M&A transactions and a total of $8.5 billion in revenue. Year-to-date, 2021’s total transacted revenue is the second-highest in recent years despite the low number of total transactions.

“For-profit health systems are maintaining their focus on building strong regional markets and divesting hospitals outside of their core business regions,” the report explained.

Transactions in Q2 were largely concentrated in the Southeast. Three of the 14 transactions came from Georgia alone, raking in $1.5 billion in revenue.

Although there were fewer transactions than in pre-pandemic times, a high number of transactions came from high-profile sellers with over $500 million in revenue. The average seller size by revenue for Q2 was $604 million, which is a significant jump from previous years.

Spectrum Health and Beaumont Health in Michigan announced that they will combine to form a system with approximately $13 billion in annual operating revenue. In addition, Tenet Healthcare plans to sell five Florida hospitals to Steward Health Care System, and Piedmont Healthcare plans to acquire four Georgia hospitals from HCA Healthcare. University Health Care System will also join Piedmont Health.

Two of the acquirers were for-profit health systems, three were academic medical centers, and one was a religiously affiliated health system. Not-for-profit health systems accounted for the remaining eight transactions.

“Many of this quarter’s most significant transactions reflect the trend toward regionalization, with an emphasis on building depth within local markets and breadth through expansion to neighboring geographies,” the report deduced.

“Moves by for-profit systems to divest hospitals in markets where they do not have a strong presence are being matched by transactions that build their strengths in core regional markets.”

Piedmont Healthcare’s transactions solidified its presence in Georgia, and the Spectrum Health and Beaumont Health merger combined western and southeastern Michigan markets. A regional focus allows health systems to share resources and partner to support state-wide population health initiatives.

Kaufman Hall pointed out that COVID-19 effectively proved the value of sharing resources within a defined region, and collaboration between local markets can expand local knowledge and lead to greater efficiency.

The report anticipated a period of stabilization in healthcare in upcoming quarters as health systems continue to recover from COVID-19. The long-term effects of the pandemic on health systems are still unknown, but researchers expect an increase in strategic regional partnerships in the near future.

Despite a positive increase in collaboration and a focus on local partnerships, a recent study found that providers going through a healthcare merger or acquisition are more likely to experience physician burnout, less likely to trust their colleagues, and less likely to recommend their employer to family and friends for healthcare services. This is likely due to the uncertainty and workflow disruptions that often come along with organizational changes.

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