2014 hospital acquisitions dip slightly, still strong, report says
Consulting firm says 80 acquisitions in 2014 included nonprofit hospitals.
Last year was another big one for hospital mergers and acquisitions, a new report suggests, as healthcare providers continue to see consolidation as a key financial strategy for surviving industry reforms.
According to Illinois-based consulting firm Kaufman Hall, there were 95 hospital transactions in 2014 compared to 98 in 2013. The number is significantly higher than 2010, when the industry saw 66 transactions.
[Also: Tracking 2015 mergers and acquisitions]
More than half of the transactions came in the fourth quarter of 2014, with 29 deals announced, more than the 25 deals made in the fourth quarter of 2013.
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Source: Kaufman Hall
The study is just the latest in several reports highlighting M&A activity, a trend experts say will only pick up as smaller hospitals struggle financially when reimbursement becomes more focused on value than in traditional fee-for-service models.
Economies of scale and cost reductions associated with consolidating operations are giving many organizations a chance, especially as population health gains traction.
The situation is more dire for nonprofit healthcare, which faces credit downgrades and negative outlooks by ratings agencies over dwindling revenues. For example, 40 percent of credit upgrades by S&P in 2014 only came after an acquisition improved the health system’s status.
According to the Kaufman Hall report, which was released Monday, 80 of the acquisitions in 2014 included nonprofit hospitals.
[Also: S&P cautious about nonprofits]
“We are seeing more transactions designed to form large, fully integrated health systems, as well as more partnerships being explored between strong community hospitals and small health systems,” said Patrick Allen, managing director at Kaufman Hall, which provides consulting services to organizations during mergers. “We are also seeing more innovative types of partnership arrangements and more cases in which traditional lines of organizational types—hospitals, insurers, and physician organizations—are being blurred.”
The report included acquisitions, mergers, joint ventures and member substitutions.
Twitter: @HenryPowderly
