Report: There were fewer, but larger, hospital mergers and acquisitions in 2018

https://www.fiercehealthcare.com/hospitals-health-systems/report-what-to-expect-healthcare-m-a-2019?mkt_tok=eyJpIjoiTkROak5UWXpOR1ZtT0RNeiIsInQiOiJBbmtrSGp0c0ZtU1hwNzRlOGNveVdHQ3JyenpWRE1FeXdVVjVYYzN0WFwvV1Vyb1ZkQWpVNHNMM29kOGw1bXRMVDA0bTNuUm1lQ1RVb0NzYVFGa0NWdGVRVk5pOGw3amFtbEI1YlpEdTdTTkYxbkFWSGlDT2lMMCtIZktpN0ZkYlcifQ%3D%3D&mrkid=959610&utm_medium=nl&utm_source=internal

Handshake business deal executives

The number of hospital mergers last year dipped about 22% in 2018 but grew in overall size as part of a broader trend toward megamergers, according to a new report.

In all, hospitals announced a total of 90 transactions in 2018, down from 115 in 2017, according to a report (PDF) from Kaufman Hall. The firm began monitoring hospital M&A in 2000. About 20% of the acquisition deals were considered distressed transactions.

The value of those deals is increasing, with the average size of a seller by revenue has grown at a CAGR of almost 14% per year since 2008 and reached a new high of $409 million in 2018.

“That so many of 2018’s mega-mergers involve the combination of systems from different—though often contiguous—geographies signals the desire of health system leaders to expand their organizations into new markets, or to bring in a partner from an outside market,” Kaufman Hall said in the report. “For health system leaders looking for an acquisition partner from outside of their organization’s home market, considerations may include the desire to improve operations within the home market, or a need for additional capital to better compete within the home market.”

Texas led the nation for M&A last year, clocking eight hospital deals with a total value of deals estimated to be about $6.8 billion. Most notably, the report points to Baylor, Scott & White’s planned merger with Memorial Hermann will bring together two Texas-based systems and combine Dallas/Fort Worth and central Texas markets with the Houston market.

Florida had seven announced deals worth about $3.6 billion, and Pennsylvania had six deals worth about $2.2 billion.

Kaufman Hall also cited the “slow but steady movement toward population health” as a factor in the desire to increase market presence and penetration.

“Effective risk management depends on a health system’s ability to improve cost efficiencies, care efficacy, and care management across the continuum, which may require both horizontal and vertical integration to achieve,” they said.

Kaufman Hall said as new combinations and competitors appear in the healthcare market, hospitals and health systems should double down on their consumer strategy and the fight to control healthcare’s “front door.”

They should also seek opportunities to deepen growth across the spectrum of healthcare services through combinations or partnerships with other healthcare organizations.

 

 

 

 

Penn State, UPMC Pinnacle rivalry intensifies

https://www.beckershospitalreview.com/facilities-management/penn-state-upmc-pinnacle-rivalry-intensifies.html?origin=cfoe&utm_source=cfoe

UPMC Pinnacle on Jan. 8, 2019 announced plans to expand its West Shore Hospital in Hampden Township in Cumberland County.

Harrisburg, Pa.-based UPMC Pinnacle revealed plans Jan. 8 to expand its hospital facility in Mechanicsburg, Pa. The announcement came several months after its rival, Penn State Health, submitted plans to build a 108-bed hospital roughly 1 mile away from UPMC’s hospital, according to Penn Live reports.

UPMC Pinnacle West Shore opened in 2014 with 102 beds. Officials said in their Jan. 8 announcement that an expansion was necessary, as the hospital “has consistently operated at 90 percent capacity.” Officials expect to complete the expansion, which will add 58 beds, by fall 2020.

Penn Live first reported Hershey, Pa.-based Penn State Health’s decision to build a 108-bed hospital in June 2018. Officials at the time said the decision to build a hospital was made because a large portion of their patients travel from the Mechanicsburg region, and that the new hospital will allow them better access to care. Officials said they aim to begin construction in the spring and open the hospital by June 2021, the report states.

To access the full report, click here.