Healthcare merger revenues hit record high, says Kaufman Hall

0

The wave of large mergers and acquisitions (M&As) that has peaked lately shows no signs of waning anytime soon; indeed, according to a new report released July 13 by the Chicago-based consulting firm Kaufman Hall, things are only heating up among hospitals and healthcare systems, for a variety of reasons.

The press release announcing the report’s release began: “Healthcare transactions in the second quarter of 2022 reached an all-time high of $19.2 billion in total revenue traded, largely driven by the planned merger of ‘Advocate Aurora Health and Atrium Health according to ‘Kaufman Hall’s Quarterly Report on Mergers and Acquisitions.’ This more than doubles the total deal revenue of $8.5 billion in Q2 2021, which had a similar number of announced deals. This quarter also continued the trend of “mega deals” with two deals involving a small party or seller with annual revenues over $1 billion, as well as two other announced deals involving a small party with annual revenues over $500. millions of dollars. This signals what could be a long-term shift in hospital and healthcare system mergers and acquisitions toward fewer, but ultimately larger deals,” the Wednesday morning news release noted.

As the text of the report notes, “The 13 deals announced in the second quarter of 2022 were consistent with what we have seen since the start of the pandemic, with the number of deals below historical pre-pandemic levels. The size of transactions announced in the second quarter, particularly the planned merger of Advocate Aurora Health and Atrium Health, generated a smaller average party size that was more than double the record year-end average size of 2021 of $619 million. For the second quarter of 2022, the average size of the smallest party approached $1.5 billion. Total transaction revenue also hit an all-time high of $19.2 billion this quarter. This more than doubles the total deal revenue of $8.5 billion in Q2 2021, which had a similar number of announced deals.

Further, the report notes, “In three of the 13 transactions announced in the second quarter, the acquirer was a for-profit healthcare system. In one transaction, there was a university/university-affiliated acquirer and there was a religiously affiliated acquirer in one transaction. Other nonprofit health systems were the acquirer in the remaining eight transactions.

How NFCs fit into the current wave of mergers and acquisitions

The report takes note of an important phenomenon that is currently taking shape, around EHPADs and EHPADs, in the context of a major change in the federal reimbursement of care delivered in EHPADs. He notes that “recent partnerships around the provision of skilled nursing and long-term care provide an example of a new phase of healthcare partnerships with hospitals and healthcare systems seeking transactions that offer consumers access to new services or improve the delivery of services that require specialized care”. skill sets.”

Indeed, the report states: “In our 2021 year-end report, we described a new phase of healthcare partnerships that extend beyond traditional horizontal partnerships between hospitals and healthcare systems to include partnerships that can offer consumers access to new services or improve the delivery of services requiring specialized skills. We are committed to seeking opportunities to highlight transactions illustrating this new phase of healthcare partnerships. In recent months, new partnerships around the delivery of skilled nursing and long-term care are an example of this. A high-performing Skilled Nursing (SNF) facility is a critical ally for health systems, especially those focusing on performance in value-based care arrangements or seeking to enable earlier exit from care to the SNF setting at lower cost and help reduce hospital readmissions. Yet NFCs face a changing and increasingly challenging environment,” the report states, noting that “effective October 1, 2019, the Centers for Medicare & Medicaid Services (CMS) began using a new Patient-Based Payment Model (PDPM) for NFS that ties payment to patient acuity rather than volume of treatment provided. In this regard, “COVID-19 and infection prevention measures have had a particularly dramatic impact on NFS, posing unique threats to patients and their caregivers and requiring reconfiguration of facilities to reduce infection risks” .

At the same time, SNF, “Like all other healthcare organizations, SNF is grappling with staffing shortages and salary inflation that could permanently reset their cost structure. These changing dynamics, along with the unique operational profile of NFS, are prompting health systems to re-evaluate strategic options for delivering skilled post-acute care. These options could include: selling or monetizing their current SNF assets; partnership (joint ventures, service contracts, etc.) with specialized SNF operators; or a “double down” strategy focused on increasing investment in next-generation SNFs (sometimes referred to as “super SNFs”) that can accommodate higher-acuity patients in a more comfortable and appropriate care environment. »

The full report can be found here.

Share.

About Author

Comments are closed.