Hospital, Physician Group M&As Slowed in 3Q

While the number of acquisitions dropped in the third quarter, there were some sizeable deals, led by the merger of UPMC and PinnacleHealth. Private equity firms acquired six physician practices in the quarter.

Hospital and physician practice mergers and acquisitions slowed in the third quarter of 2017, according to HealthCareMandA.com.

“Despite the lower number of hospital deals in this quarter, some sizable health systems merged or were acquired,” stated Lisa Phillips, editor of the Health Care M&A Report.

“PinnacleHealth (1,267 beds) and UPMC merged, and NantWorks LLC acquired BlueMountain Capital’s majority stake in Integrity Healthcare (1,650 beds). We expect to see a few more of these large mergers in the fourth quarter,” Phillips said.

According to HealthCareMandA.com:

• The number of hospital acquisitions slipped to 15 in the third quarter, down 32% from the 22 publicly announced acquisitions in the second quarter of 2017, and down 21% from the 19 announced deals in the year-ago third quarter. None of the transactions disclosed a purchase price in the third quarter of 2017.
   
• The largest group of acquirers were not-for-profit hospitals and health systems, with eight acquisitions announced by seven buyers. St. Luke’s University Health Network, a not-for-profit system in Pennsylvania, announced two acquisitions, as did publicly traded HCA Healthcare.
   
• Among the sellers, two financially troubled publicly traded hospital companies divested four hospitals through four announced deals. Community Health Systems sold two hospitals in the third quarter, and its 2016 spinoff, Quorum Health, also sold two. HCA acquired the two Community Health Systems hospitals, one in Texas and one in Florida.

Physician medical group M&As also dipped slightly in the third quarter of 2017 to 28 transactions, a 10% drop from the second quarter.

“This third quarter’s deal volume may seem disappointing, but it is more in line with transaction volumes we’ve seen in the third and fourth quarters of 2016,” Phillips said.

• The 28 transactions were a decline of 15% from the third quarter of 2016. The first quarter of 2017 represented the highest level of physician medical group M&A activity in several years, with 59 deals.
   
• Even with the decline in deal volume, spending increased 91% compared with the previous quarter, to $1.45 billion.
   
• Four companies announced two acquisitions apiece in the quarter: CRH Medical Corporation, Envision Healthcare Corporation, MEDNAX and Riverchase Dermatology and Cosmetic Surgery.
   
• Eight of the acquired medical groups had 20 or more physicians, compared with three in the second quarter. 
   
• Hospital companies or health systems announced three physician medical group acquisitions in the third quarter, while private equity firms announced six, not including transactions announced by physician medical groups backed by private equity firms.