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Kaufman Hall: Healthcare M&A Transactions Down in Q1 but Size 'Significantly Larger'

Analysis  |  By Jack O'Brien  
   April 08, 2021

The analysis was released weeks after Kaufman Hall issued its February National Hospital Flash Report.

The amount of healthcare M&A transactions during Q1 2021 was fewer than Q1 2020 but the size of the deals was larger than this time last year, according to a Kaufman Hall report released Thursday.

There were 13 announced transactions affecting 72 hospital facilities during Q1, well below the historical averages but consistent with activity since the COVID-19 pandemic began last year.

However, the average seller size by revenue during Q1 was $676 million, driven by a combination of for-profit providers and a "significant realignment of hospital ownership in the upper Midwest."

Related: Nonprofit Hospitals' Charity Care Falls Short of Favorable Tax Treatment

Some of the major deals that were announced during the quarter included OU Health's intention to merge with the University of Oklahoma College of Medicine to form an integrated academic health system and CommonSpirit's announced plan to sell 14 hospitals to Essentia Health. 

"The COVID-19 pandemic has affirmed the importance of transformation and again validated the pursuits of scale, relevance, and intellectual capital that remain evident in nearly all this quarter’s transactions," the report stated. "The decision to partner with health systems that have an established market presence remains a key driver, as another emerging trend is the significance of local market knowledge. While smaller health systems may not have the financial scale of larger multi-state systems, they may have intellectual bandwidth and an understanding of local issues that can be significant advantages."

Additionally, the total transacted revenue of the quarter's activity was $8.8 billion, second only to the total from Q1 2018, according to the report. 

"COVID-19 will have a long-lasting effect on hospitals’ and health systems’ operations and strategy," the report stated. "We anticipate that COVID-19’s impact will continue to influence partnership, merger, and acquisition activity through the remaining quarters of 2021."

The analysis was released weeks after Kaufman Hall issued its February National Hospital Flash Report, which found that provider organizations continue to deal with lingering financial challenges related to COVID-19.

Related: Kaufman Hall: February Hospital Margins 'Slim to Negative'

Editor's note: This story was updated on April 9.

Jack O'Brien is the Content Team Lead and Finance Editor at HealthLeaders, an HCPro brand.

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