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Analysis

Top 5 Healthcare Mergers of 2018

By Jack O'Brien  
   December 26, 2018

There were numerous multibillion dollar deals in 2018 with the potential to reshape healthcare in the years to come.

Throughout the year, healthcare finance was dominated by M&A activity, as insurers and providers seek to navigate increasingly competitive environments by achieving greater scale. 

Precedent-setting deals across healthcare is a trend that analysts expect to continue into 2019 and beyond, serving as a primary business strategy for a majority of healthcare organizations. 

Despite growing popularity, deals are subject to the factors that can delay closure, such as last week's announcement that the proposed Dignity Health-CHI merger was being pushed back one month without a specific reason given. 

Below, HealthLeaders has highlighted coverage of the top five healthcare mergers from 2018, transactions that will likely have a significant impact on the industry next year. 

1. Advocate Health Care-Aurora Health Care 

The two Midwestern health system giants announced plans to merge in late 2017 and by late spring 2018, had formed one of the top 10 largest consolidated systems in the country.

By bringing together Advocate's presence in Wisconsin and Aurora's population base in Chicagoland and surrounding areas in Illinois, the new system employs over 70,000 people while accounting for $11 billion in annual revenue.

One crucial aspect to effectively merging was Advocate's decision to adopt the same electronic health record (EHR) system as Aurora, a factor that usually costs health systems when going through the merger process.  

2. CVS-Aetna

Though the deal is still awaiting the final greenlight from a federal judge, the pharmacy chain and insurance giant closed on the deal in late November after months of regulatory reviews from state and federal agencies. 

New York and California regulators were able to secure major concessions from both companies, while the most consequential stipulation from the Department of Justice (DOJ) was that Aetna sell its Medicare Part D business to WellCare Health Plans.

The nearly $70 billion deal is expected to have a landmark impact on healthcare, as numerous players study the scope of the merger and how it might spur other companies to consider similar vertical integration opportunities. 

3. Cigna-Express Scripts

In the same vein as CVS-Aetna, the Cigna-Express Scripts deal closed in Q4 2018 and is likely to have a profound impact on the insurance marketplace as well as in the pharmacy benefits manager (PBM) sphere.

The $71 billion deal survived a shareholder vote in August that was preceded by a short-lived opposition effort conducted by billionaire Cigna shareholder activist Carl Icahn, along with nearly 30 state regulatory reviews and input from the DOJ. 

Industry players see this integration as a bold strategic vision for the two companies, but David Henka, CEO of ActiveRADAR, warned that the benefits may not be shared by the consumer.  

4. Beth Israel Deaconness Medical Center-Lahey Health 

The two Massachusetts-based systems received clearance from the Federal Trade Commission in October, with the agency even referring to it as a "close call," while referring future review to state agencies.

State Attorney General Maura Healy granted the systems her conditional support but imposed a seven-year price cap far below the Massachusetts Health Care Cost Benchmark.

The newly merged 13-hospital system will also provide $71 million in care to underserved communities.

5. RCCH HealthCare Partners-LifePoint Health 

RCCH's acquisition of LifePoint came amid the announced retirement of longtime CEO Bill Carpenter and a planned package of $120 million in golden parachutes for four outgoing executives.

However, while LifePoint shareholders approved the $5.6 billion merger, they nixed the golden parachutes option during a financial earnings call in October. 

Ultimately though, the company decided to issue the golden parachutes as it takes LifePoint private and installs David Dill, LifePoint's current president and COO, as Carpenter's replacement.

Jack O'Brien is the finance editor at HealthLeaders, a Simplify Compliance brand.


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