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Healthcare M&A Hits Pre-Pandemic Levels in Q2 2023

Analysis  |  By Melanie Blackman  
   July 14, 2023

The number of deals are on-par with the transactions announced in Q2 2019 and 2018 and include three "mega merger" deals.

Healthcare merger and acquisition (M&A) activity has increased, bringing the number of deals back up to pre-pandemic levels, according to the newest Kaufman Hall M&A Quarterly Activity Report.

From April through the end of June 2023, there were 20 hospital and health system M&A transactions announced, making this the highest number of transactions announced since Q1 2020.

The number of deals is "on par" with the 19 transactions announced in Q2 2019 and the 21 transactions announced in Q2 2018. It's also an increase from the 15 transactions announced during Q1, 2023.

Of the 20 announced transactions during the past quarter, the acquiring or larger party in the deals included:

  • 8 nonprofit health systems
  • 4 investor-owned health systems
  • 2 religiously affiliated organizations
  • 4 academic/university-affiliated organizations
  • 1 governmental organization
  • 1 academic organization partnering with multiple nonprofit organizations

The total transacted revenue is also in line with pre-pandemic activity levels. During Q2, the average size of the smaller party by annual revenue remained elevated, Kaufman Hall says. The average size of the seller or smaller party, measured by annual revenues, was at $664 million. This is down from the record-breaking year-end average of $852 million in 2022.

This data slightly dilutes the impact of three "mega mergers" that were announced during the quarter. These "mega mergers" include entities in which the seller or smaller party has an annual revenue of more than $1 billion.

Froedtert Health and ThedaCare

Milwaukee-based Froedtert Health and Neenah-based ThedaCare announced on April 11 that the systems signed a letter of intent to combine the systems. Following the merger, the 10-hospital Froedtert system in the southeast and the 8-hospital ThedaCare system in the northeast of the state plan to operate under their established brands and names.

Kaiser Foundation Hospitals and Geisinger Health

Megasystem Kaiser Permanente and Pennyslvania's Geisinger Health announced on April 26 plans to merge, with Geisinger to become the first hospital under KP's newly created but separate, value-based care affiliate, Risant Health. According to the deal, Geisinger will keep its name and mission and will continue to work with other health plans, employed physicians, and independent providers. At the same time, Geisinger will tap Risant's value-based platform to maximize practices in care model design, pharmacy, consumer digital engagement, health plan product development, and purchasing.

BJC HealthCare and St. Luke's Health System

BJC HealthCare of St. Louis and Saint Luke's Health System of Kansas City signed a letter of intent on May 31 to explore a merger that would create the largest health system in Missouri. The systems are based in Missouri's two biggest cities, with headquarters located about 250 miles apart. The 28 hospitals and scores of clinical venues created by the consolidated system, if approved by state and federal regulators, would serve "two distinct geographic markets," the systems say.

"As capabilities become an increasingly compelling factor in partnerships and mergers, hospitals and health systems should focus on developing unique capabilities that would make them a strong partner, whether or not they are currently seeking a partnership," the report concludes. "This strategy will help organizations differentiate themselves within an increasingly competitive healthcare market and enhance their options as that market continues to evolve."

Melanie Blackman is a contributing editor for strategy, marketing, and human resources at HealthLeaders, an HCPro brand.

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