Skip to main content

Hospital Consolidation 2016 Forecast: 'More of the Same'

By John Commins  
   January 15, 2016

The volume and pace of consolidation, marked by more large deals, more small deals, and more partnerships among hospital providers, physician providers, and insurers will continue "for many years and well past this current decade," says one industry analyst.

By all accounts, hospital consolidation continued at a strong pace in 2015. Kit Kamholz, managing director with Skokie, IL-based Kaufman Hall, has tracked the hospital mergers and acquisitions market for more than two decades. He spoke with HealthLeaders Media this week about market trends in 2015, and what lies ahead in 2016 and beyond. The following is an edited transcript.

 

>>>View Slideshow

HLM: Give us the broad view of hospital consolidation in 2015.

Kamholz: It looks like 2015 is going to be one of the higher numbers of transactions. We are looking at over 100 transactions in hospitals and health systems, which is modestly higher than it has been in the past five years, which has been in the range of 90 to 100 transitions. I don't see it as setting a new trend line.

I see it as modestly higher than prior years but consistent with levels we've seen historically.

HLM: What is sustaining this consolidation?

Kamholz: There are a lot of clouds on the horizon for healthcare providers, and that is leaving independent hospitals to pursue two major initiatives. The first is to develop the competencies that will be necessary to be successful in the value-based business model and with population health management.

The second area is on various levels of cost management. There is probably not a hospital in the country right now where taking some cost out of the system is not being evaluated.

When organizations come to the realization that they cannot accomplish either of those initiatives on their own, or they can't do it fast enough based on how quickly their markets are evolving, that is largely what is leading them to pursue partnerships. Those factors have been consistent for the past several years and we are seeing more of it in 2015.

HLM: What's trending within these consolidations?

Kamholz: We are seeing more of the larger transactions in the marketplace. We went from a period between 2000 and 2010 when there were essentially one or two or no transactions where the target had $1 billion or more in revenue.

Since then on an annual basis, about five to six of those transactions have been announced in any given year. We continued to see that in 2015. Some of the more recent ones in 2015 were Robert Wood Johnson and Barnabus in New Jersey and Penn State and Pinnacle in Pennsylvania.

John Commins is a senior editor at HealthLeaders.

Tagged Under:


Get the latest on healthcare leadership in your inbox.