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Hospital Revenues Up Despite Shift to Regional Partnerships

Analysis  |  By John Commins  
   July 09, 2021

In the first six months of 2021, total revenue was the second highest in recent years at $17.2 billion with 27 transactions.

Health systems continue to see solid revenues even as they shift from acquiring smaller, independent hospitals and instead form regional partnerships, a new analysis from Kaufman Hall shows.

In the first six months of 2021, total revenue was the second highest in recent years at $17.2 billion with 27 transactions. In 2020, revenue for the same span was $17 billion with 43 transactions.

"For health systems, partnerships focused on resource sharing within a defined geography proved valuable during the heights of the COVID-19 pandemic," KH said. "Strong regional market presence allowed health systems to partner with health plans and local employers by offering the necessary scale for population-health-focused initiatives. By partnering with well-established organizations, health systems can preserve and leverage local knowledge within a newly combined organization."

Deal activity for Q2 2021 was below pre-pandemic averages with 14 announced transactions, though this was consistent with Q2, 2020 levels. KH said the fewer deals were offset by a high number of transactions with seller revenues above $500 million, including one "mega-merger" involving Spectrum Health and Beaumont Health, with combined annual revenues of more than $1 billion.

Many of the deals in Q2 2021 were concentrated in the Southeast, with Georgia reporting three deals involving eight hospitals and about $11.5 billion in transaction revenues.

In addition to the Spectrum / Beaumont proposed merger, other significant deals in Q2 included:

  • Tenet Healthcare's planned sale of five hospitals in south Florida's Miami-Dade and Broward Counties to Steward Healthcare System.
     
  • Piedmont Healthcare's planned acquisition of four Georgia hospitals from HCA Healthcare; in a separate announcement, University Healthcare System in Augusta, Ga. Said it would join Piedmont Health.
     
  • HCA's planned sale of a fifth north Georgia hospital—Redmond Regional Medical Center in Rome, Ga.—to Florida-based AdventHealth.
     
  • Rush Health Systems' plan to merge with Louisiana-based Ochsner Health.
     
  • The Medical University of South Carolina's plan to purchase three hospitals in Richland County and adjacent Kershaw County from LifePoint Health.

“For health systems, partnerships focused on resource sharing within a defined geography proved valuable during the heights of the COVID-19 pandemic.”

John Commins is a content specialist and online news editor for HealthLeaders, a Simplify Compliance brand.


KEY TAKEAWAYS

Deal activity for Q2 2021 was below pre-pandemic averages with 14 announced transactions, though this was consistent with Q2, 2020 levels.

The fewer deals were offset by a high number of transactions with seller revenues above $500 million, including one "mega-merger" involving Spectrum Health and Beaumont Health.

Many of the deals in Q2 2021 were concentrated in the Southeast, with Georgia reporting three deals involving eight hospitals and about $11.5 billion in transaction revenues.


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