Q2 M&A Transactions Hit $19B Historic High

While the 13 transactions during the second quarter were on trend with quarterly post-pandemic activity, mega transactions created record-breaking revenue.

Hospital and health system mergers and acquisitions in Q2 of 2022 have returned to trendlines that Kaufman Hall has been following since the beginning of the pandemic, the consulting firm said in its recently released M&A quarterly report.

During the second quarter of 2022, there were 13 hospital and health system M&A transactions, on-trend and only one transaction less than the 14 transactions reached in Q2 of 2021 and 2020. However, the total transacted revenue in the second quarter reached a "historic high" of $19.2 billion, more than doubling the $8.5 billion transacted revenue in the same quarter in 2021.

The high percentage of mega transactions in the second quarter had, on average, a smaller party with a record-breaking annual revenue of $1.5 billion, more than doubling the 2021 record-setting year-end average size of $619 million.

Organizations that participated in transactions during Q2 include:

• Advocate Aurora Health and Atrium Health, with a smaller party revenue of $12.9 billion
• MercyOne and Trinity Health, with a smaller party revenue of $3 billion
• Bellin Health System and Gundersen Health System, with a smaller party revenue of $800 million
• George Washington University Hospital and Universal Health Services, with a smaller party revenue of $600 million

Kaufman Hall also noted that in three out of the 13 transactions the acquirer was a for-profit system, in one transaction an academic/university-affiliated organization was the acquirer, in one transaction there was a religiously affiliated acquirer, and in eight of the transactions the acquirer was a nonprofit health system.

Additionally, two health systems sold their skilled nursing facilities in transactions during the second quarter. Hackensack Meridian Health announced in March that Complete Care would acquire the majority of its long-term care facilities, while Virtua Health announced in April the sale of two of its skilled nursing facilities to Tryko Partners.

Dennis Pullin, president and CEO of Virtua Health, said "by divesting in the realm of skilled nursing, we are better equipped to reinvest in areas where we can truly make an impact."

Both health systems will work in ongoing partnerships with the acquiring organizations to ensure patient quality.

The report authors concluded, "The full return this quarter to the trend of fewer but larger hospital and health system transactions signals what may be a long-term shift in hospital and health system transactions. We expect continued activity in this space, but believe that the emphasis on transformative combinations, strategic rationale, and heightened selectivity will only grow."