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Report: Hospital and health system M&As infrequent but larger in Q3 2022

Written on Oct 19, 2022

The hospital industry’s recent shift toward fewer, but larger, merger and acquisition deals continued through the third quarter of 2022, according to a new report. 

There were 10 hospital and health system transactions announced from July through September according to advisory firm Kaufman Hall — up slightly from last year’s seven announced deals but still well below the 19 from 2020 or the 25 from 2019. 

The total transacted value of those 10 deals, however, exceeded nearly all of the third-quarter totals measured by the firm in the last seven years. 

The past three months’ $8.3 billion handily outpaced 2021’s $5.2 billion and 2020’s $7.4 billion, the firm wrote, and is only beaten by the $10.8 billion recorded among 19 deals back in 2018. 

This year’s third quarter included two “mega transaction” announcements in which the smaller party’s annual revenue exceeds $1 billion: Pure Health’s $500 million minority equity investment in Ardent Health Services and Medical Properties Trust’s sale of nine hospitals and two related medical office buildings. The largest deal of the quarter was UChicago Medicine’s announcement that it would acquire a majority stake in four AdventHealth hospitals. 

The average smaller party size of all 10 transactions was $834 million, greater than the $619 million average of full-year 2021 and more than double that of any full year’s average dating back to 2016, according to the report. 

Two of the quarter’s 10 deals involved a for-profit health system as the acquirer, per the firm’s review. Academic or university-affiliated organizations were the acquirers in four, a religiously affiliated organization in one and other nonprofit systems in the remaining three. 

The few but large hospital transaction trend took hold in 2021 and has been consistent with the exception of this year’s first quarter, in which no mega transactions were among 12 announced deals.