Hospital M&A Activity Surges in Q3 2024, Driven by Mega Mergers

What You Should Know: 

– The hospital and health system merger and acquisition (M&A) market experienced a significant surge in activity during the third quarter of 2024, reaching its highest level since 2017, according to Kaufman Hall’s latest M&A report. 

– Kaufman Hall’s M&A report reveals this surge was largely fueled by the Steward Health Care bankruptcy and a series of “mega mergers” involving prominent health systems.

Steward Health Care Bankruptcy Drives Transaction Volume

The bankruptcy of Steward Health Care, a national for-profit hospital operator, triggered a wave of transactions as its hospitals were put up for sale. Of the 27 announced transactions in Q3, 11 involved Steward hospitals, highlighting the impact of financial distress on the healthcare M&A landscape.

Mega Mergers Dominate the Headlines

Q3 2024 witnessed four “mega mergers,” defined as transactions where the seller’s annual revenue exceeds $1 billion. These included:

• Health Care Systems of America assuming operations at eight Steward hospitals in Florida, Louisiana, and Texas.
• Orlando Health acquiring Brookwood Baptist Health from Tenet in Alabama.
• Prime Healthcare acquiring eight Ascension-owned hospitals in Illinois.
• Sanford Health and Marshfield Clinic Health System combining forces in a major rural health system merger.

These mega mergers signal a trend towards consolidation and expansion among large health systems.

Key Trends in Q3 M&A Activity

• Increased Transaction Volume: Q3 2024 saw the highest number of announced transactions since Q3 2017, driven by the Steward bankruptcy and other market factors.
• Shifting Market Dynamics: The Steward transactions illustrate the challenges faced by financially distressed hospitals in less favorable markets, while also highlighting opportunities for established health systems to expand their footprint.
• Portfolio Realignment: Large health systems like Community Health Systems, Tenet, and Ascension are actively realigning their portfolios by divesting non-core assets and focusing on strategic growth areas.
• Expansion into New Markets: Health systems are seeking growth opportunities by entering new geographic markets and combining forces across different regions.

Challenges and Opportunities in the Healthcare M&A Landscape

While the high transaction volume in Q3 2024 indicates a dynamic market, it also underscores the financial challenges faced by many healthcare organizations. The Steward bankruptcy and other transactions involving distressed hospitals raise concerns about access to care in vulnerable communities.

However, these challenges also present opportunities for strong health systems to expand their reach and provide much-needed support to struggling hospitals. The trend towards consolidation and strategic partnerships may lead to improved efficiency, enhanced care coordination, and greater access to specialized services.