Hospital merger and acquisition activity generated $12B in Q1 2024

Hospital merger and acquisition activity in quarter one of 2024 hit a first-quarter high since 2020, with 20 announced transactions generating $12 billion, a Kaufman Hall report found.

The number of transactions announced in Q1 2024 increased from 15 in Q1 2023, 12 in Q1 2022, and 13 in Q1 2021. In contrast, 29 deals were announced in the first quarter of 2020.

Four of the 20 transactions announced in Q1 2024 were mega-mergers—deals where the seller’s or smaller party’s annual revenue exceeded $1 billion. The average size of the seller was $598 million, which surpassed the year-end averages for every year since 2017 except for 2021 and 2022, when the averages were $619 million and $852 million.

The mega-mergers and high number of transactions contributed to significant transacted revenue of $12 billion in Q1 2024. This marks the third-highest Q1 total since 2017, behind $12.7 billion in 2018 and $12.4 billion in 2023.

One transaction included a for-profit health system acquirer, six acquirers were academic or university-affiliated health systems, two were religiously affiliated health systems, two were governmental health systems, and other not-for-profit health systems were the acquirer in nine deals.

Cross-market transactions continued in 2024, with the most notable deal being Connecticut-based Nuvance Health joining New York-based Northwell Health to form an integrated regional health system with 14,500 providers at more than 1,000 care sites. The health systems are in separate markets but operate in nearby regional geographies. This type of deal allows health systems to diversify revenue sources while expanding their capabilities to additional regions.

A few transactions highlighted the trend of independent community health systems seeking larger partners to maintain financial stability. St. Peter’s Healthcare System announced plans to join Atlantic Health System, and Evangelical Community Hospital plans to join WellSpan Health.

Portfolio realignment continued among large for-profit and not-for-profit health systems. Tenet Health sold six hospitals and related operations in California. Four of the hospitals were sold to UCI Health and two were sold to Adventist Health. Tenet Health also finalized its sale of three South Carolina hospitals to Novant Health. The transactions included contracts for revenue cycle management services from Tenet’s subsidiary, Conifer Health Solutions.

Quorum Health, HCA Healthcare, CommonSpirit Health, and Ascension also divested hospitals and related operations in Q1 2024. Around 40 percent of the quarter’s transactions involved portfolio realignments.

Academic health systems were the acquiring party in around 30 percent of the announced transactions in Q1 2024. Developing a network of high-quality community hospitals can help systems shift the treatment of lower acuity patients to community settings and alleviate occupancy pressures. In addition, larger hospital networks can expand opportunities for residency programs, clinical research trials, and access to tertiary and quaternary services.

While recent Kaufman Hall reports show that hospital finances may be stabilizing, 40 percent of facilities continue to lose money in 2024. Experts anticipate that additional financial headwinds will impact merger and acquisition activity in the future.