Hospital and health system mergers set a record in 2017, with a new report saying networks of care providers bulked up to offer a broader range of services and prepare for new contracts that ask health systems to take financial risk.
The consulting firm Kaufman Hall tracked 115 hospital deals last year. It was the single highest annual tally since the company started tracking mergers in 2000, and was particularly noteworthy for deals involving systems with at least $1 billion in revenue.
Health systems say the deals are part of a future where hospitals and clinics are better able to provide efficient care across a broad population of patients. But there also are worries that bigger systems are part of an ongoing story line in which hospitals and health insurers keep getting bigger, and healthcare consumers are faced with ever-growing prices and costs.
“The implications reach far beyond the unprecedented number of individual transactions,” Illinois-based Kaufman Hall said in a report released Jan. 29. “Organizational size and scale have mattered for decades—but today, they are proving to be imperatives.”
By September, merger and acquisition activity was on pace to set a record, according to Kaufman Hall. But the trend was further charged, the consulting firm said, by fourth quarter activity among groups that haven’t been traditional healthcare providers.
Pharmacy giant CVS Health announced in December a $69 billion deal to buy the health insurer Aetna. Also last month, Minnetonka-based UnitedHealth Group’s division for health services said it was buying a large group of medical clinics for $4.9 billion.
The number of deals in 2017 edged the 112 transactions seen during 2015, according to Kaufman Hall. But last year’s activity was notable for the large size and scale of the transactions, including eleven deals that involved sellers with net revenue of $1 billion or more.
The 2017 transactions involved sellers/merger targets with a total of $63.2 billion in annual revenue, nearly double the comparable revenue in 2015, according to Kaufman Hall.
