Healthcare deals are taking a nose dive.
Mergers and acquisitions were down 42% for the quarter ended Sept. 30 compared with the year-ago period, according to a new report from Irving Levin Associates, a New Canaan, Conn.-based firm that tracks healthcare transactions.
The number of publicly announced transactions among hospitals, physicians and HMOs plunged to 163 for the quarter compared with 280 deals the previous year.
The decline was caused partly because fewer hospitals are playing the consolidation game, said Stephen Monroe, a partner at Irving Levin.
Monroe said hospitals may be less interested in merging because past deals haven't met expectations.
"From the studies that I've read and seen and heard about, I think people are saying (mergers) may not generate the savings and the negotiating power that we thought," Monroe said.
Hospital deals were down more than 23% for the quarter, with the number of transactions dropping to 26 from 34 a year earlier.
Monroe said reimbursement effects of the Balanced Budget Act of 1997 on post-acute-care providers also fueled the decline in merger activity.
Combined, the number of deals involving long-term care, home health and rehabilitation providers sank almost 38% to 35 in the third quarter from 56 in the year-ago period.
In other healthcare sectors, the number of physician deals dropped 44% to 33 in the third quarter of this year from 59 in the year-ago quarter.
In a related matter, the Washington-based Employee Benefit Research Institute issued a new report last week stating that evidence is mixed on whether hospital mergers improve efficiency and quality of care.
The 15-page report is based on literature and studies of hospital consolidation. It points out that a merger's effect on prices depends on the hospitals' market. For example, there were fewer merger-related price reductions in markets with a higher hospital concentration and in areas with lower HMO penetration.