Hospital merger activity fell for the fourth straight year in 2001, but the decline was slighter than during the three previous years, according to Irving Levin Associates, New Canaan, Conn. Last year brought 83 announced mergers or acquisitions involving 118 hospitals, down 3% from 86 deals in 2000. That was 58% lower since a peak of 197 deals in 1997, the firm said. The data is contained in Irving Levin's eighth annual Health Care Acquisition Report."After recovering from some of the Medicare reimbursement changes of a few years ago, hospital companies have concentrated more on internal growth, and have limited acquisitions mostly to smaller, tactical deals than in the past," said Irving Levin partner Stephen Monroe. Consistent with previous years, the majority of sellers -- about two-thirds -- were not-for-profits, while buyers were split evenly between for-profit and not-for-profit.In managed care, mergers and acquisitions fell 39% in 2001, with 30 announced deals compared with 49 in 2000, the firm said. Acquisitions were not a priority for many managed-care companies last year because they were more concerned with deteriorating medical-loss ratios and potentially adverse legislation, the firm said. Physician group deals dropped 46%, continuing a dramatic four-year decline. There were 39 medical group deals last year, down from 72 in 2000. In 1997, there were more than 300 acquisitions of physician practices. "With no capital coming into this sector, and the business model of the former physician practice management companies largely discredited, there has been little interest in buying physician groups in the past two years," said Sandy Steever, the report's editor.The behavioral health and rehabilitation sectors had fewer than 20 transactions each in 2001. "Reimbursement has been terrible for these two areas of the healthcare economy and investors have shown little desire in providing capital when the return is so uncertain," Monroe said.
Hospital M&A activity continues to fall
Send us a letter
Have an opinion about this story? Click here to submit a Letter to the Editor, and we may publish it in print.