Every one of the eight partners in the four deals during the first quarter has annual revenue of at least $1 billion-a glimpse into the size of the affiliations. And there's at least one medical school in three of the deals.
With that size, though, comes antitrust scrutiny. Each deal will have to pass muster with the Federal Trade Commission, which has scuttled several hospital mergers in recent months, including Advocate Health Care's planned merger with NorthShore University HealthSystem in the Chicago area.
In January, Beth Israel Deaconess made a bid to become Massachusetts' second-largest health system behind giant Partners HealthCare by agreeing to merge with Lahey Health of Burlington, Mass.
As a Harvard Medical School teaching hospital, Beth Israel is a magnet for specialized care, while its three other hospitals and four from Lahey would give the system a combined $4.5 billion in patient revenue.
March saw two blockbuster deals.
Minneapolis-based Fairview Health, which manages the University of Minnesota Medical Center among its seven hospitals, agreed to merge with four-hospital HealthEast in St. Paul to create a system with annual revenue of more than $5 billion.
Fairview has a large health plan, PreferredOne, that can drive patients to HealthEast's hospitals and physicians, while Fairview ups the ante for patients against Twin Cities rivals Allina Health, HealthPartners and Mayo Clinic.
Another big hospital tie-up in March involved the UPMC system and PinnacleHealth, a Harrisburg, Pa.-based system that couldn't overcome antitrust hurdles to merge with Penn State Hershey Medical Center last year.
PinnacleHealth had revenue of $1 billion and three hospitals before agreeing to buy four Pennsylvania hospitals from struggling Community Health Systems on the eve of the UPMC announcement. It will now join UPMC, one of the nation's largest integrated health systems, with more than 25 hospitals, a health plan, revenue of $13 billion and a newly acquired medical school in Scranton.
In another big deal last quarter, for-profit Steward Health System of Boston took advantage of CHS' massive, ongoing asset sale to further its national ambitions. It agreed to add eight CHS hospitals to its nine-hospital system, with three of the CHS hospitals in Ohio, three in Florida and two in Pennsylvania.
In January, RWJBarnabas Health, New Jersey's largest health system with 14 hospitals and annual revenue of $5.4 billion, agreed to an affiliation with Children's Hospital of Philadelphia to create pediatric networks across New Jersey. CHOP is a $2.3 billion system with a teaching affiliation with Rutgers, while RWJBarnabas has the Robert Wood Johnson Medical School.
All told, Kaufman Hall charted 27 hospital transactions in the first quarter of 2017 vs. 25 in the year-ago period. Most were not-for-profit health systems merging with in-state counterparts.
Big hospital mergers are rarely easy to put together and often hard to keep together in subsequent years, said attorney Torrey McClary, a partner with Hogan Lovells, who was lead outside counsel for Vanderbilt University's 2016 spinoff of Vanderbilt University Medical Center in Nashville.
Bringing together two complex organizations, including an academic medical center, is going to naturally create questions about turf, she said. Physicians are going to want to know which procedures are going to be performed where, partners will sometimes disagree about commitments to upgrade facilities, and there are learning curves on implementing best practices and information technology.
At the end of 2016, two separate teaching hospitals agreed to end relationships with their managing community hospital operators.
In December, the University of Louisville Hospital and KentuckyOne Health announced they were terminating a troubled joint operating agreement that has seen KentuckyOne manage the academic medical center and the accompanying James Graham Brown Cancer Center for the past four years.
Two months earlier, the university had accused KentuckyOne in a letter of breaching its commitments by failing to make about $17 million in promised program improvements and falling $29 million behind in making capital improvements to the facilities.
When the joint operating agreement dissolves on July 1, management of the hospital and the cancer center will revert back to University Medical Center.
In October, Oklahoma University Medical Center in Oklahoma City and HCA Holdings announced they were parting ways after HCA had managed the academic medical center for 20 years.
At the same time, Oklahoma said it had initiated partnership talks with St. Louis-based SSM Health to replace HCA with the Catholic-sponsored hospital chain after first buying out HCA to the tune of $750 million.
Negotiations between the university and SSM fell apart last quarter for reasons that neither side would disclose. So now the university plans to proceed with the buyout of HCA and operate alone for the foreseeable future.
McClary said that even when roles and funding responsibilities in a partnership are spelled out in great detail, a relationship is only as tight as the two sides commit to make it.
In Wisconsin, UW Health sees a new joint operating agreement with UnityPoint Health-Meriter, previously bitter hospital rivals in Madison, as a way to alleviate space shortages at the teaching hospital, while integrating the physician networks and health plans that each partner brings to the alliance. The FTC approved the deal this month.
In announcing the deal last summer, UW Health CEO Dr. Alan Kaplan said the university won't have to build more space with Meriter in the system and tertiary and quaternary care can be reserved for the teaching campus. Occupancy at the 505-bed main hospital is more than 80% and the system has complained about having to sometimes turn admissions away because of space constraints.
"By more closely aligning our two organizations, our leaders can increase access to care for patients and further build a smart, efficient delivery system that optimizes the best of both organizations and cares for patients where and when they need care," Kaplan said at the time.
Kaplan, who previously was a senior executive at UnityPoint, proved to be the right person to bridge a competitive divide between the two organizations. Meriter and UW Health explored a joint operating agreement in 2011, but after those talks fell through, Des Moines-based UnityPoint swooped in to affiliate with Meriter, setting up an intense competition with UW Health.
Note: View Q1 buying season information here.