Healthcare mergers and acquisitions are off to a strong start in 2024, with the number of first-quarter deals at their highest in four years, according to consulting firm Kaufman Hall.
Twenty transactions were announced in this year's first quarter, compared with 15 deals in the first quarter of 2023, 12 in 2022's first quarter and 13 in 2021's first quarter. In 2020, there were 29 first-quarter deals, according to an M&A Quarterly Activity Report released Thursday by Kaufman Hall.
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“In a post-COVID world, organizations now are saying, ‘let’s get back to strategy,’” said Anu Singh, managing director and M&A practice leader at Kaufman Hall. “You have organizations that have been thinking about industry transformation and saying, look, we have a certain set of capabilities or resources or intellectual capital that we think we need to really thrive.”
Four of this year's first-quarter transactions were megamergers, in which the smaller organization has annual revenue of $1 billion or more. Academic health systems were the buyers in six transactions, while nonprofit systems were the buyers in nine, according to the report.
Transacted revenue, or the total operating revenue for each seller, totaled $12 billion in the first quarter, down from $12.4 billion in the first quarter of 2023, but up substantially from $3 billion in 2022's first quarter, the report found.
Industry watchers predicted a stronger year for M&A in 2024, following the deal slowdown during the COVID-19 pandemic and despite heightened scrutiny from regulators. Hospitals and health systems are looking to size up to better navigate financial pressures and have more clout in payer negotiations. Recent acquisition targets tend to be larger, and more providers are considering less capital-intensive partnerships instead of full mergers, according to Kaufman Hall's 2023 year-end report.
One notable first-quarter deal is Northwell Health's proposed acquisition of Nuvance Health, which would create a system with 28 hospitals and more than 1,000 care sites across New York and Connecticut. The health systems expect the transaction to close by the end of the year.
In January, New Jersey-based Saint Peter's Healthcare System and Atlantic Health System signed a letter of intent to merge in the coming months.
The Kaufman Hall report also noted the wave of hospital sales by large health systems, including Tenet Health, HCA Healthcare and Ascension. Dallas-based Tenet, for example, sold six California hospitals and their related operations in March. In February, Tenet sold three South Carolina hospitals, 27 physician clinics, an outpatient center and a free-standing emergency department to Winston-Salem, North Carolina-based Novant Health.
