Hospital merger and acquisition activity was fairly quiet in the first four months of the year, totaling 24 deals that made to a definitive agreement or beyond. Then came May, with a combined total of 13 transactions announced in the first four weeks (through May 26).

Deal volume in the hospital sector through May 26 now totals 37 transactions, targeting 79 hospitals with 13,854 beds. The nearly $2.3 billion combined spending includes the $1.4 billion just announced by Medical Properties Trust (NYSE: MPW), which acquired the real estate assets of 10 acute care hospitals and one behavioral health facility (approximately 2,400 beds) belonging to IASIS Healthcare, a TPG portfolio company.

That transaction is contingent on an even larger one, the acquisition of IASIS Healthcare by Steward Health Care System, LLC, a portfolio company of Cerberus Capital Management LP. Medical Properties Trust owns the assets to most of Steward’s current portfolio of 18 hospitals. Financial details were not disclosed at the time of the announcement on May 19, but The Wall Street Journal reported a $1.9 billion price tag, according to a source with knowledge of the deal.

IASIS operates 17 acute care hospitals and one behavioral health facility, for a total of approximately 3,600 beds.

This transaction will create the largest private for-profit hospital operator in the United States, with 36 hospitals across 10 states, managed care operations in Arizona, Utah and Massachusetts, and projected revenues of almost $8 billion in 2018. The merger is expected to close in the third quarter of 2017.

The Steward/IASIS merger is significant for other reasons. In the last two years, the largest transactions (by dollar volume) in the Hospital sector were among foreign-based entities, targeting multi-hospital chains in Australia, Spain and the United Arab Emirates.

Also, the deal consolidates two privately held, multi-facility health systems, an event we haven’t witnessed in some time. Mega-mergers among publicly traded hospital companies came in a wave back in mid-2013, as Tenet Healthcare (NYSE: THC) acquired Vanguard Health Systems for $4.3 billion, and Community Health Systems (NYSE: CYH)  took on Health Management Associates for $7.6 billion. Privately held hospital companies, such as Prime Healthcare Services, tend to acquire single facilities as they cherry-pick among financially troubled facilities.

Target Breakouts

In the first five months of 2017, 18 not-for-profits announced 20 deals, targeting 27 hospitals (2,462 beds). Among the not-for-profit targets were seven critical access hospitals and two hospitals in bankruptcy proceedings. Among these were two deals announced by the not-for-profit side of Prime Healthcare Services, the Prime Healthcare Foundation, each for a single facility.

The publicly traded hospitals have been in divestment mode for the past year, and that trend is still going strong. Community Health announced five transactions to sell 16 hospitals (3,075 beds) through May 26. Only one deal disclosed a price, for $25 million.

CHS’s 2016 spin-off, Quorom Health Corp. (NYSE: QHC), announced three divestitures covering four hospitals (381 beds). No financial terms were disclosed. Tenet Healthcare, which is seeing higher returns from its ambulatory surgical centers, sold three hospitals in the Houston metropolitan area to HCA Holdings (NYSE: HCA) for $725 million.

Eight transactions targeted 28 privately held hospitals (including 10 that were part of the Medical Properties/IASIS deal),

Acquirer Breakouts

Three real estate investment trusts (REITs) announced four deals. The most active was Global Medical REIT (NYSE: GMRE) with two deals targeting a total of three hospitals (73 beds) for $50.5 million. MedEquities Realty Trust (NYSE: MRT) acquired a surgical hospital (4 inpatient rooms) for an undisclosed price, and Medical Properties Trust announced the previously mentioned $1.4 billion deal for 11 IASIS facilities.

HCA was the single publicly traded chain that acted as an acquirer. It announced two deals, the $725 million acquisition of Tenet’s three Houston hospitals, and another targeting two Texas hospitals owned by Community Health.

Two not-for-profits announced two deals apiece. One was Prime Healthcare Foundation, and the other was Minneapolis-based Fairview Health Services. In January, Fairview took on the Grand Itasca Clinic & Hospital (36 beds) in Grand Rapids, Minnesota. In March, it acquired HealthEast Care System, a four-hospital system with 14 clinics, a home care service and a medical transportation center.

There’s still a lot of time left in 2017, and the American Health Care Act is now in the Senate, where Republican senators are working behind closed doors to improve it. Just this week, the Congressional Budget Office published the latest “score” on the House’s final version of the AHCA. Some 23 million people were projected to lose health insurance coverage by 2026, but the deal would save $119 billion in the same time period.

Fewer “insureds” mean more financial strain all across the U.S. healthcare system. We expect to see many more small and/or rural hospitals in the Target column by 2018. Stay tuned.