Mergers and acquisitions in the Hospital sector suffered in the first quarter of 2017, as President Trump took office and the Republican-led Congress vowed to repeal and replace the Affordable Care Act.
Hospitals and health systems felt the uncertainty as deal volume slipped 17% to 19 transactions versus the previous quarter, and dropped 30% year over year. This quarter’s deal volume represents 23% of the 81 hospital transactions announced in the previous 12 months. (N.B.: We record hospital deals when they reach the definitive agreement stage, not when a letter of intent is signed.)
Source: HealthCareMandA.com, April 2017
Four transactions disclosed a price, for a combined total of only $67.5 million, a 97% plunge from the fourth quarter’s total of $2.3 billion, and a 95% decrease compared with the first quarter of 2016. This quarter’s deal value represents less than 1% of the nearly $12.65 billion spent on hospital deals in the past 12 months.
Dollars Spent on Hospital Mergers & Acquisitions, by Quarter
Two of the top three deals were announced by REITs, but the largest deal by price was announced by the Health Care Authority of Anniston (Alabama), also known as Northeast Alabama Regional Medical Center (252 beds). The public authority agreed to acquire Stringfellow Hospital (125 beds), also in Anniston, from Community Health Systems, for $25 million. This deal is part of Community Health’s ongoing effort to trim its $15 billion debt.
Publicly traded Global Medical REIT acquired the real estate assets of the physician-owned Great Bend Regional Hospital in Great Bend, Kansas. Great Bend Surgical Properties LLC, the owners’ organization, sold the 33-bed, 58,000-square foot hospital, for $24.5 million.
MedEquities Realty Trust, Inc., another publicly traded REIT, paid almost half that amount ($12.5 million) for Advanced Diagnostics Hospital East, an acute care surgical hospital that opened in December 2015. The campus in east Houston consists of approximately 1.6 acres and 23,300 square feet with four operating rooms, two special procedure rooms, four inpatient rooms and four recovery rooms.