It’s been a slow year for hospital mergers and acquisitions in the United States. In the first half of 2019, just 29 transactions have reached the definitive agreement stage, or actually closed. In the first half of 2018, 38 transactions made that cut.
The targets are much smaller in 2019, too. A total of 4,991 beds changed hands in the first six months of this year, compared with 9,327 beds in the same period in 2018.
Fourteen not-for-profit hospitals or systems (2,380 beds combined) were targets in 1H:19, and three of them were critical access hospitals which are regulated to just 25 beds. That’s not a stand-out trend, considering six critical access hospitals found new partners in the first half of 2018, from a total of 23 not-f0r-profit transactions (6,828 beds).
Transactions in the not-for-profit segment follow the trends seen in recent years, as smaller hospitals and single-hospital health systems join larger regional hospitals and systems. A few examples in 1H:19 are New Hampshire-based Exeter Health Resources, anchored by a 100-bed hospital with a physician medical group and home health and hospice agency, joined Boston’s Massachusetts General Hospital, part of Partners HealthCare System there; Berger Health System in Circleville, Ohio, an 83-bed hospital with a physician group and home health services, became part of OhioHealth in Columbus; and Beaver Dam Community Hospital (125 beds) and its outpatient clinics merged with Marshfield Clinic Health System, both in Wisconsin.
The number of for-profit hospitals sold this year is down, too. Just six deals were announced by Community Health Systems (NYSE: CYH), HCA Healthcare (NYSE: HCA), Quorum Healthcare (NYSE: QHC) and Surgery Partners (NASDAQ: SGRY), compared with nine sales in the same period in 2018, when Tenet Healthcare (NYSE: THC) was also selling facilties to pay down deb
The stand-out trend in the first half of 2019 is the number of facilities involved in bankruptcy proceedings, with eight deals. Verity Holdings, LLC, a subsidiary of not-for-profit Verity Health System of California, Inc., filed for Chapter 11 bankruptcy protection in 2018. The $1.06 billion sale included St. Francis Medical Center (339 beds); St. Vincent Medical Center (320 beds); Seton Medical Center (279 beds) and Seton Coastside, a skilled nursing facility. Two other Verity hospitals were sold to Santa Clara County for $235 million in December 2018.
For-profit Promise Healthcare’s November 2018 bankruptcy filing has had the most impact in the first half 2o19, though there are a few more companies heading in the same direction. Boca Raton, Florida-based Promise operated long-term acute care hospitals (LTACHs) and skilled nursing homes in several states. In the auction process, Select Medical Holdings (NYSE: SEM) picked up three LTACHs (160 beds) in Florida; privately held KPC Healthcare acquired seven LTACHs (345 beds) in Arizona, Kansas, Lousiana, Mississippi, Texas and Utah; Kindred Healthcare, Inc. purchased one LTACH (177 beds) in Los Angeles, and Lexmark Holdings, LLC bought two LTACHs (196 beds) in Louisiana.