In the fourth quarter of 2024, healthcare M&A volume took a plunge, according to data captured in the LevinPro HC platform. Activity declined by 10% compared with volume in Q3:24, falling from 504 announced transactions to just 452. Compared with the fourth quarter of 2023, results looked even worse, falling 13% from 521 deals. It’s worth noting these are preliminary results, as more deals and transactions could surface in the upcoming quarterly and annual reports.
Total spending also fell in the fourth quarter, sinking to $31.4 billion compared with $44.8 billion in the third quarter. Q4 was not without some significant transactions price-wise, but nothing hit more than $5 billion in the year’s closing months.
Full-year results paint a similar picture, with activity declining by approximately 11% from 2023 (2,199 deals) to 2024 (1,963 deals). Volume since 2023 pales to the record-breaking year of 2022, which had an annual deal count of 2,454, propelled by low interest rates and pent-up dry powder and capital from private equity firms and other investors.
The decrease in activity can be attributed to a wide range of headwinds creating a challenging market. Private equity firms, which have been the main driver of M&A volume for the better part of a decade, are under heightened scrutiny, both from state regulators and the Federal Trade Commission. Some advisors we’ve spoken with have disclosed that valuations also make deal negotiations difficult; a seller believes their practice or agency is valued much higher than some firms are willing to stomach. There was a sentiment that valuations during 2022 reached staggering levels, but those numbers are unsustainable in the current environment. Finding a middle ground and setting expectations between buyer and seller must be tricky for advisors in the market.
There’s also some uncertainty in the market due to shifting healthcare policy. The Biden Administration typically pushed to strengthen the Affordable Care Act, but he signed the Inflation Reduction Act, finally giving the government the power to negotiate drug prices. Will the Trump Administration continue to bolster the Affordable Care Act? How many free-market policies will they introduce? There’s no clear answer right now, so investors are in “wait-and-see” mode.
Although the overall volume fell, there was some nuance in the numbers. For example, Behavioral Health Care rose by a deal in the fourth quarter, hitting 15 transactions. Investor interest was spread evenly across the verticals: three deals for providers focused on autism, three for substance use disorder treatment centers, and two deals for inpatient behavioral health hospitals. Disclosed pricing was scarce, but some major players returned to the market. Acadia Healthcare Company, Inc. acquired three opioid treatment program clinics in South Carolina, which provide treatment for people seeking recovery from opioid use disorder. The clinics were formerly the opioid treatment programs of Recovery Concepts, Recovery Concepts of the Carolina Upstate and Clear Skye Treatment Center.
The volume of deals for Physician Medical Groups declined by 12%, falling to 99. Although activity was slower than usual, several notable deals occurred. Cencora, Inc., formerly known as AmerisourceBergen, purchased Retina Consultants of America for approximately $4.6 billion, one of the largest deals for a physician group since the COVID-19 pandemic.
Retina Consultants of America is a Southlake, Texas-based management services organization of retina specialists, one of the largest in the country. Since they were formed in late 2019 by Webster Equity Partners, the platform has announced more than 25 transactions nationwide. The deal closed on January 2, 2025.
Hospital M&A activity also dropped, with only 15 transactions in the fourth quarter (compared to 21 in Q3). The largest deal was the acquisition of Summa Health by Health Assurance Transformation LLC for $485 million in cash. Summa Health is one of the largest integrated healthcare delivery systems in Ohio. It encompasses a network of hospitals, community medical centers, a health plan, an accountable care organization, a multi-specialty physician organization, research and the Summa Health Foundation.
According to its annual report, Summa Health generated approximately $1.86 billion in total revenue in 2023, and according to its 2023 financial audit, its EBITDA was approximately $22.6 million.
When added to Summa Health’s current cash, the purchase price of $485 million will enable the health system to eliminate $850 million in existing debt. Health Assurance Transformation, founded by General Catalyst in 2023, focuses on acquiring and operating health systems nationwide.
The digital health sector is also worth highlighting. It only dropped by nine deals, with 56 transactions announced in the fourth quarter, but there were still notable acquisitions, especially from private equity firms. New Enterprise Associates, Inc. purchased NeueHealth, Inc., which offers Medicare, patient engagement, virtual care and telemedicine services through owned and affiliated clinics. According to its most recent annual report, NeueHealth’s revenues during fiscal year (FY) 2023 were nearly $1.2 billion, while EBITDA for FY 2023 was a loss of $567 million.
It’s worth noting that these are preliminary results, as more deals and transactions could surface in the upcoming quarterly and annual reports. In the upcoming weeks, look for our quarterly reports, which will examine the numbers more in-depth as we gather the data.
