For the past six weeks, players in the health system and hospital M&A market seem to be running a marathon, with 12 deals so far on the books. There has been a flurry of activity, ranging from divestments to larger system mergers. Many of these deals are unsurprising, often resulting from a years-long plan of a health system’s promise to balance its portfolio. Let’s look at some of the most notable hospital M&A activity of the third quarter (so far).
Ascension divests in Illinois
In late July, Missouri-based Ascension sold eight hospitals in Illinois and related post-acute and senior living facilities, which all comprise Ascension Illinois. Collectively, the eight hospitals reported more than $1.75 billion in revenue and $500 million in EBITDA in 2023 and had more than 2,000 beds. The buyer, Prime Healthcare, said in a statement that this was its largest deal to date and will commit $250 million in upgrades and improvements.
Ascension has been in rough waters for the past 18 months. In 2023, it reported a $3 billion operating loss in its consolidated financial statements and has been moving quickly to turn things around. On May 17, Ascension’s third fiscal quarter financial results for the nine months ended March 31, 2024, showed the organization only suffered a net operating loss of $238 million, a significant improvement driven by “an increase in overall same facility volume over the comparable period in the prior year, most notably driven by total inpatient admissions, emergency visits and total surgery visits.”
The sale of Ascension Illinois isn’t the health system’s first divestment this year, either. In June, it sold Ascension St. Vincent’s Health System to UAB Health System for $450 million, and in March it offloaded three hospitals in northern Michigan to MyMichigan Health.
Tenet sells majority stake in Brookwood Baptist Health
In early August, Tenet Healthcare sold a 70% stake in Alabama-based Brookwood Baptist Health, which is comprised of five hospitals, affiliated physician practices and other related operations, for $910 million in cash, implying a total value of $1.3 billion for the health system. Brookwood Baptist Health is a joint venture with Baptist Health System, another health system based in San Antonio, Texas.
The buyer is Orlando Health, which has been extremely active in the hospital M&A market in the past few years.
Tenet has divested 11 hospitals this year (including the five from this deal). In February, it sold its Pacific Coast Network to UCI Health for $975 million. Following that deal, in March it sold two hospitals in California to Adventist Health for $550 million.
By cutting down on its portfolio size, Tenet has improved its financial health. In its Q2:24 earnings release, the company raised its 2024 outlook and Saum Sutaria, Tenet CEO, said its “portfolio transformation and enhanced cash flow profile provide [it] with compelling opportunities for growth as [it] executes on [its] strategy and continue to broaden [its] service offerings for patient-centered care.”
According to the release, Tenet generated $5.1 billion in net operating revenue in Q2:24.
Arizona hospital traded twice
In the span of a week, Arizona General Hospital, a micro-hospital in the Phoenix metro area, was traded twice. The hospital’s operator, San Francisco-based Dignity Health, purchased the facility from its landlord, Medical Properties Trust, for $160 million. The deal also included seven freestanding emergency departments in the Phoenix metropolitan area.
Then, Dignity Health sold the facility to HPA Exchange LLC, a new business platform created by the executive team of Healthcare Property Advisors, a vertically integrated healthcare real estate owner, investor and operator. Even though Dignity Health had no interest in owning the building, it will keep 100% of the lease and remain as the operator.
Community Health Systems sells PA hospitals
WoodBridge Healthcare, Inc. purchased Commonwealth Health, a subsidiary of Community Health Systems, for $120 million. The three hospitals, all located in or around Scranton, Pennsylvania, collectively have 677 beds and reported a combined net patient revenue of $626.2 million in 2023. According to the official press release, the deal also includes the related businesses to the hospitals.
The hospitals included in this transaction are among the additional potential divestitures discussed on Community Health Systems’ second quarter 2024 earnings call. Kevin Hammons, President and CFO, said in the call that they “estimate combined potential proceeds of more than $1 billion through a handful of transactions that are in various stages of evaluation or negotiation.”
Dartmouth Health expands in New Hampshire
Dartmouth Health, New Hampshire’s only academic health system, purchased Valley Regional Hospital based in Claremont. It’s a critical access hospital (25 beds) and had $62.8 million in net patient revenue in 2023. This official affiliation builds upon the existing relationship and enables the formal integration of its clinical, administrative and financial resources. Under an agreement between the two organizations, Dartmouth Health will maintain essential services at the Claremont hospital for at least 10 years and will oversee a capital campaign to pay for and operate a new medical center building on the hospital’s campus.
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