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Hospitals and health systems have experienced extreme financial pressure in the past couple years — and the issue is being reflected in the sector’s M&A activity.
There have been dozens of M&A deals in the health systems space this year, with hospitals seeking out partnerships to grow and protect their long-term financial sustainability. A Kaufman Hall report found that financial distress was the driving factor behind nearly 40% of deals announced during the third quarter of 2023.
Below are seven of the most newsworthy M&A deals that took place in the hospital world this year.
Kaiser Permanente & Geisinger Health
In April, Kaiser Permanente announced its plans to acquire Pennsylvania-based Geisinger Health. The financial terms of the deal were not disclosed. However, The Wall Street Journal reported that the combined health system would result in more than $100 billion in revenue.
California-based Kaiser, which is an integrated health system, owns 40 hospitals. Geisinger comprises 10 hospitals, as well as a health plan with more than half a million members.
Kaiser’s move to acquire Geisinger is part of a larger plan. When Kaiser unveiled its plan to buy Geisinger, it also announced that the Pennsylvania system will be the first to join Risant Health — a new company Kaiser launched to operate nonprofit health systems.
Risant’s mission is to improve population health by scaling access to value-based care and coverage at health systems, according to Kaiser. The plan is for Risant to acquire a portfolio of nonprofit community-based health systems across the country.
Geisinger and the other health systems that will join Risant will maintain their names and continue to operate as regional health systems, but they will have a greater focus on value-based contracts, Kaiser said.
Kaiser also said it expects to invest $5 billion in Risant and fold five or six health systems into the company over the next five years.
Presbyterian Healthcare Services & UnityPoint Health
In March, New Mexico-based Presbyterian Healthcare Services and Midwest-based UnityPoint Health signed a letter of intent to merge. The deal could have resulted in an approximately $11 billion entity with nearly 50 hospitals and an insurance arm.
When the deal was announced, Sanjay Saxena — global leader of Boston Consulting Group’s healthcare division — told MedCity News he wouldn’t be surprised if it got called off, given that a significant chunk of cross-market mergers end up not going through.
Lo and behold, Presbyterian and UnityPoint called off their merger plans in October without giving an official reason. UnityPoint also made a concurrent announcement that its CEO, Clay Holderman, had left the organization and that its former chief legal officer was promoted to his role. This is the second merger deal the health system has abandoned in recent years — it previously had plans to merge with South Dakota-based Sanford Health, but the $11 billion deal was scrapped in 2019.
Cross-market mergers often fail due to health systems realizing they’re not ready to make the sacrifices needed to reap the benefits of a megamerger, Saxena pointed out.
Issues creep up, such as who will be in the C-suite, where the headquarters will be and who will get the dominant number of board seats. But positions — and sometimes duplicative service lines or programs — need to be cut in order for newly merged health systems to reap the benefits of scale, Saxena explained.
Henry Ford Health & Ascension Michigan
In October, Detroit-based Henry Ford Health announced plans to fold Ascension’s hospitals and healthcare sites in southeastern Michigan into its organization. Should the deal go through, Henry Ford Health would become an organization that employs about 50,000 people across more than 550 care sites.
The deal is expected to close in the summer. If it is approved by federal and state regulators, the new organization will generate more than $10.5 billion in annual operating revenue.
BJC HealthCare & St. Luke’s Health System
In May, two Missouri health systems — St. Louis-based BJC HealthCare and Kansas City-based St. Luke’s Health System — signed a letter of intent to combine their organizations into one integrated academic health system. The deal is expected to close on January 1, the organizations said in November.
The combined health system will comprise 28 hospitals and hundreds of clinics serving 6 million people across Missouri, Illinois and Kansas. It is expected to generate $10 billion in annual revenue.
BJC CEO Richard Liekweg will lead the new health system, while Saint Luke’s CEO, Melinda Estes, plans to retire.
Centura Health breakup
In February, Chicago-based CommonSpirit Health and Florida-based AdventHealth announced their plans to break up Centura Health — a 20-hospital joint venture the two health systems had been operating in Colorado, Kansas and Utah for 27 years. The partnership had “reached its natural maturity,” the health systems said.
In August, the breakup was finalized. AdventHealth now operates 5 formerly Centura hospitals in Colorado, while CommonSpirit operates the remaining 15 in Colorado, Kansas and Utah.
Photo: Dmitrii_Guzhanin, Getty Images
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