The number of hospital mergers and acquisition deals hit a new low in 2022, although more are expected this year.
Only 55 transactions reached the letter of intent or definitive agreement stage, the lowest number since 2009, five financial advisory groups Ponder & Co. started monitoring hospital M&A activities. According to data from Ponder & Co. Included in Modern Healthcare’s Premium Data Centers, the 2022 tally marks the fifth consecutive decline in annual volume.
There are fewer financially difficult hospitals to acquire after years of consolidation and potential buyers are being more careful as they manage higher labor and supply costs, reduced return on investment, oversight regulation and cut Medicare reimbursement. Amid that financial pressure, large and mid-sized systems will still find ways to sell hospitals in smaller markets, said Jake Aygun, M&A group manager at Ponder & Co.
“Potential buyers are facing their own challenges and will therefore be much more prudent and discerning as they consider integrating challenged assets into their systems,” Aygun said. “But there is a healthy backlog of other trades that are at the intent stage and a lot of behind-the-scenes discussions going on, which could mean the trendline will turn back in the opposite direction. again.”
While the number of hospital transactions fell, the value of transactions from 2022 nearly doubled from the previous annual record over the past decade, according to Ponder & Co. data. Financially sound regional systems are looking for merger partners in similar positions—often in non-overlapping markets—as they seek to allocate increasing labor and supply costs to each other. with larger institutions, improving their position in the bond market and increasing bargaining leverage with commercial insurers.
