INSIGHT: Health Care M&A Transactions on Pace to Set Record in 2019

Bloomberg BNA Health Law and Business

Gary W. Herschman, Member of the Firm, and Yulian Shtern, Associate, in the Health Care and Life Sciences practice, in the firm’s Newark office, co-authored an article in Bloomberg Law Health Law & Business, titled “INSIGHT: Health Care M&A Transactions on Pace to Set Record in 2019.”

Following is an excerpt:

March madness is over for college basketball fans, but it’s just the beginning of a fast-paced year for health-care M&A activity.

At the current pace, deal activity is projected to eclipse over 1,200 deals by the end of 2019 (compared to 1,059 deals in 2018). With over 317 deals announced or closed year-to-date (through the end of March), we may very well see a record setting year for health-care deals.

Very Active Hospital/Health System Sector

Hospital and health system deals are currently on pace to eclipse 180 deals in 2019, with nearly 50 deals having been announced or closed through the end of the first quarter.

Several common themes from 2018 continue to drive M&A activity in 2019: (i) smaller, community based hospitals partnering with large regional players to accomplish the need for size and scale to ensure survival and longevity; and (ii) mega-mergers of larger regional, statewide and multi-state health systems to achieve a larger breadth of service coverage.

Of note, HCA and Mission Health completed their $1.5 billion dollar merger, resulting in HCA’s entrance into the North Carolina market. Additionally, the merger of San Francisco, CA-based Dignity Health and Englewood, Colo.-based Catholic Health Initiatives to create CommonSpirit Health, resulted in a 21-state enterprise with over 140 hospitals and generating more than $29 billion in revenue.

While deal activity is expected to continue its strong pace, some merger discussions fell apart due to the complex challenges in integrating large health systems. For instance, the previously announced merger of Memorial Hermann Health System and Baylor Scott & White, which would have created the largest health system in Texas, was called off, in part, due to concerns about the parties’ ability to provide continued high-quality of care.

However, deal activity is expected to continue at its current pace, as participants strive for innovative solutions for mega-merger integration challenges.

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This article was referenced in the "For Your Consideration" section of "WEEKEND READ | Regain Client Trust and Build a Brand—Win the Work and Keep It," Bloomberg BNA Daily Labor Report, by Robert Wilhelm, April 28, 2019. (Read the full version - subscription required.)