Number of System-Affiliated vs Independent Community Hospitals, 1999-2011

System-affiliated hospitals outnumber those that remain independent. In 2011, 61% of community [acute care, non-federal] hospitals were affiliated with a health care system. This compares to 51% in 1999. Conversely, 39% of community hospitals were independent facilities in 2011, down from 49% in 1999.

Source: Table 2.1: Number of community hospitals, 1991-2011. In: Trendwatch Chartbook 2013, American Hospital Association, Feb. 26, 2013. http://www.aha.org/research/reports/tw/chartbook/2013/table2-1.pdf . Related chart 2.4 for 2001-2011: http://www.aha.org/research/reports/tw/chartbook/2013/chart2-4.pdf

Posted by AHA Resource Center, (312) 422-2050, rc@aha.org

Healthcare Mergers & Acquistions – 2012 Trend Data

Irving Levin Associates has released summary data on health care M&A activity during 2012. Deal volume for hospitals showed an uptick of 2.2% over 2011 — 94 deals, up from 92 in 2011. However, dollar value of the deals declined  77.2%, from $8.3 billion in 2011 to $1.9 billion in 2012. In the health services market overall, the number of deals was up 8.9%, but total dollar value was down 31.5%.

Significant growth in deal dollar value was seen for the home health/hospice, physician medical groups, behavioral health, and managed care sectors. For the entire health sector – both technology [biotech, ehealth, devices, and pharma] and health services – the deal dollars shrank 38% while deal volume grew 5.9%.

Source: Health care M&A spending falls nearly 40% in 2012, lowest year on record since 2003, according to Irving Levin Associates, Inc. Business Wire, Jan. 21, 2013. http://www.businesswire.com/news/home/20130121005788/en/Health-Care-MA-Spending-Falls-40-2012.

Posted by AHA Resource Center, (312) 422-2050, rc@aha.org

MERGERS: Reform to influence hospital consolidation

Health reform is likely to decrease inpatient revenue, increase hospitals’ cost of compliance with government programs, and encourage clinical integration.  Generally speaking, larger organizations should be better positioned to compete in the changing environment.  This article, with authors from McGuire Woods and Juniper Advisory, gives a pragmatic overview of the current hospital M&A market.  It is different now because financial concerns are not as strong a driver as they have been in the past for smaller providers.  The authors describe the more popular types of deal structures.  The relative positions of for-profit and not-for-profit systems in so far as they are approaching mergers and acquisitions is also addressed.

Source: Brown, T.C., Jr., and others.  Current trends in hospital mergers and acquisitions.  HFM. Healthcare Financial Management;66(3):114-118, 120, Mar. 2012.  Click here for full text from publisher: http://www.hfma.org/Templates/Print.aspx?id=31062 Posted by AHA Resource Center, (312) 422-2050, rc@aha.org

More health care provider-payor integration on the horizon?

Hospitals mergers with other hospitals, hospital acquisition of physician practices – are provider-payor mergers next on the M&A horizon? Insurer Highmark is acquiring West Penn Allegheny Health System in Pittsburgh, pending final regulatory approval. At the May annual meeting sponsored by Becker’s Hospital Review, former West Penn executive Bob Edmonson discussed these key trends that suggest provider-payor integration may gain more traction in the future:

• Payors are beholden to medical loss ratio limits
• Physicians are the core of accountable care organizations [ACOs]
• Insurers have key ACO competencies
• Providers are assuming greater population risk
• ACO start-up capital is high at a time when hospital revenues are flat or declining

Source: Dunn L. Payor-provider integration: anatomy of the Highmark-West Penn Deal. Becker’s Hospital Review, May 17, 2012. http://www.beckershospitalreview.com/hospital-transactions-and-valuation/payor-provider-integration-anatomy-of-the-highmark-west-penn-deal.html

UPDATE: West Penn Allegheny calls off Highmark merger. Becker’s Hospital Review, Sept. 28, 2012. http://www.beckershospitalreview.com/hospital-transactions-and-valuation/west-penn-allegheny-health-calls-off-highmark-merger.html

UPDATE: Herman B. Highmark-West Penn merger receives Pennsylvania approval. Becker’s Hospital Review, Apr. 29, 2013.   http://www.beckershospitalreview.com/hospital-transactions-and-valuation/highmark-west-penn-merger-receives-pennsylvania-approval.html

Related resources:

Gamble M. The quiet takeover: insurers buying physicians and hospitals. Becker’s Hospital Review, July 11, 2011. http://www.beckershospitalreview.com/hospital-management-administration/the-quiet-takeover-insurers-buying-physicians-and-hospitals.html

Payer-provider M&A roundup: the biggest deals of 2011. FierceHealthPayer, Nov. 7, 2011. http://www.fiercehealthpayer.com/special-reports/payer-provider-ma-roundup-biggest-deals-2011

Kurtz R. Highmark-West Penn merger sets precedent for payer-provider deals. FierceHealthPayer, May 2, 2012. http://www.fiercehealthpayer.com/story/highmark-west-penn-merger-sets-precedent-payer-provider-deals/2012-05-02

Braun CJ and Short F. Going vertical: the hospital-health insurer merger. Background article for American Bar Association and American Health Lawyers Association, Antitrust in Healthcare Conference, May 3-4, 2012. http://www.mintz.com/publications/3255/Going_Vertical_The_Hospital_Health_Insurance_Merger

Crosby J. 2 giants – HealthPartners, Park Nicollet – plan to merge. StarTribune, Aug. 30, 2012. http://www.startribune.com/business/168058306.html

Posted by the AHA Resource Center, (312) 422-2050, rc@aha.org

Hospital Merger & Acquisition Deals Up 12% in 2011

Levin Associates has just released its annual data on the number and dollar volume of mergers and acquisitions in 2011 for the health care sector. For hospitals there was a 12% increase in deals –86 deals compared to 77 in 2010. However, dollar value of the hospital deals declined 27%, dropping from $10.793 billion in 2010 to $7.868 billion in 2011.

M&A activity for physician medical groups was up 60%, involving 107 groups in 2011 versus 67 the previous year. Value of physician group deals grew to $465 million, a 9% rise over the previous year.

For the entire health care sector, including other health services, biotech, e-health, managed care, medical devices and pharmaceuticals, spending on deals rose 11% to $227,371,000,000 in 2011, but the number of deals was down to 980, a decrease of 3%.

Source: Health care M&A spending rises 11% in 2011 according to new report from Irving Levin Associates, Inc. Irving Levin Associates press release, Jan. 25, 2012. http://www.levinassociates.com/pr2012/pr1201mamq4

Posted by the American Hospital Association Resource Center, (312) 422-2050, rc@aha.org.

Principles and Guidelines for Changes in Hospital Ownership

With renewed interest in clinical integration comes potential change in hospital ownership or control due to mergers/acquisitions, the formation of new integrated delivery networks, or the development of accountable care organizations.  To help  hospital leaders navigate the community interests and the regulatory requirements involved in an ownership change, the American Hospital Association and Jones Day have developed voluntary principles and guidelines.

The report discusses fiduciary duties in fulfilling the hospital’s mission, key considerations for potential control changes, and guidelines for review of possible ownership change. The guidelines cover:

• Community engagement to identify future health improvement needs
• Initial steps in considering a change
• Evaluation of proposed changes
• Conduct of  an appropriate review of state and federal laws
• Appropriate antitrust analysis where necessary
• Protection of the value of the community’s assets
• Education of and communication to the community of the changes taking place

A comprehensive checklist of the documents needed for review of a proposed change in ownership is appended to the report.

American Hospital Association; Jones Day. Principles and guidelines for changes in hospital ownership. American Hospital Association, Jan. 2012. http://www.hpoe.org/hpoe/resources/hospital-ownership.pdf

Posted by the American Hospital Association Resource Center, (312) 422-2050, rc@aha.org.

Hospital M&As: strategic overview and reports of experience

Potential advantages and disadvantages of health care provider consolidation are identified in the lead-off article in this special issue of Frontiers devoted to mergers, acquisitions, and affiliations.  In the first article, consultant and strategist Alan Zuckerman also covers the key M&A questions that health care execs should be asking.  In the second paper, Ann Madden Rice, CEO of UC Davis Medical Center  discusses the academic medical center’s affiliation strategy with primary care clinics and community hospitals.  Julie Manas, CEO of Genesis Medical Center in Davenport, IA, draws on multiple past experiences with M&A situations to develop lessons for leaders who are going through the process.  Dorothy Erdmann, CEO of Shawano Medical Center in Wisconsin, describes the process of affiliating this community hospital with ThedaCare (Appleton, WI).  L. Ray Humphreys, CEO of Anderson Regional Medical Center (Meridian, MS), recounts the acquisition of nearby Riley Hospital from Health Management Associates.

Why I like this article:  It’s a nice combination of an experienced consultant’s general principles (including some useful graphics) and the reflections from hospital CEOs who have been through the process with their institutions.

Source: Frontiers of Health Services Management;27(4):entire issue, Summer 2011.  Posted by the AHA Resource Center, (312) 422-2050, rc@aha.org

Hospital mergers and acquisitions increase in 2010

In 2010, the number of hospital mergers and acquisitions increased 33 percent over the previous year, according to a recent report by Irving Levin Associates. Last year represented the highest level of activity since 2001, with most occuring in the second half of the year. For data on the top five transactions of 2010 and the number and total value of transactions for 2001-2010, see http://www.levinassociates.com/pr2011/pr1102hospital

Source: Irving Levin Associates Press Release, Feb. 3, 2011.