Mergers and acquisitions in the healthcare industry surged in the second quarter of 2011, setting a pace to break all previous records in the sector as measured by dollars, according to Norwalk, CT-based Irving Levin Associates, Inc. From April to June 2011, there was more than $73.5 billion in spending on healthcare mergers and acquisitions transactions. This represents an increase of 44% from prior quarter spending of $51.1 billion and more than 61% increase as compared to the second quarter in 2010 with $45.7 billion. Healthcare M&A activity has remained strong through March of 2012. There are four sectors with strong M&A activity: service-based companies and hospitals with 153 transactions, medical device companies with 43 transactions, pharmaceutical at 22, biotech with 29 and online health care companies with 27 transactions during the first quarter of 2012.
HOSPITALS
There has been an increase in consolidations of medical practices and hospitals over the past couple of years due in large part to healthcare reform and decreased cash flows. Many regional health care groups are joining with local physician practices in a merger that increases market share. Consolidating hospitals and medical practices makes sense on several levels: initially increased revenues followed by cost-cutting and efficiency measures. More and more, hospitals need to do so to stay alive.
Hospital M&A activity is on the rise. For the first three months of 2012, there were 23 M&A deals with a total value of $129 million. There were 86 hospital M&A transactions in 2011 – more than any other year in the last decade. Recent hospital deal activity is listed below.
- CARIS HEALTHCARE: In January of 2012, South Carolina-based Solaris Hospice was acquired by Caris Healthcare in a merger that will grow Caris’ employee base from 400 to 550 employees.
- HEALTH MANAGEMENT ASSOCIATES: Health Management Associates of Naples, Florida, entered into an agreement to create a joint venture with a group of Oklahoma hospitals in February 2012. In the new arrangement, Health Management Associates takes over operations of all five hospitals and owns 80% controlling interest. Once this transaction takes place, Health Management Associates network will cover 71 hospitals and 10,700 beds throughout the US. The hospitals named in the agreement include the following Oklahoma INTEGRIS facilities: Blackwell Regional, Clinton Regional, Marshall Memorial, Mayes County Medical Center and Seminole Medical Center.The assets of Mercy Health Partners of Knoxville, Tennessee were acquired by Health Management Associates in July 2011 in a transaction valued at more than $525 million. Assets acquired include seven hospitals and 1,323 licensed beds.
- ROTECH HEALTHCARE INC.: With more than 400 locations throughout the country, Rotech Healthcare is known for its emphasis on the home medical community specializing in home respiratory, medical equipment and services. Three home medical businesses were acquired by Rotech Healthcare in December 2011. These acquired companies are Best Care HHC, NeighborCare Home Medical Equipment of Maryland and NeighborCare Home Medical Equipment and are expected to provide $11 million in 2012 revenues collectively.