Expect more healthcare mergers in 2022
The healthcare industry is going through a period of transformation. Large healthcare organizations continue to grow in size and scale while smaller community hospitals struggle to find partners and ultimately close their doors. As a result, healthcare M&A activity will continue to be strong in 2022 as the mega-mergers continue.
The decline in the number of healthcare mergers
In 2021, the number of collaboration, merger, and acquisition transactions between hospitals and health systems was down overall but larger in size. However, healthcare experts believe that this pattern will reverse in 2022. In fact, as healthcare organizations become more picky about finding a partner, mergers and acquisitions are anticipated to rise.
The pandemic played a substantial role in declining the number of mergers, but organizations are more selective in which market they are entering and stricter FTC guidelines on approving the transactions. According to the United States Federal Trade Commission (FTC), healthcare transactions can result in significant competitive effects where healthcare systems or hospitals are dominant in an area and, therefore, can increase prices for healthcare services.
To better enable competition among healthcare systems, FTC guidance requires healthcare organizations to demonstrate that their merger will not substantially lessen competition. Even if healthcare organizations can meet the FTC's standard, healthcare mergers and acquisitions may also raise antitrust concerns in other countries.
As healthcare spaces have become more crowded and competitive, large healthcare systems have turned to mergers to consolidate power—and price. The mega-merger trend will continue, especially with partnerships across state lines.
Q4,2021 HCA Healthcare agreed to buy Steward Health Care'sCare's five hospitals in Utah, citing the opportunity to expand in a state with a rising population. Earlier in the year, HCA sold four hospitals in Georgia to Piedmont Healthcare.
Looking at Steward healthcare, they also purchased five Florida hospitals and physician practices from Tenet Healthcare. With the move, Steward now operates ten hospitals in the State. These health systems are expanding their footprint in the targeted geographical area that can be financially optimal.
One pattern emerged during 2021 in health system MA and that is the number of transactions decreased, yet the value of transactions increased. The impact on transaction activity of the changes in the healthcare industry continues to develop. Unaffiliated and independent health care facilities are uncommon, and organizations have gotten more discerning about potential partners as a result of their focus on business reasons.