News Release: Leadership in Hospital Consolidation

As the health care industry experiences accelerating change due to factors such as the continuing implementation of PPACA, hospitals and health systems are actively exploring and entering into re-alignment and consolidation transactions with other health systems, physicians, payers and other providers. 2012 was another extremely active year for hospital mergers and acquisitions, with several key trends emerging:

  1. Larger Transactions: The number of acute care hospital beds acquired in 2012 exceeded 40,000 for the first time since 2006 (which included the blockbuster HCA going-private transaction). The average number of beds per transaction, moreover, more than doubled from 2011 to over 600 beds. Nonetheless, most hospital transactions involved the partnering or sale of a single facility, which is consistent with historic trends.
  2. Regional Partnerships among Financially Successful Organizations: Many financially and operationally strong health care systems announced or closed affiliations with similarly situated entities in an attempt to build the economies of scale and clinical infrastructure necessary to compete in a fee-for-value environment. Noteworthy transactions and pending transactions included Northeast/Lahey, Hoag/St. Joseph (pending), Henry Ford/Beaumont (pending), and Baylor/Scott & White (pending).
  3. Faith-Based Consolidation: Large faith-based systems have been among the leaders in the consolidation trend. Ascension Health Alliance announced affiliations with Daughters of Charity Health System and Marian Health System (pending) in 2012, potentially adding over 40 hospitals to the largest not-for-profit provider in the country. Additionally, Catholic Health East and Trinity Health announced plans to merge, and Catholic Health Initiatives signed a letter of intent with PeaceHealth to create an integrated health system serving Washington, Oregon and Alaska.
  4. Blurring of Traditional Lines: Vertical integration and diversification are major themes in some of the most interesting health care transactions of 2012. Examples of payers moving “downstream” to better control health care costs included Humana’s acquisitions of Metropolitan Health Networks and Concentra and Highmark’s purchase of Jefferson Regional Medical Center (pending) as well as its ongoing plan to acquire West Penn Allegheny. Similarly, many health systems acquired complementary “upstream” businesses, such as Partners/Neighborhood Health Plan and Dignity/U.S. HealthWorks. In one of the most talked-about transactions of 2012, DaVita acquired physician practice giant HealthCare Partners in a bold move to reposition itself for “where the puck is headed.”
  5. Growth of Capital and Clinical Partnerships: Joint ventures between for-profit capital partners, including private equity firms, and not-for-profit “clinical” partners has been another emerging trend. New partnerships announced in 2012 included Aurora/IASIS and Norton/LifePoint, among others. These collaborations enable capital-constrained not-for-profit systems to expand clinical reach, while simultaneously providing the for-profit partner with an attractive platform to acquire additional facilities. A few examples of such transactions include Duke LifePoint’s acquisition of Marquette General Hospital and Montclair Health System’s (LHP & HackensackUMC) purchase of Mountainside Hospital.
  6. Academic Medical Centers Increase Activity: AMCs face increasing pressure due to significant cuts in graduate medical education funding, cuts in Medicaid and other government programs that have traditionally represented significant portions of AMC budgets. In addition, AMCs are experiencing changing payer behavior that drives volume to lower cost providers, more concentrated research dollars, and reduced philanthropy and investment earnings due to continued low interest rates and the slow recovery in to the economy. Transactions reflecting these trends include the University of Louisville entering a joint operating agreement with Kentucky One, the sale of Creighton University Medical Center by Tenet to Alegent, and the announced affiliation between UCSF with Children’s Hospital Oakland.


Cain Brothers is the leading investment bank providing M&A advisory services to management teams, boards, and owners of hospitals and health systems across the United States. Our investment banking and strategic advisory teams are led by experienced senior bankers with dedicated sector expertise and decades of experience. Our advisory services include: sellside and buyside mergers & acquisitions, sponsorship transfers, divestitures of non-core business units or assets, joint ventures and strategic partnerships, and assessment and evaluation of strategic alternatives.

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