Nonprofit Healthcare Mergers Are Regaining Momentum

A press release a few days ago announces what media reports describes as a $1 billion nonprofit merger.  We have previously blogged about antitrust concerns surrounding nonprofit hospital mergers.  The Stop Anticompetitive Healthcare bill discussed in that prior post seems stalled at the moment, though it is consistent with the Biden administration’s general disdain for hospital mergers.  Here is what media market watchers are saying about nonprofit mergers and acquisitions:

The M&A landscape is hot across the behavioral health sector. While private equity deals account for the bulk of M&A, the nonprofit space is also heating up. Investment bank Matrix Capital Markets Group reported 439 transactions in the behavioral health space over the last five years.

The bank reported that 39 of those transactions included not-for-profit targets. Additionally, 42 deals included not-for-profit acquirers and 27 not-for-profit mergers with other not-for-profits.

“I think a lot of the nonprofits are going to come to a point where they need to figure out how to get additional capital, which is now more expensive,” Vasanta Pundarika, co-head of health care investment banking at Matrix Capital Markets Group, recently told BHB.“Some of the not-for-profits are probably going to look at their missions and how [they can] continue to grow to fulfill this mission. One of the ways they can do that is by going through an M&A transaction and joining a larger, growing company with the capital resources.”

Here is the joint press release.  Meanwhile, Iowa’s UnityPoint Health has signed a letter of intent to explore merger with Presbyterian Healthcare Services, a smaller system based in New Mexico.  For some good data on nonprofit hospital mergers check out this report concluding that nonprofit hospital M&A is “regaining momentum.”  Here are some of the data:

The Year in Numbers

Figure 2: 2022 Hospital and Health System Transactions by the Numbers

Total Announced Transactions…………………………………………..   53

Number of Announced Transactions in Q4 2022……………..   17

Breakdown by Smaller Party Size in Revenue (as % of Total Transactions)

• Revenue < $100M……………………………………………………….   27%
• Revenues Between $100M and $500M………………………….   42%
• Revenues Between $500M and $1B………………………………   15%
• Revenues > $1B…………………………………………………………..   15%

Not-for-Profit/For-Profit Deals

• Not-for-Profit Acquiring Not-for-Profit…………………………….   66%
• Not-for-Profit Acquiring For-Profit…………………………………..   19%
• For-Profit Acquiring Not-for-Profit…………………………………….   6%
• For-Profit Acquiring For-Profit…………………………………………..   9%

Transactions Involving

• Religiously Affiliated Seller………………………………………………..   4%
• Governmental Seller…………………………………………………………   6%
• Rural or Urban/Rural Seller…………………………………………….   30%
• Financially Distressed Seller…………………………………………….   15%

Source: Kaufman, Hall & Associates, LLC

darryll jones