Hospital M&A Activity For Q3 Still Slow, But Better Than 2021

The quarter saw two ''mega transactions" that were spurred by organizations' capital structure interests.

There were 10 announced M&A transactions from hospitals and health systems during the third quarter of 2022, a relatively sluggish figure, but an improvement from the seven transactions announced during the same quarter in 2021, according to research from Kaufman Hall.

This quarter saw two "mega transactions," which Kaufman Hall defines as "smaller party annual revenues over $1 billion." According to Kaufman Hall, these transactions are normally "strategic in nature" but the two from this quarter were the result of financial and capital structure interests.

Pure Health, an Alpha Dhabi Holding subsidiary based in the United Arab Emirates, signed an agreement in September to purchase a $500 million minority equity investment in Ardent Health Services, a Nashville-based 30-hospital system. The second of the two mega transactions involved the sale of nine hospitals and two related medical office buildings in California, Indiana, Nevada, and Pennsylvania from Medical Properties Trust, Inc. to Prime Healthcare.

Two of the 10 Q3 transactions were by for-profit health systems, three were by non-profit organizations, four of the transactions were by academic or university-affiliated acquirers, and there was a religiously affiliated acquirer as well, according to Kaufman Hall.

"Given the current volatile interest rate environment, we anticipate that systems (both for-profit and not-for-profit) will be focusing heavily on their capital structures, which may spur more financially driven transactions," Kaufman Hall said in the report. " Portfolio realignment and focused regional growth are among the trends we expect to continue, as hospitals and health systems focus on building depth and breadth of services within core markets. We also anticipate continued growth in partnership models that can offer new sources of capital and new capabilities as organizations emerge from an extremely challenging financial year and refocus on strategic growth opportunities."