Providers Target Similar Organizations in M&A Activity

Healthcare organizations prefer to pursue like or similar entities to increase scale in merger, acquisition, and partnership deals, with high interest in pursing physician practices.

Healthcare leaders in the April 2017 HealthLeaders Media Mergers, Acquisitions, and Partnerships Survey indicate that the top three entities involved in respondents’ most recent merger, acquisition, and partnership (MAP) activity are health systems (27%), physician practices (27%), and hospitals (20%), representing 74% of the total MAP activity.

Interestingly, responses indicate that providers favor MAP activity with a provider from the same or a similar setting. For example, a greater share of health systems (35%) than hospitals (26%) and physician organizations (10%) say that their most recent MAP activity is with another health system, and a greater share of physician organizations (48%) than health systems (25%) and hospitals (16%) mention activity with physician practices.

Further, a greater share of hospitals (37%) than health systems (17%) and physician organizations (7%) cite activity with another hospital, and a greater share of physician organizations (21%) than health systems (5%) and hospitals (3%) mention activity with another physician organization. These responses appear to indicate that providers have a preference for increasing scale along similar lines of business, and that increasing infrastructure diversity throughout the care continuum is currently a secondary strategy.

Looking forward to the next year, more than half of respondents (59%) say that their organization has a high interest in pursuing a physician practice through a MAP. The response for this type of entity is followed by a second tier of tightly clustered responses, including physician organization (30%), health system (27%), and hospital (26%). The strong response for physician practices is likely because primary care physicians are a key component of the continuum of care, and will play an increasingly important role in population health management and clinical integration efforts in the years to come.

A number of entities had large increases in response rate for being pursued within the next year compared with the results for the entity involved in the most recent MAP activity. The largest increase in response is for physician practices (up 32 percentage points to 59%), followed by physician organization (up 23 percentage points to 30%), ambulatory surgery center (up 19 percentage points to 20%), and retail clinic/urgent care clinic (up 17 percentage points to 20%). A broad spectrum of the remaining care continuum entities also had large increases, an indication that expanding population health infrastructure is of growing importance to providers.

Note that there is also a correlation between organizational setting and the type of entity respondents say their organization has a high interest in pursuing through a MAP within the next year, with organizations generally pursuing like or similar entities.

For example, a greater share of respondents from physician organizations (81%) than hospitals (59%) and health systems (50%) indicate that they have high interest in pursuing a physician practice, and a greater share of physician organizations (48%) than health systems (26%) and hospitals (23%) indicate that they have high interest in pursuing another physician organization. Further, a greater share of respondents from health systems (33%) than hospitals (26%) and physician organizations (16%) say their organization has a high interest in pursuing a health system through a MAP within the next year.