Hospital mergers and acquisitions rise in 3rd quarter, biggest number in 7 years

Hospital merger activity picked up significantly in the third quarter, and the number of transactions this year has nearly matched the number of deals seen in all of 2023.

There were 27 announced hospital mergers and acquisitions in the third quarter of 2024, according to Kaufman Hall, the healthcare consulting firm. That’s the biggest number of third quarter deals in seven years, nearly matching the 29 transactions seen in 2017.

Much of the activity is driven by the bankruptcy of Steward Health Care and the system’s sale of its hospitals. No fewer than 11 of the 27 transactions in the third quarter were tied to the sale of Steward’s hospitals.

But it’s worth noting that even if the Steward deals were excluded, there were 16 other hospital mergers in the third quarter, and that number tracks well with the past few years (18 in the third quarter of 2023, and 10 in 2022).

The hospital deals in the third quarter represented $13.3 billion in transacted revenue, the highest third quarter total over the past eight years, Kaufman Hall says.

Hospital analysts have been projecting more mergers and acquisitions in 2024, and those estimates appear to be sound. There have now been 58 hospital transactions in 2024, including the 31 deals that took place in the first half of the year, according to Kaufman Hall’s data.

For comparison, there were 65 hospital mergers and acquisitions in all of 2023. There were 53 transactions in 2022, so the number of deals in 2024 has already topped that number.

Some substantial deals were announced in the third quarter of the year. Sanford Health and Marshfield Clinic Health System are planning a merger that would create a system with 56 hospitals and $10 billion in revenue. If the deal is finalized, Marshfield Clinic would become part of Sanford Health.

Prime Healthcare has reached a deal to buy Ascension Illinois, which includes the health system’s nine hospitals in the state, along with a host of clinics and outpatient facilities. With the deal, Prime Healthcare expands its footprint in the Chicago region, the third largest metropolitan area in the country.

Orlando Health is planning to buy five hospitals in Alabama from Tenet Healthcare Corp. in a $910 million transaction. Tenet is selling its 70% majority ownership interest in Brookwood Baptist Health in Birmingham, Alabama.

A nonprofit system, Orlando Health says it will manage day-to-day operations of Brookwood Baptist Health in partnership with Baptist Health System. Brookwood will remain a faith-based organization.

Orlando Health was busy in the third quarter. The health system also reached a deal to buy three of Steward’s hospitals along Florida’s “Space Coast.”

Anu Singh, managing director at Kaufman Hall, told Chief Healthcare Executive® in a July interview that financial pressures are driving more hospitals to consider merging with other partners.

In some cases, hospitals and health systems are having difficulty with operating margins and are looking at deals before their position worsens. But some hospitals are looking to find partners because they’re in trouble.

“We're also seeing some organizations that are almost coming into the partnership discussion with the level of distress where a financial trigger is what's driving them to partnership,” Singh says.

In California, Santa Clara County has reached a deal to buy the Regional Medical Center in San Jose from HCA Healthcare. The county is looking to add the hospital to the county-owned Santa Clara Valley Healthcare, which operates three hospitals.

Steward Health Care filed for bankruptcy earlier this year and has been working to sell its 31 hospitals in eight states. While many of those hospitals have been sold, two Steward hospitals in Massachusetts have closed their doors after the company said it couldn’t find a buyer for the facilities.

Some for-profit systems have been scaling back their footprint in certain markets this year. In addition to Ascension’s plans to sell its hospitals in Illinois, the health system announced a deal to sell five of its hospitals in Alabama to the University of Alabama Health System in a $450 million deal announced in June. Ascension also announced a deal in the spring to sell three hospitals to MyMichigan Health.

Tenet, which sold five hospitals in Alabama, also recently completed the sale of four of its California hospitals to UCI Health, the clinical enterprise of the University of California, Irvine, in a $975 million deal.