Several planned health system transactions have fallen through this year. Here’s a look at why some deals didn’t come together.
It’s been a slow time for hospital mergers.
In the first six months of 2022, there have been 25 hospital deals announced, according to Kaufman Hall, a consulting firm. That’s a smaller number than in previous years. In 2021, there were 49 hospital consolidations, down from 79 in the previous year.
Hospital analysts expect the pace of hospital deals to pick up eventually. Experts say the pace of deals has slowed partly due to the COVID-19 pandemic, which has diverted attention from long-range planning and strategy.
However, several announced deals have dissolved in the past year.
Some have collapsed due to regulatory opposition. The FTC has been applying more scrutiny to hospital deals involving transactions in competing markets. President Biden has directed regulators to take a close look at mergers, including hospital consolidations, to preserve competition.
Here’s a look at some recent hospital mergers and acquisitions that have been abandoned this year.
ChristianaCare and Crozer Health
ChristianaCare, based in Delaware, had planned to buy Crozer Health, which operates four hospitals in the Philadelphia suburbs. ChristianaCare initially hoped to buy the hospitals from Prospect Medical Holdings, the for-profit company, and convert them to nonprofit hospitals.
Last month, ChristianaCare and Prospect Medical Holdings announced the deal wasn’t happening. The organizations didn’t shed much detail on why the deal isn’t happening.
"Both organizations worked very hard to reach a final agreement and have significant respect for each other, and remain committed to caring for the health of those in Delaware County," the systems said in a news release.
But the organizations said "the economic landscape has significantly changed, impacting the ability of the sale to move forward."
ChristianaCare, the largest health system in the state of Delaware, and Prospect signed a letter of intent for the acquisition in February 2022.
ChristianaCare did make one recent acquisition. In July, ChristianaCare completed the acquistion of Jennersville Hospital, which had closed at the end of 2021. ChristianaCare announced in June that it was purchasing the hospital in the Philadelphia suburbs from Tower Health, based in Reading, Pa. Jennersville Hospital shut its doors in Dec. 31, 2021, and local officials were striving to find someone to re-open the hospital.
HCA Healthcare and Steward Health Care
HCA Healthcare, based in Nashville, had planned to buy five hospitals in Utah from Steward Health Care. The systems dropped their plans to pursue the deal in the face of opposition from federal regulators.
In the planned HCA-Steward deal, the Federal Trade Commission said it was moving to stop the transaction because it would reduce competition for healthcare services in Utah’s Wasatch Front region, home to 80% of the state’s residents. FTC Bureau of Competition Director Holly Vedova called it an anticompetitive merger that “should never have been proposed in the first place.”
HCA initially hoped to acquire the hospitals and make them part of HCA Healthcare’s Mountain Division, which includes 11 hospitals in Utah, Idaho and Alaska. HCA has been concentrating on expanding its presence in fast-growing states. Utah was the fastest growing state in the country in the 2020 Census.
Based in Nashville, HCA Healthcare operates 182 hospitals in the United States and United Kingdom. HCA is also building new hospitals in Texas and Florida, two other states with fast-rising populations.
Steward, based in Dallas, operates 39 hospitals in several states.
RWJBarnabas Health and Saint Peter’s Healthcare System
RWJBarnabas Health, one of New Jersey’s largest healthcare providers, had planned to acquire Saint Peter’s Healthcare System, also based in the Garden State.
The systems dropped the deal after the FTC authorized a suit to block the merger. The FTC said patients would see higher costs and reduced services.
"Saint Peter's University Hospital is less than one mile away from RWJ in New Brunswick, and they are the only two hospitals in that city," Vedova said in the statement. “There is overwhelming evidence that this acquisition would be bad for patients, because the parties would no longer have to compete to provide the lowest prices and the best quality and service.”
Barry H. Ostrowsky, chief executive officer of RWJBarnabas Health, said the deal would have offered better services for patients. The two systems had said they hoped to create New Jersey’s first premier academic medical center. New Jersey state officials had signed off on the merger.
“We are disappointed in the termination of the proposed transaction, which we believe would have transformed quality, increased access and decreased the overall cost of care for the people of this state through the creation of a premier academic medical center,” Ostrowsky said in a statement.
RWJBarnabas Health operates 11 hospitals, 4 children’s hospitals and dozens of other care sites. Saint Peter’s, a Catholic system, operates a 478-bed acute-care hospital and a children’s hospital.
Lifespan and Care New England
Lifespan, Rhode Island’s largest healthcare system, and Care New England, also based in Rhode Island, signed an agreement to merge in 2021.
But the FTC signaled its objections and sued to stop the merger in February. In March, Lifespan and Care New England announced they were dropping their merger plans.
“Had the FTC and the Rhode Island Attorney General not challenged the proposed transaction, it would have combined the two largest healthcare providers in Rhode Island and created a dominant entity that would have led to higher prices and lower quality care for Rhode Islanders,” the FTC said in a statement.
Rhode Island Attorney General Peter Neronha also opposed the deal, saying, “nearly all Rhode Islanders would see their healthcare costs go up, for health care that is lower in quality and harder to access.”
After the Lifespan deal fell through, Care New England, which has faced financial challenges, said it was looking for other merger partners. In July, however, Care New England’s board unanimously voted to operate independently.
Care New England said in July that the system is looking at “enhanced support from various clinical and operating partners to improve liquidity and operational performance.” Care New England is looking at partnerships with Brown University, other area hospitals and clinical partners. The system also said it would with Lifespan.
Hackensack Meridian Health and Englewood Health
Hackensack Meridian Health, New Jersey’s largest healthcare provider, initially agreed to acquire Englewood Health in 2019. After two years, the systems said they were abandoning the plans following opposition from the FTC and state prosecutors.
The FTC filed suit in late 2020 saying that the proposed deal would eliminate competition between Hackensack Meridian Health and Englewood in Bergen County. The merged organizations would operate three of the six acute care hospitals in Bergen County.
Twenty-six state prosecutors from around the nation, led by Pennsylvania Attorney General Josh Shapiro and California Attorney General Rob Bonta, filed a brief in support of the FTC effort to block the merger. “Ensuring that there is strong competition in the healthcare system helps keep prices down and still provides patients with quality care,” Shapiro said in a statement.
The FTC secured a preliminary injunction in August 2021 to temporarily block the deal. In March 2022, the Third Circuit Court of Appeals upheld the injunction.
In April, Hackensack Meridian and Englewood Health notified the FTC that they were dropping their merger plans.
Completed and planned mergers
Some hospital mergers have taken place in 2022.
Intermountain Healthcare completed its merger with SCL Health. Intermountain now operates 33 hospitals in several states in the west. Piedmont Healthcare completed its acquisition of University Health Care System and its three hospitals in northern Georgia. City of Hope concluded its acquisition of the Cancer Treatment Centers of America and shifted it to a nonprofit organization.
Atrium Health and Advocate Aurora Health announced in March that they have reached an agreement to merge. The deal still awaits regulatory approval.
If the deal comes together, it would create an organization that would operate 67 hospitals and have a combined $27 billion in annual revenue.
Analysts say if regulators approve the merger, it could spur other large hospital systems to pursue similar deals.
The two systems don’t operate in competing markets, reducing one area of concern for federal regulators. Atrium, based in Charlotte, N.C., runs hospitals and care sites in North Carolina, South Carolina, Georgia and Alabama. Advocate Aurora, with corporate offices in Downers Grove, Ill. and Milwaukee, Wisc., operates in Illinois and Wisconsin.