2020 was off to a strong start in hospital merger and acquisition activity, with the number of announced transactions in Q1 among the highest seen in the past four years. Then the COVID-19 pandemic struck with full force in March. Unlike past shocks the healthcare industry has sustained, which typically have been related to changes in regulation or reimbursement, the pandemic was a direct hit on the delivery of acute care. Many health systems experienced both a liquidity crunch, as revenue flows dried up in the wake of canceled procedures, and an ongoing grind of diminished volumes, heightened labor and supply expenses, and continued surges of the virus that placed extraordinary demands on both frontline staff and management. Aside from the economic shock, the focus of many management teams on clinical and operational needs affected their ability to focus on certain long-term strategic initiatives, including partnership activity.

In the face of these pressures, it is remarkable that M&A activity for the year stayed within the historic range of activity seen over the ­­past 10 years. As noted in our quarterly activity report for Q3, it appears that COVID-19 has actually confirmed the strategic rationale underlying many transactions that were already underway, and may be acting as a catalyst for innovative strategic partnerships and tactical transactions. The pandemic has accelerated the need for strategic initiatives that address the opportunities of industry transformation and that reward well thought-out alignment opportunities.

This report includes a “Year in Numbers” summary of activity between hospitals and health systems and discusses key trends that emerged over 2020 and that we anticipate to see in 2021, as the COVID-19 pandemic has compelled healthcare organizations to:

  • Focus on core business strengths and assess the long-term viability of non-core assets, aligning as needed with partners that offer complementary, innovative, or otherwise unrepresented capabilities
  • Build partnerships to address gaps in the healthcare infrastructure exposed or intensified by the virus, including collaborative partnerships with non-traditional partners
  • Strengthen intellectual capital resources to be nimbler and more flexible in dealing with the current crisis and in pivoting to new modes of providing care more efficiently, effectively, or uniquely relative to other legacy providers and potential new market entrants

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This report was published on January 7, 2021