Q2 Hospital M&A Activity Show Pursuit of Strategy Over Scale

M&A activity points to increase in transactions that shore up intellectual capital and capabilities

CHICAGO - July 9th, 2024 - Eleven hospital mergers and acquisitions were announced in Q2 2024, indicating solid but reduced activity after a very busy Q1, according to Kaufman Hall’s latest analysis. In fact, total transacted revenue in the quarter remained near historic highs at $10.8 billion, despite fewer overall transactions.

Strategy Over Scale

Kaufman Hall analysts say data show that M&A activity was undertaken by hospitals and health systems in deliberate, strategic pursuit of intellectual capital, complementary capabilities, or to support system reconfiguration. Two of the 11 announced transactions in Q2 were mega-mergers, but neither was in pursuit of greater scale, analysts say.

“As pressure intensifies to transform the current health care system to bring greater value to patients and communities, the impetus of M&A activity will rely less on seeking capital in traditional ways and instead move toward new, strategic partnership models,” said Anu Singh, managing director and Mergers & Acquisitions practice leader with Kaufman Hall. “Many of these M&A transactions enable hospitals to sustain and enhance access to care, launch new services, or strengthen and stabilize systems, which allows for future growth.”

Hospital Financials Stabilizing

Hospitals’ financial performance in May held relatively steady, according to Kaufman Hall’s most recent National Hospital Flash Report. Rates of change for margins and other key performance indicators have slowed, which analysts say is a sign that the environment is stabilizing.

“The widening gap between higher-performing and lower-performing hospitals illustrates the need for longer-term strategic investments. Short-term cuts and crisis management will not make for sustainable change,” said Erik Swanson, senior vice president and Data and Analytics Group leader with Kaufman Hall. “Hospitals should seize this relative moment of calm to focus on enterprise strategic planning in order to achieve long-term success.”

The National Hospital Flash Report draws on data from more than 1,300 hospitals from Syntellis Performance Solutions, now part of Strata.

About Kaufman Hall 

Kaufman Hall provides management consulting solutions to help society’s foundational institutions realize sustained success amid changing market conditions. Since 1985, Kaufman Hall has been a trusted advisor to boards and executive management teams, helping them incorporate proven methods, rigorous analytics, and industry-leading solutions into their strategic planning and financial management processes, with a focus on achieving their most challenging goals.

Kaufman Hall services use a rigorous, disciplined, and structured approach that is based on the principles of corporate finance. The breadth and integration of Kaufman Hall advisory services are unparalleled, encompassing strategy; financial and capital planning; performance improvement; treasury and capital markets management; mergers, acquisitions, partnerships, and joint ventures; and real estate.

Kaufman Hall companies include Claro Healthcare and Gist Healthcare.