2023 Hospital Merger & Acquisition Activity Up 27% vs. 2022

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Hospital and health system merger and acquisition activity increased 27% year over year to 75 announced transactions in 2023, according to a report published Jan. 2 by Cain Brothers, a division of Key Banc Capital Markets.

Five things to know:

1. The increase in M&A activity is attributed to cooling macroeconomic headwinds as strategic discussions between hospitals and health systems pick up steam. Key factors driving activity in the sector include:

  • Improving market relevance
  • Desire for revenue and geographic diversification and economies of scale and capabilities
  • Decreasing EBITDA margins due to cost inflation
  • Reimbursement increases below historical rates
  • Medicaid expansion and certificate-of-need changes in certain states
  • Increasing construction costs per new bed

2. While M&A activity has been relatively consistent in recent years, new trends are gathering momentum such as transformative partnerships that expand beyond traditional acute care settings, according to the report.

3. Behavioral health, outpatient surgery and post-acute joint ventures are among the partnerships that hospital and health systems are pursuing this year, according to a Jan. 4 VMG Health survey of hospital executives.

4. Cross-market M&A activity is also a notable trend. Health systems are expected to continue to identify mergers across state lines with like-minded systems as they aim to generate economies of scale as a tool to fight elevated expense pressures, according to Fitch Ratings.

5. Some transactions have been met with regulatory challenges as state and federal agencies apply more scrutiny to deals they deem potential anticompetitive. Walnut Creek, Calif.-based John Muir Health terminated plans to fully acquire San Ramon Regional Medical Center from majority owner Tenet Healthcare — headquartered in Dallas — after the Federal Trade Commission sued to block the deal in December. The FTC argued that the transaction would drive up healthcare costs in the area by eliminating head-to-head competition between John Muir and Tenet.

 

Source: Becker’s Hospital Review

Finding Heathcare Real Estate Development Opportunities In A Tough Market

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The current healthcare real estate development market is a bit of an enigma.

The GlobeSt Healthcare conference developer panel discussion included (from left to right): Sean Miller of Anchor Health Properties, Jaime Northam of Ryan Cos. US Inc., Sharon Harper of The Plaza Companies, Jake Dinnen of based PMB and Malcolm Sina of Sina Companies. Not pictured: Moderator Murray W. Wolf of HREI™. (PHOTO CREDIT: HREI)

But panelists at a recent GlobeSt Healthcare conference developer panel discussion say they are staying busy despite a challenging environment

The number of medical office building projects under construction remained somewhat steady from 2022 and into 2023. Yet the total square footage started nationwide during a 12-month period from the third quarter (Q3) of 2022 to Q3 2023, fell 41.6 percent. In Q3 2022, 23.3 million square feet of space was started, while Q3 2023 saw that drop to 13.8 million square feet.

Murray W. Wolf, the publisher and founding editor of Healthcare Real Estate Insights, presented these stats compiled by Arnold, Md.-based Revista, an HRE research firm, during a panel discussion focused on development at the ALM/GlobeSt. Healthcare conference on Dec. 12 at the Andaz Scottsdale Resort. Mr. Wolf served as the moderator of the session titled, “Through the Lens of Developers: Reimaging Healthcare CRE.”

Although HRE project starts were down in late 2023 versus 2022, Mr. Wolf pointed out that the number of projects under construction nationwide as of the end of Q3.

 

Source: HREI

Healthcare Realty Trust Announces $338 Million Of Fourth Quarter 2023 Asset Sales

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Healthcare Realty Trust Incorporated just announced the completion of $338 million of asset sales during the fourth quarter of 2023 bringing full year additional dispositions to $656 million at an average cap rate of 6.6%.

The full year additional dispositions resulted in proceeds of $597 million as well as $59 million of seller financing across three transactions, including $14 million of seller financing in the fourth quarter. Proceeds were used for general corporate purposes, including the funding of development commitments and repayment of debt. Healthcare Realty had no outstanding balance on its revolving credit facility as of December 31, 2023.

The 2023 additional dispositions of $656 million do not include the $112.5 million of asset sales in January 2023 that fully repaid the July 2022 merger-related special dividend.

Healthcare Realty is a real estate investment trust that owns and operates medical outpatient buildings primarily located around market-leading hospital campuses. The company selectively grows its portfolio through property acquisition and development. As the first and largest REIT to specialize in medical outpatient buildings, Healthcare Realty’s portfolio includes more than 700 properties totaling over 40 million square feet concentrated in 15 growth markets.

In addition to the historical information contained within, the matters discussed in this press release may contain forward-looking statements that involve risks and uncertainties. These risks are discussed in filings with the Securities and Exchange Commission by Healthcare Realty Trust, including its Annual Report on Form 10-K for the year ended December 31, 2022 under the heading “Risk Factors,” and as updated in its Quarterly Reports on Form 10-Q filed thereafter. Forward-looking statements represent the company’s judgment as of the date of this release. Healthcare Realty disclaims any obligation to update forward-looking statements.

 

Source: HREI