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Healthcare Mergers: Expecting More In 2024

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Even with some high-profile hospital deals taking place in the first half of the year, merger activity across the broader healthcare industry has slowed a bit.

And KPMG is projecting that healthcare mergers and acquisition activity may be a bit more subdued for the remainder of the year. In the first half of 2023, there were 245 healthcare mergers, a 7% drop from the first six months of 2022, according to a report from KPMG.

“The pace of healthcare deals may not pick up more steam until 2024,” says Ross Nelson, KPMG’s national healthcare strategy leader for the provider and payer sectors. “We do think it’s going to pick up soon. I don’t know the exact date, but we’re hopeful that calendar year ’24 is certainly going to be more robust than the calendar year ’23.”

There have been some big healthcare transactions taking place in the beginning of the year, including CVS buying Oak Street Health in a $10.6 billion deal. UnitedHealth is purchasing Amedisys, the home health and hospice provider, in a $3.3 billion transaction. TPG and AmerisourceBergen completed a $2.1 billion deal to acquire OneOncology, a network of cancer practices.

Hospital merger activity is on the rise, and some analysts expect that to continue. In a deal that gained widespread attention, Kaiser Permanente agreed to acquire Geisinger Health, the Pennsylvania system. BJC HealthCare of St. Louis and Saint Luke’s Health System of Kansas City announced May 31 that they plan to merge and form an integrated academic health system. Aspirus Health, a Wisconsin-based system, and St. Luke’s of Duluth, Minn., said in July they plan to come together.

Headwinds And Tailwinds

Even with some big deals that have been announced, Nelson says a number of factors have slowed down some merger activity in the broader healthcare industry.

“The headwinds include higher interest rates, and if the Federal Reserve continues to raise interest rates, some organizations could wait before pursuing M&A plans,” Nelson says.

The Federal Reserve has raised its benchmark interest rate 11 times in the last 17 months, and it’s unclear if other hikes are coming, the Associated Press reports.

“If the nation moves into a recession, then that would likely cool healthcare merger activity,” Nelson says. “Some organizations are paying closer attention to heightened scrutiny from regulators, Nelson says. In some cases, the Federal Trade Commission has been vocal in opposing mergers and acquisitions involving health systems in the same market, drawing criticism from some in the hospital industry.”

Some hospitals have explored mergers with systems in other states to skirt regulatory concerns about the consolidation of providers in the same market.  UnityPoint Health and Presbyterian Healthcare Services said in March that they are exploring a merger, potentially creating an organization with more than 40 hospitals. UnityPoint operates hospitals in Iowa, Illinois and Wisconsin, while Presbyterian serves New Mexico.

“I think folks are looking at deals in other markets because they feel like often, the deals within their markets are having a tough time getting done,” Nelson says. “Even with deals involving organizations in different markets, regulators are taking a closer look.”

Nelson expects to see more hospitals teaming with other health systems or other partners on certain service lines to keep patients in their network.

“With hospitals that have assets that may not be as profitable as they should be, they may look for partners that might unlock revenue or cost synergies and they can share in the cumulative or combined bottom line,” Nelson says.

KPMG expects some of the economic pressures on merger activity to ease, leading to some increased deal-making.

“There is a lot of money on the sidelines that needs to be deployed,” Nelson says.

Some health systems could be looking at selling some hospitals in markets where they don’t have a commanding presence. Steward Health Care agreed to sell five hospitals in Utah to CommonSpirit Health earlier this year. In June, Ascension agreed to transfer Our Lady of Lourdes Memorial Hospital in Binghamton, N.Y., along with its physician practices, to the Guthrie Clinic of Sayre, Pa.

‘Unlock Value Creation’

As more care shifts outside the hospital, organizations could be looking to acquire more outpatient and ambulatory surgical centers. Investors could find opportunities in markets where the bulk of services are still being done inside the hospital, KPMG projects.

“Healthcare organizations considering mergers and acquisitions should think strategically,” Nelson says. “I think they should be continuously giving their portfolio a review of what’s kind of a core and non-core asset, or a performing or non-performing asset, within the existing portfolio.”

Organizations should stay disciplined about the thesis of their deals and valuations.

“You’ll get your chance to buy the right asset at the right price,” Nelson says. “For those that are buying assets, I would constantly look at how to unlock value creation or continue  do integration activities to unlock as much synergies and value as possible.”

Anu Singh, managing director and leader of partnerships, mergers and acquisitions at Kaufman Hall, told Chief Healthcare Executive in July that he expects to see more hospitals making deals in the months ahead.

“There are organizations that are looking for complementary resources and capabilities …  there are ones in the middle who have maybe some increased concerns about their long-term viability of remaining independent,” Singh said.

 

Source: Chief Healthcare Executive

Why Amazon and Bank of America Are Supporting Parkland’s RedBird Health Center

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By almost any measure, southern Dallas is medically underserved, resulting in worse health outcomes Measurements of life expectancy, diabetes, asthma, insurance rates, and even COVID-19 outcomes are all lower for communities south of I-30.

The development of Parkland Health’s RedBird Health Center will be joining the fight against health disparity and has two massive allies in Amazon and Bank of America. The lack of insurance and quality healthcare options mean that Parkland Hospital’s emergency room is often inundated with patients whose issues could be solved in an urgent care or primary care clinic.

Parkland has the busiest emergency department in the country, serving 750 patients a day, often addressing symptoms of chronic health issues suffered by residents of southern Dallas county, where many households are at or below 200 percent of the federal poverty level. All this means that one of the best predictors of success, chronic disease, and life expectancy is one’s ZIP code, a troubling notion to the next generation.

A crowded emergency room is compounded by a lack of providers in southern Dallas, transportation hurdles, a need for child care, and other obstacles for a population that has been neglected for generations. The RedBird Health Center will provide access to needed services closer to home as part of the mixed-use development Reimagine RedBird. The center will be offering adult and geriatric primary and women specialty care, behavioral health for all ages, pharmacy, social work, and other services.

While most of what Parkland does is publicly funded, private philanthropy has significantly impacted the health center’s final version. That’s where Parkland Foundation Michael Horne comes in. A former charter school principal who started a KIPP Campus across the street from RedBird, Horne’s passion for the community and ability to advocate for its advancement have allowed him to secure critical partnerships. He wanted the foundation to be a part of what was happening and grow existing partnerships and add new ones But it isn’t as easy as asking for a blank check from Amazon or Bank of America. The conversations needed to be centered around a particular need that appealed to both sides of the equation.

Seeking the advice of community leaders and clinicians, the foundation found cancer identification as a key area to keep patients from arriving at the ER with stage III and IV cancer symptoms. Horne found a private donor to give $1.5 million toward mammography services and found willing partners in some of the nation’s largest companies. Using tools like Parkland’s Community Health Needs Assessment, Horne can tell a story to connect partners to the reality of health disparity in Dallas, looking for common ground.

“Companies have a series of pillars they want to promote from a corporate social responsibility standpoint,” Horne says. “I download that information and look for any kind of connective tissue between where they are globally and how they want to invest their billions of dollars and what they want to do in Dallas.”

In Amazon’s first partnership with the community health worker program, the company contributed $150,000 toward a community health worker program in the area. Amazon’s philanthropy is wide-ranging and worldwide, and the company was swayed by the data about uninsured rates in Dallas and felt like community health workers would be a targeted way to address a need. These workers would develop relationships in the community to educate and build trust, helping people identify and manage the disease and chronic conditions before they become emergencies. The workers would allow community members to utilize RedBird earlier and more often, identifying and addressing problems along the way.

“It’s all about community outreach and education around chronic health conditions, but it’s peer-to-peer, so the public health workers live in the community,” says Vickie Yakunin, Amazon’s external affairs lead in North Texas who met Horne while they were in the Leadership Dallas cohort. “That’s what builds trust between the community this new health clinic that opened up in the community.”

Bank of America has been a longtime booster of Parkland, and their $1 million anchor grant is meant to address the disparity in Southern Dallas. The gift will be used to bolster preventative and primary care services. Quality healthcare is essential for achieving upward economic mobility, which is one of BoA’s focus areas. When residents are consistently plugged into the health system, they are more likely to adhere to medications, avoid the hospital, and improve outcomes.

“The research highlighting the needs of specific ZIP codes in southern Dallas was impactful for BoA,” says Jennifer Chandler, the Head of Philanthropic Solutions for Bank of America and Dallas Market President. “If you look at the data, the transportation challenges, and the fact that they can help solve for that in an efficient way through the community, that was a standout for us.”

RedBird Health center wants to be a place in and of the community, offering connectivity to healthcare that doesn’t exist in large swaths of the city. The facility will balance quality services with education, outreach, and community involvement. Without the latter, the former won’t be accessed.

“Let’s teach you how to be stewards of your health, empower you with information that you want, and then we have a space you can come back to as your medical home,” Horne says.

 

Source: D CEO Magazine

Catalyst Breaks Ground On 100,000 SF Multi-Tenant Medical Office Building In Naples, Florida

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Catalyst Healthcare Real Estate (“Catalyst HRE”), a national healthcare real estate developer, has announced breaking ground on a multi-tenant medical office building adjacent to Physicians Regional Medical Campus – Pine Ridge.

The four-story medical office building will create a premier healthcare destination and feature Physicians Regional Healthcare System outpatient services such as imaging, cardiology, orthopedics, primary care, physical therapy, surgical specialties, and a walk-in clinic.

“We are proud to form a partnership with Physicians Regional Healthcare System and be part of their mission to deliver the best patient experience”, said Brandon McFarren, Vice President, Development & Leasing of Catalyst HRE.

The 100,000 square foot medical office building will be home to Physicians Regional Healthcare System and will offer additional clinical space for other various specialties including Naples Heart Rhythm Specialists, Naples Cosmetic Surgery Center, Levine Heart & Wellness, Florida Gulf Coast Ear, Nose & Throat, Steven S. Goldberg, MD – Orthopedic Surgery & Sports Medicine, George A. Gamouras, MD – Cardiology, and Premier Optical Group.

“This new Medical Office Building will allow for an expansion of inpatient beds at our Pine Ridge location”, said Scott Lowe, CEO of Physicians Regional Healthcare System. “We are excited to expand our hospital beds in order to keep up with the community demand and still have the ability to have our specialists in close proximity to the hospital”.

 

Source: HREI