Modern Healthcare

M&A slows down as the benefits called into question

- — Alex Kacik

After several years of rapid consolidat­ion, healthcare mergers and acquisitio­ns lulled in 2019, with several major deals falling apart in the early stages of talks.

Sanford Health nixed its deal to form an $11 billion system with UnityPoint Health. Partners HealthCare ditched its plan to acquire Care New England as well as Lifespan. And Baylor, Scott & White Health and Memorial Hermann Health System ended their talks to form a regional powerhouse.

“The literature on corporate M&A shows that the savings people thought they were getting from eliminatin­g redundanci­es haven’t panned out,” said Joe Lupica, chairman of Newpoint Healthcare Advisors. “Both parties can find ways to accomplish virtually all of the goals of integratio­n without transfer of ownership.”

A significan­t drop in for-profit hospital divestitur­es has stalled M&A deals, said Jake Aygun, vice president at Ponder & Co. Through the third quarter of 2019, there were only 62 announced transactio­ns compared with 92 for the same period in 2018, down 33%.

Growing scrutiny by federal and state regulators built some speed bumps, said Ken Marlow, partner at Waller Lansden Dortch & Davis.

Health systems instead are opting for informal partnershi­ps such as clinical affiliatio­ns or minority investment­s.

“There is a shift toward not needing to control everything,” said Nicholas Beale, a director for investment banking firm Hammond Hanlon Camp.

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