Hospital M&A activity continues decline - Brief Article

Health Industry Today, May, 2001

Concern among device and med-surg product suppliers that M&A activity among health care providers has reduced market potential may have been alleviated; at least temporarily, by statistics indicating that in 2000 the number of U.S. hospital mergers and acquisitions declined for the third year in a row.

Last year, 22% fewer M&A deals were announced than in 1999, said "The Health Care Acquisition Report" released by Irving Levin Associates Inc., New Canaan, Conn.

Still, said Levin in the seventh annual edition of the report, with 86 transactions announced in 2000, the hospital sector had more merger and acquisition activity than any other health care services industry segment.

In 2000, hospital M&A activity dropped from the 110 deals reported in 1999, 139 in 1998, 197 in 1997 and 163 in 1996.

While M&A volume decreased, says Irving Levin, health care stocks in general--and especially hospital stocks--improved markedly during the year 2000.

Those figures bode well for the future and should allow device and med-surg product suppliers to look forward to a more lucrative marketplace.

"The outlook for 2001 is positive," said Kathy Hammell, editor of the report. "Reimbursement relief was obtained for certain segments of the industry after two years of suffering from The Balanced Budget Act of 1997. And now the health care industry is beginning to stabilize."

Irving Levin says that hospitals account for the largest share of the more than $1 trillion American spent annually on health care.

For the first time in seven years, for-profit hospital acquisitions surpassed nonprofit acquisitions in terms of numbers of hospitals with 69% of acquisitions involving for-profit institutions.

The firm says indicative of the rise in corporate acquisitions was the largest deal of the year, the $2.4 billion acquisition of Quorum Health Group by Triad, a spinoff from Columbia/HCA (now HCA-The Healthcare Company).

Transaction volume in the managed care sector also dropped in 2000, reflecting the declining financial health of that sector, says Irving Levin. Last year, 49 managed care transactions were announced compared to 66 deals in 1999, 62 in 1998 and 57 in 1997.

In the past five years, six managed care deals exceeded a transaction value of $1 billion, but no deals exceeded that level during the past two years.

* www.levinassociates.com