Hospitals May Look to M&A Cure for Bleeding Profits

Community hospitals that have fought to stay independent may be ripe takeover targets later this year as health systems assess coronavirus-related financial trauma. Hospital M&A has been robust in recent years, driven less by financial stress than by strategic initiatives to achieve geographic scale, according to Carsten Beith, co-head of health systems M&A at Cain Brothers. Dealmaking in the space dipped slightly in 2019 versus previous years. According to data from healthcare-focused boutique investment bank Ponder & Co, there were 85 announced hospital transactions last year, against 116 in 2018 and 118 in 2017. Mergermarket data show 248 transactions among healthcare providers as a whole for last year, compared with 321 in 2018 and 294 in 2017. The novel coronavirus has set hospitals of all sizes into a tailspin as providers work overtime to service an influx of patients. And independent community hospitals, many of which were under-resourced to begin with, are now in critical need of scale, said Hector Torres, a healthcare managing director at Focal Point Partners.

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