Hospital and health system Q1 transaction volume was down versus Q1 2020 volume, with only 15 transactions announced. "Most hospitals focused on COVID-19 in 2020, and strategic priorities took a back seat, but we believe that volume will return, and we're hearing from our clients that now is a good time to execute strategic priorities," said Michael J. Tierney, Director, H2C. As stimulus funds cease and Medicare Advance Payments require repayment, hospitals and health systems may face liquidity crunches, which will create additional opportunities. On the other hand, there is also the prospect of additional stimulus, allowing some hospitals and health systems to maintain independence for a while longer. The recently enacted American Rescue Plan Act of 2021 provides for $8.5 billion in funding to rural organizations such as sole community hospitals. Those funds will be available to cover COVID-related expenses and lost revenue.

 

Brentwood, Tenn.-based LifePoint Health is rumored to be in talks to buy Ardent Health Services, a 30-hospital network based in Nashville, Tenn. The deal would create an entity worth $10 billion, including debt. According to people familiar with the talks, the deal would value Ardent Health at more than $2 billion. Additionally, Ascension Wisconsin plans to sell seven hospitals, 21 physician clinics, and its patient transport services to Wausau, Wis.-based Aspirus Health. The seven Ascension hospitals are in north and central Wisconsin.

 

Activity in the home health sector continued at a robust pace, with 27 transactions in Q1 2021. This marked a 13 percent increase over Q1 2020, when 24 transactions were announced, and follows a solid second half of 2020, with 31 announced transactions in Q3 and 30 announced transactions in Q4. The home health sector has shown a strong recovery since Q2 2020 when just 11 transactions were announced.

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In the post-acute sector, HCA Healthcare (NYSE: HCA) entered into a definitive agreement to acquire 80 percent of Brookdale Senior Living's Home Health and Hospice Assets for a purchase price of $400 million. That total implies a $500 million value for the business, according to Brookdale's press release. Also, BrightSpring Health Services and LHC Group, Inc. continue to build out their platforms with Abode Healthcare and Bayfront Home Health Services acquisitions, respectively.

 

Recent events, such as the increased need for behavioral health services stemming from the pandemic as well as several state and federal increases for reimbursement for behavioral health services, continue to drive M&A activity in the behavioral health sector. In Q1 2021, 23 transactions announced, representing a year-over-year increase of 35 percent versus Q1 2020, when 17 transactions were announced. Q1 2021 volume exceeded volume during each quarter in 2020.

 

Private equity-backed behavioral healthcare companies with a focus on autism treatment remain especially active. Buyers include The Mentor Network (Centerbridge Partners and Vistria Group), LEARN Behavioral (Gryphon Investors, LLR Partners, and PineBridge Investments), and The Stepping Stones Group (Florac and Five Arrows Capital Partners) which all added onto their platforms in Q1.

 

Transaction volume in HCIT maintained a strong pace in Q1 2021, with a total of 38 transactions, but this is down from 55 transactions announced in Q1 2020. Despite this slight year-over-year decline, it is still higher than any single quarter of 2019. 2020 was also a year in which HCIT companies raised a record $15.3 billion of investments.

 

Several special purpose acquisition companies ("SPAC") completed acquisitions of HCIT companies in Q1 2021. Examples include Falcon Capital Acquisition Corp.'s acquisition of Sharecare, CM Life Sciences' acquisition of Mount Sinai Genomics, and CM Life Sciences II's acquisition of SomaLogic Inc. SPACs offer companies an alternative to a traditional IPO, which was uncommon in the HCIT sector for many years until 2019.

 

It is important to note that some announced transactions do not go on to close due to unforeseen risks, regulations, or other factors. In a COVID-19 environment, the number of announced transactions that do not ultimately close could be higher than usual because of the pandemic's economic impact on healthcare organizations.

 

If your organization is considering evaluating options and opportunities for merger, acquisition, divestiture, or partnership, H2C is uniquely positioned to offer expert advice. Let us put our market knowledge and expertise to work for you. Contact an H2C professional directly.

 

For more information, access H2C's M&A database.