January 27, 2023

Another year of larger health system mergers

After the number of health system mergers and acquisitions (M&A) reached a recent low in 2021, last year saw a slight rebound in deal volume, while continuing the trend toward mergers between larger systems. Using data from Kaufman Hall’s 2022 M&A report, the graphic below shows that the number of announced health system M&A transactions dropped by over 50 percent from 2017 to 2022, while the average revenue of the smaller system in each deal increased by over 125 percent. The steadily rising average size of the smaller party is a product of both larger transactions occurring more frequently and smaller deals happening less often. Since 2019, when the average seller posted $272M in annual revenue, the number of billion-dollar revenue systems merging together has more than doubled, while pickups of hospitals with less than $100M in annual revenue declined by over 65 percent. Between the industry’s march toward consolidation, which has left only 20 percent of hospitals independent, and the market pressures created by vertically-integrated payers, we expect “mega-mergers” to be the new normal, especially as health system leaders look to build cross-regional scale while regulators continue to heavily scrutinize in-market combinations.

2022 M&A graphic