HOSPITAL M&A ACTIVITY DIPS SLIGHTLY IN 2001, WHILE OTHER AREAS HAVE LARGER DECLINES According to Irving Levin Associates, Inc.
FOR IMMEDIATE RELEASE
Stephen M. Monroe, Partner
Sanford B. Steever, Editor
HOSPITAL M&A ACTIVITY DIPS SLIGHTLY IN 2001, WHILE
OTHER AREAS HAVE LARGER DECLINES According to Irving Levin Associates, Inc.
NEW CANAAN, CT - April 24, 2002 - After peaking in 1997, the hospital merger and acquisition market has steadily declined. In 2001, there were just 83 announced mergers or acquisitions involving 118 hospitals, compared to 86 transactions with 132 hospitals in 2000, according to Irving Levin Associates, Inc., a research and health care publishing firm located in New Canaan, Connecticut.
In its eighth edition, The Health Care Acquisition Report 2002, Levin reports that the number of hospital transactions declined by just 3% in 2001, but that the volume has plunged by 58% since the peak in 1997. Despite this relatively low level of activity, the hospital market was the most active segment in health care services in terms of number of deals in 2001. "After recovering from some of the Medicare reimbursement changes of a few years ago, hospital companies have concentrated more on internal growth, and have limited acquisitions mostly to smaller, tactical deals than in the past," according to Stephen M. Monroe, a partner at Levin. "There was about an even split between nonprofit and for-profit buyers in the market, but two-thirds of the hospitals that were sold or merged had been nonprofit before the transaction, which is consistent with past years," continued Mr. Monroe.
In the managed care sector, the number of mergers and acquisitions plunged by 39% in 2001, with just 30 announced deals compared to 49 in 2000. Acquisitions were not a priority for many managed care companies during 2001 because they were more concerned with deteriorating medical loss ratios and potentially adverse legislation. In the previous two years, there had not been one acquisition valued in excess of $1.0 billion, but in 2001 WellPoint Health Networks announced two transactions with prices of $1.3 billion each. Both of these involved former Blue Cross/Blue Shield plans.
In the physician medical group sector, an area of the health care market that has been in significant decline for four years, the number of transactions dropped by 46% in 2001, with only 39 deals compared to 72 in 2000. In 1997, there were more than 300 acquisitions of physician practices. "With no capital coming into this sector, and the business model of the former physician practice management companies largely discredited, there has been little interest in buying physician groups in the past two years," stated Sandy Steever, editor of the report.
The behavioral health and rehabilitation sectors had fewer than 20 transactions each in 2001. "Reimbursement has been terrible for these two areas of the health care economy and investors have shown little desire in providing capital when the return is so uncertain," stated Mr. Monroe.
The Health Care Acquisition Report, Eighth Edition, contains more than 125 pages of hard-to-find information on all publicly announced hospital, managed care, physician medical group, behavioral health and rehabilitation mergers and acquisitions in 2001, including an analysis by both the type of acquirer and by the type of target.
Irving Levin Associates, Inc. is a New Canaan, Connecticut-based research and publishing firm specializing in health care investments. The firm has more than 50 years of experience in the health care acquisition market. The Health Care Acquisition Report, Eighth Edition, may be purchased for $495 by calling 1-800-248-1668 or logging in at www.healthcaremanda.com.
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