Second quarter merger and acquisition activity in Health Care Services remains robust According to Irving Levin Associates, Inc.

FOR IMMEDIATE RELEASE
Stephen M. Monroe, Partner
Sanford B. Steever, Editor
Phone: (800) 248-1668
Fax: (203) 846-8300
pressreleases@levinassociates.com
Second quarter merger and acquisition activity in Health Care Services remains robust According to Irving Levin Associates, Inc.
(New Canaan, Connecticut–July 31, 1998)—Irving Levin Associates, Inc. has just released the preliminary results of the Firm’s 1998 second quarter report on the merger and acquisition market in the health care services industry, available in middle August.
According to The Health Care Merger & Acquisition Report, there were 306 transactions which were publicly announced during the second quarter ended June 30, 1998, down 0.1% from the previous quarter’s 308 deals. The Physician Medical Group, Long-Term Care and Hospital sectors together account for 54.6%, or more than half, of all the deals transacted. The breakout of transactions by sector and the percentage change over the previous quarter are given in the table below:

SUMMARY OF HEALTH CARE TRANSACTIONS
(By Sector, Number of Transactions, Percentage Change)
Sector
Number of Transactions
Percentage Change
Physician Medical Groups
76
-3.8%
Hospitals
50
+47.1%
Long-Term Care
41
+13.9%
Home Health
28
0.0%
Laboratories/MRI/Dialysis
22
-18.5%
Rehabilitation
15
+25.0%
HMOs
13
+30.0%
Psychiatric
12
+9.1%
Other
49
-30.9%
Total
306
-0.1%

“The fundamentals for consolidation in the health care services industry remain firmly in place,” said Stephen M. Monroe, a partner at Irving Levin Associates, Inc. “Mergers and acquisitions allow providers and payors to overcome the disadvantages of a fragmented delivery system with economies of scale. And by helping to contain health care cost inflation, they free up resources for providers to devote to patient care.”
This is the third quarter during the past year that the number of deals has exceeded the 300 mark. “Even in the face of increased public awareness, media attention and regulatory scrutiny, health care providers and payors continue to pursue the economic and clinical benefits afforded by consolidation,” noted Sanford Steever, editor of the Report.
Deal volume in the Hospital sector rose the most of any individual segment of the industry. “The sharp increase in hospital mergers and acquisitions reflects an urgency among consolidators to secure local market share and build regional delivery systems around acute care facilities,” stated Mr. Steever.
“The divestment of Columbia/HCA’s hospitals to nonprofit operators signals a shift in the industry toward developing regional systems,” observed Mr. Monroe. “The increased activity in the Hospital and HMO sectors reflects the continuing battle between providers and payors to gain critical mass for negotiating terms in contracts,” according to Mr. Monroe. “As long as providers and payors jockey for bargaining clout, we can expect to see continued merger and acquisition activity.”
Irving Levin Associates, Inc. is a New Canaan, Connecticut-based research and publishing firm specializing in health care investments. The Firm has 50 years experience in the health care acquisition market.  To purchase The Health Care Merger & Acquisition Report, consisting of 12 monthly newsletters and four quarterly supplements, please call (800) 248-1668.
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