MERGERS & ACQUISITIONS IN U.S. HEALTH CARE SERVICES LOWEST SINCE 1995, REPORTS IRVING LEVIN ASSOCIATES

FOR IMMEDIATE RELEASE
Stephen M. Monroe, Partner
Sanford B. Steever, Editor
Phone: (800) 248-1668
Fax: (203) 846-8300
pressreleases@levinassociates.com
MERGERS & ACQUISITIONS IN U.S. HEALTH CARE SERVICES LOWEST SINCE 1995, REPORTS IRVING LEVIN ASSOCIATES
(NEW CANAAN, CT–October 18, 1999)—There were 19 percent fewer mergers and acquisitions in U.S. health care services during the third quarter of 1999 compared to the previous three months, according to Irving Levin Associates, Inc. of New Canaan, a research and health care investment publishing firm.
In its third-quarter 1999 Health Care Merger & Acquisition Report, to be released shortly, Irving Levin Associates reported that there were 163 publicly announced transactions for July, August and September 1999, down 19 percent from 200 deals in the previous quarter.
The total number was down 42 percent compared to the third quarter of 1998, and represents the lowest activity since 1995. Most of the transactions involved physician medical groups, hospitals and long-term care organizations, accounting for 52 percent of the deals. Rehabilitation services saw the least activity, with only two transactions for the quarter.
Stephen M. Monroe, senior editor at Levin, attributed the slumping activity to tight financing, the Balanced Budget Act of 1997 and changes in Medicare reimbursement.
“The toll that the Balanced Budget Act of 1997 and changes in Medicare reimbursement have taken on the financial resources of providers, particularly in the post-acute and ancillary services sectors, has certainly slowed the merger and acquisition market,” said Monroe.
However, Monroe sees relief in sight. “Legislation now working its way through Congress may ultimately help to loosen the financial choke-hold on providers,” he said. “With a return to financial stability, they will seek to engage in a broader spectrum of corporate activity, including renewed growth through mergers and acquisitions.”
While the number of transactions was down, the deals that were made were more focused, according to Sanford Steever, the editor of The Health Care M&A Report. “The current tight financing has imposed greater discipline on deal-makers and lenders alike; as a result, we see fewer haphazard deals getting funded and longer periods of deliberation over potential transactions,” he said.
“The deals that get done nowadays are more focused; for example, the drive to create regional networks and to establish a dominant presence in certain markets fosters the continuing consolidation in the HMO and Hospital sectors,” added Steever. “The importance of strategic planning also applies in the Physician Medical Group sector where more focused specialty physician practice management companies, or PPMs, continue to acquire practices while most general PPMs are forced to divest them.”
The breakout of transactions by sector and the percentage change from the previous quarter and the third quarter of 1998 are given in the table below:
SUMMARY OF HEALTH CARE TRANSACTIONS
(By Sector, Number of Transactions, Percentage Change)
Number of
Percentage Change
Sector
Transactions
Q2:99
Q3:98
Physician Medical Groups
33
-28%
-44%
Hospitals
26
-35%
-24%
Long-Term Care
25
+127%
-24%
HMOs/Managed Care
17
+12%
-11%
Laboratories/MRI/Dialysis
12
+20%
-37%
Psychiatric/Behavioral
11
+10%
-8%
Home Health
8
-60%
-50%
Rehabilitation
2
-82%
-71%
Other
29
-22%
-64%
Total
163
-19%
-42%
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 four quarterly reports, 12 monthly newsletters and 50 weekly bulletins, please contact 800-248-1668. The annual subscription is $1,495.00.
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