FOR IMMEDIATE RELEASE
Stephen M. Monroe, Partner
Sanford B. Steever, Editor
HOSPITAL M&A ACTIVITY DROPS SIGNIFICANTLY IN 2002, WHILE OTHER AREAS HAVE SMALLER DECLINES According to Irving Levin Associates, Inc.
NEW CANAAN , CT – April 3, 2003 – Reflecting a difficult merger and acquisition market in general, activity in the Hospital merger market declined significantly in 2002, hitting its lowest level of transactions in 10 years. During 2002, there were just 58 announced hospital mergers or acquisitions involving 101 hospitals, compared with 83 transactions with 118 hospitals in 2001, according to Irving Levin Associates, Inc., a research and health care publishing firm located in New Canaan, Connecticut. Despite the decline in the number of transactions, the dollar value of the deals with disclosed prices increased from $3.0 billion in 2001 to $3.5 billion in 2002. One transaction, the purchase of Health Midwest by HCA Inc. accounted for more than 30% of the dollar amount in 2002.
Now in its ninth edition, The Health Care Acquisition Report 2003 reports that the number of hospital transactions declined by 30% in 2002 from the previous year, but that the volume has plunged by more than 70% since the peak in 1997. “After the surge of consolidations during the mid-1990s, there has been a steady decline in merger and acquisition activity in the hospital sector,” according to Stephen M. Monroe, a partner at Levin. “In 2002, more than 80% of the transactions were single-facility deals, as most hospital companies focused on enhancing services, revenues and profits at their existing hospitals, rather than looking for large acquisitions.” Five years ago, in nearly 75% of the hospital transactions the buyer was a nonprofit, compared with just 25% in 2002. Consequently, much of the decline in activity over the past several years reflects the diminishing role of nonprofit hospital organizations as buyers.
The merger and acquisition activity in the Managed Care sector remained almost unchanged, with 32 announced transactions in 2002 compared with 30 in 2001. The dollar volume of announced transactions, however, jumped by almost 30%, from $4.0 billion in 2001 to $5.1 billion in 2002. Approximately 80% of the dollar amount in 2002 was the result of Anthem’s purchase of Trigon Healthcare.
One of the largest sectors, in terms of dollar amount of transactions in 2002, was the Laboratories, MRI and Dialysis group, with 51 announced transactions worth $4.7 billion. Most of these transactions were acquisitions of laboratory services providers, and there were five with a value of $500 million or more, including the $1.1 billion acquisition of Unilab by Quest Diagnostics. The ability to negotiate better prices with managed care companies is seen as a direct benefit of becoming larger providers. Activity in some of the other health care sectors, including Physician Medical Groups and Behavioral Health, was lower in 2002 compared with the previous year.
The Health Care Acquisition Report, Ninth Edition, contains more than 125 pages of hard-to-find information on all publicly announced hospital, managed care, laboratory services, physician medical group, behavioral health and rehabilitation mergers and acquisitions in 2002, 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, Ninth Edition, may be purchased for $495 by calling 800-248-1668 or logging in at www.healthcaremanda.com.
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FOR IMMEDIATE RELEASE