Acute hospital transactions were down in the first quarter of 2019, according to a report from Ponder.
There were a reported 14 hospital transactions in the first quarter of 2019, the lowest since the fourth quarter of 2009. At its height, there were 40 hospital transactions in the first quarter of 2018, with quarterly transactions typically in the 20s, according to an analysis by Ponder & Co.
"We do not view the reduced volume of the first quarter 2019 to be a harbinger of the end of hospital M&A," states the report. "The drivers of consolidation have not changed. The need to consistently grow at a rate that exceeds persistent expense inflation, reimbursement challenges, technology and capital needs, and the need to adapt to uncertain value-based payer models continue to pressure hospitals and systems of all sizes. Scale is critical in helping address these challenges although regional relevance is also essential."
Four key trends in the report:
1. While care shifts outpatient, health systems are still largely inpatient based and bonded to their communities. The report authors expect nonprofit health systems to operate more like "systems" than "confederations" in the future.
2. Healthy systems are now merging or partnering with each other, creating a structure where the two systems can co-exist instead of one system taking over another.
3. Health systems are evaluating partnering options regularly in addition to prioritizing external growth.
4. The nationwide decrease in inpatient care could mean that health systems "are questioning the need to continue to acquire small community hospitals."