Can We Expect Further Healthcare Consolidation?

SCOTTSDALE, AZ—Three quarters of the way through 2018, healthcare merger and acquisition transaction volume is down on a year-over-year basis, but still very active overall. That is according to recent insights from Hammond Hanlon Camp LLC. According to H2C, the pace of hospital and health system transactions has slowed this year, with the most significant slowdown occurring in the second quarter.

To date, there have been 14 fewer hospital transactions announced than during the same period last year, despite the first quarter of 2018 keeping pace with 2017 activity, says H2C.

“Lower activity in the second and third quarter is being driven by a combination of factors, but we hear consistent themes: lack of available opportunities and a stable economy,” said Michael Tierney, vice president of H2C.

GlobeSt.com caught up with other healthcare experts in preparation for the upcoming RealShare Healthcare conference Dec. 5-6 in Scottsdale. According to Chris Wadley, an SVP at JLL, will should expect to see continued consolidation of the industry through mergers and acquisitions.

“This isn’t a new trend but it’s still active,” he tells GlobeSt.com. “Because of rising costs and dwindling Medicare reimbursements, it’s a challenging small-business environment.”

Private equity, he adds, is entering the space and acquiring practices as a way to gain buying power and achieve economies of scale. “We are also seeing regional and national health systems merge to increase market coverage and reduce costs through the elimination of redundant operational expenses.”

He also points out that the healthcare sector is absolutely growing. According to JLL research, healthcare is the fastest growing sector in the US economy and today accounts for 17.9 percent of the GDP. “From now through 2025, we expect healthcare spending to continue to grow by another 5% or more annually. Healthcare employment is also surging, growing faster than any sector in the US workforce.”

But this doesn’t mean all areas of care are growing equally, he explains. “In Houston, and many US markets, we went through a period of robust population growth in which major healthcare players opened hospitals across the metro. Today, we are seeing a slowdown of new hospital development. Systems in Houston are now infilling with outpatient facilities and retail locations.”

Wadley will appear on the mergers and acquisitions panel at the event. And for more information on healthcare real estate news, join us at REALSHARE HEALTHCARE in SCOTTSDALE, AZ, from Dec 5-6, 2018. This event brings together the best and brightest in the healthcare CRE industry as developers, owners, investors, brokers, and financiers convene to discuss the top trends in healthcare real estate. This conference is powered by GlobeSt.com, the go-to-source for healthcare real estate news and analysis. To register for REALSHARE HEALTHCARE, please visit https://www.eiseverywhere.com/ehome/306663/661182/