Healthcare industry sees spike in mergers & acquisitions

The healthcare industry has seen a spike in mergers and acquisitions (M&A), with a total of $73.5 billion spent to finance 243 deals. This number is up 44 percent from the $51.1 billion spent in Q1 of 2011 and up a substantial 61 percent from the $45.7 billion spent in Q2 in 2010, according to a report issued by Irving Levin Associates.

“As far as dollar volume is concerned, M&A activity is on track to break all previous records in this market,” stated the Norwalk, Conn.-based publisher of merger and acquisition data on the seniors housing and healthcare industry.

A recent survey by the Society of Healthcare Strategy and Market Development showed that the percentage of physicians who will be employed by hospitals will increase from the current level of 10 percent to 25 percent by 2013 as physicians and independent physicians look for a safe haven to survive the impending healthcare cuts. Likewise, during a recent webinar sponsored by MedAxiom, company President Patrick White estimated that by the end of this year, 60 to 80 percent of cardiology practices will be integrated due to the changing healthcare landscape.

As the challenging road toward healthcare reform continues, hospitals have began looking toward integration as an outlet to help them stay afloat during cuts.  Hospitals “are buying other hospitals and physician medical groups to build up local and regional systems, implement ACOs—accountable care organizations—and share financial risk and reward through a more diversified provider network,” Stephen M. Monroe, managing editor at Irving Levin Associates, concluded.

During the first half of 2011, the firm said that the healthcare M&A market has had 472 deals that are worth an estimated $125 billion. The company speculated that 2011 will end with an estimated 950 deals worth $250 billion, which would set a record in dollars spent on M&A in the healthcare industry.

In comparison, the service segment of the healthcare industry had a 26 percent change in deals, from 110 in Q2 2010 to 139 in Q2 2011. Likewise the number of deals in the technology segment dropped 15 percent, from 123 in Q2 2010 to 104 in Q2 of 2011.

For the past two quarters, medical device technologies have gained the majority of investor dollars. “Investors believe that technological innovation in this sector is positioning it for growth,” said Sanford Steever, editor of The Health Care M&A Report. “They also believe this growth can be accessed through the acquisition of the innovating companies by larger companies better able to bring new technologies and products to market."