Healthcare services M&A: 10 key trends

Merger and acquisition activity rose dramatically in 2013, with more of those deals generating a higher dollar value, according to a 2015 Health Care Services Acquisition Report.

"Healthcare mergers and acquisitions posted record-breaking totals in 2014, so it would be surprising if the services sector didn't keep pace," said Lisa E. Phillips, editor of the report. Here are 10 things to know from the report:

1. Deals in the healthcare services sectors were up 18 percent to 752 transactions in 2014.

2. Dollar value of the deals last year was up 17 percent to $62 billion.

3. The services side contributed to 58 percent of the combined total of 1,307 deals in 2014.

4. The services side was only 16 percent of the year's $387 billion in spending for mergers and acquisitions.

5. These sectors within healthcare services posted gains:

• Behavioral healthcare
• Home health and hospice
• Hospitals
• Managed care
• Physician medical groups
• Rehabilitation

6. There were slight declines in the laboratories and MRI and dialysis sector, which were down 8 percent year-over-year in deal volume.

7. Last year, deals started off slow with uncertainty from healthcare reform, but the number of deals picked up in the second quarter and more investors entered the healthcare market, raising valuations beyond the comfort level of traditional investors, according to Ms. Philips.

8. The hospital sector saw deal volume increase 14 percent with 100 transitions. The number of hospitals involved in deals last year was down 40 percent, however, to 178.

9. The physician medical group sector saw strong interest from outside companies, with nearly $3.2 billion spent on physician groups last year.

10. The behavioral healthcare sector recorded more transactions last year than the four previous years and home health and hospice experienced some consolidation.

"Some of the deal-making activity in 2014 was a direct result of the mega-mergers of 2013, as Tenet and Community Health realigned their portfolios," said Ms. Phillips. It also reflected the growing impact of the Affordable Care Act, and the shift in reimbursement models, toward value-based payments. Smaller hospitals were ready to merge with larger systems in order to stay afloat."

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