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Big Health System Deals Dominate Transactions in October

Nov. 21, 2018, 11:46 AM

The announced merger of two major Texas health systems is October’s deal-of-the-month.

The health systems, Dallas-based Baylor Scott & White Health and Houston-based Memorial Hermann Health System, signed a letter of intent to merge Oct. 1.

The deal will create a “not-for-profit behemoth,” Hector M. Torres told Bloomberg Law. Torres, a principal with ECG Management Consultants in Chicago, counsels health-care companies and investors.

The combined entity will consist of 68 hospitals, employ more than 70,000 people, and offer access to more than 14,000 doctors across more than 1,000 care delivery sites, Torres said.

Strategically Important Locales

The transaction will bring together two fast-growing health-care markets—an important industry trend, Paul D. Gilbert, of Epstein Becker Green’s Nashville office, told Bloomberg Law.

Hospitals and health systems are consolidating in geographic areas they believe to be strategically important, he said.

The move toward an ambulatory care environment—that is, care offered outside a hospital—creates a significant headwind for hospitals, Gilbert said. Hospitals, therefore, want to position themselves where it makes the most sense to be, he said.

More Big Deals

The Texas deal, for example, wasn’t the only large hospital transaction in October. Cleveland Clinic announced two major deals aimed at bulking up its presence in southeast Florida, Gary W. Herschman told Bloomberg Law. Herschman, with Epstein, Becker & Green’s New York and Newark, N.J., offices, advises health-care clients on deals.

Cleveland Clinic signed a definitive agreement to acquire Stuart-Fla.-based Martin Health System Oct. 2. It is committed to investing $500 million over five years to upgrade Martin’s three hospitals, Herschman said.

Indian River Medical Center, in Vero Beach, Fla., also will join the Cleveland Clinic system, the health-care providers announced Oct. 3. Cleveland Clinic will invest $250 million over 10 years, Herschman said.

Growing Trend

Overall, nine hospital-health system deals were announced in October. That was a substantial increase over the two deals announced in October 2017, Nicholas B. Davis told Bloomberg Law. Davis is an analyst at ECG Management Consultants in Chicago.

“With a total of 154 announced or closed hospital-health system transactions in 2018 year-to-date, activity this year represents a staggering 102.6 percent increase compared to the same period in 2017,” Davis said. There were 76 announced or closed hospital deals from January through October 2017, he said.

Physician Consolidation Continues

“October healthcare sector deal activity remains on pace relative to overall deal activity for 2018, indicating that interest in the space from strategic and financial partners remains strong,” Robert Aprill told Bloomberg Law. Aprill is an associate with Provident Healthcare Partners in Boston.

The physician services sector saw the greatest number of transactions in October, 21 percent of the month’s announced or closed deals involving physician practices, Aprill said.

“The physician practice sector is expected to continue to skyrocket through the end of the year,” Herschman said. There are “dozens of groups across the country in the midst of formal processes, and many others in the earlier stages of discussions or exploration,” he said.

The announced deals involve many specialties, including anesthesiology, radiology, neonatology, eye care, and dermatology, Herschman said.

Multispecialty physician practices are becoming more important, as they continue expanding to offer more ancillary and complex medical services, Gilbert said. More frequently, they are aggressively competing with hospitals to provide ambulatory care, Gilbert said.

Long-Term Care

Merger and acquisition activity in 2018 in the long-term care sector has outpaced its 2017 activity, Aaron T. Newman, of ECG Management Consultants, Chicago, told Bloomberg Law.

There were 188 announced or closed long-term case deals between January and October 2018, compared to 175 deals during the same period in 2017, Newman said. Three of the 16 October 2018 deals involved private equity firms, Newman added.

“Due to the record of deployable capital presently available for investment, private equity firms have been more active in health-care service opportunities in general, and in long-term care specifically,” he said.

The lists of select transactions involving health-care providers, managed care, and services companies for October 2018 and the year to date were compiled by health-care investment bankers using publicly available information, including articles, websites, and press releases.
The list of transactions announced or closed in October is at
The list of transactions year-to-date is at

Bloomberg Law’s Health Care Transactions Editorial Committee contributed editorial guidance for this report. Members include Gary W. Herschman, of Epstein, Becker & Green PC, Newark (; Paul D. Gilbert, of Epstein, Becker & Green PC, Nashville (; Yulian Shtern, of Epstein, Becker & Green PC, in Newark, N.J. (; Robert Aprill, of Provident Healthcare Partners LLC, Boston (; Lucas Lebrao, of Provident Healthcare Parners LLC, Boston (; Hector M. Torres, of ECG Management Consultants, Chicago (; and Aaron T. Newman, of ECG Management Consultants, Chicago (

Epstein, Becker & Green PC did not comment on any particular transaction or party discussed or listed in this article.

To contact the reporter on this story: Mary Anne Pazanowski in Washington at

To contact the editor responsible for this story: Jo-el J. Meyer at