Academic Health Systems Stepping Up as Buyers in Hospital Sales Trend

Academic Health Systems Stepping Up to Purchase Hospitals Amid Financial Challenges

As the financial challenges for hospitals continue to mount, big health systems are making the tough decision to sell off some of their facilities. For-profit large health systems, despite some turning a profit last year, are trimming the number of hospitals in their portfolios. According to Cain Brothers, there have been 81 deals in the last 12 months, with a significant number of for-profit divestitures joining nonprofit systems.

HCA Healthcare, which posted $5.2 billion in net income in 2023, and Tenet Healthcare, reporting $1.3 billion in net income, have both been involved in multiple deals in recent months. Even large nonprofit systems like Ascension and CommonSpirit Health’s Dignity arm are downsizing, with both reporting losses last year.

So who is stepping in to purchase these hospitals? In many cases, it’s academic health systems. These academic medical centers are making strategic investments to expand their clinical, teaching, and research capabilities. Transactions in the last three months include UCLA Health acquiring a 260-bed Los Angeles hospital from HCA Healthcare, UCI Health in Orange, Calif., purchasing four hospitals from Tenet Healthcare, UCSF Health signing an agreement to acquire two Dignity hospitals, and MyMichigan Health in Midland announcing plans to add Ascension Michigan, which includes 16 hospitals.

Academic medical centers have been transforming into more traditional health systems over the last several years, with a network of clinics and surgery centers across the community. Now, they’re also adding hospitals to support more local healthcare in surrounding communities. Kaufman Hall noted an uptick in academic health system acquisitions in the third quarter of 2023, with seven of 14 transactions with nonprofit buyers being academic systems.

By keeping local hospitals afloat, academic health systems hope to better serve those communities and avoid further straining capacity issues at the flagship hospital. When community hospitals close, people have to travel further for care at the academic medical centers, leading to an influx of patients that may overwhelm the system.

Anu Singh, managing director and practice leader of partnerships, mergers, and acquisitions at Kaufman Hall, predicts more academic health system acquisitions in the coming months. This trend of academic health systems stepping up to purchase hospitals in need reflects the changing landscape of healthcare delivery and the creative partnerships forming to address the challenges facing the industry.