Every quarter, Health Evolution will report on the biggest proposed and finalized mergers and acquisitions in the health care industry that occurred over the preceding three months. If we missed any deals, contact us here.
Like with venture capital funding in the digital health space, the money is flowing freely in the health care M&A arena.
According to a new analysis from PwC, deals in 2021 are outpacing 2018, 2019 and 2020. Most subsectors have seen double-digit growth in deal volumes and triple-digit growth in values. Moreover, according to PwC’s Nick Donkar, US health services deals sector leader, there is likely more to come. “Larger corporate players with large balance sheets will see more opportunity to consolidate and pick up market share based on the strength of their overall historical operations and financial positions,” said Donkar.
In fact at a recent M&A event, Stewart Kohl, a private equity CEO, said this was the “best M&A market” he could recall, with the “highest multiple[s], fastest to sell, easiest time to operate.” In its quarterly report released in April, Moody’s predicted that M&A will continue at “a robust pace in the health care sector in 2021, extending a decade-long trend for both not-for-profit and for-profit health systems and providers.”
The ratings service company said that smaller enterprises are looking to partner to gain access to clinical, strategic, and financial resources and reduce labor, supply, and IT expenses. For larger health systems, it’s about increasing scale and expanding geographic presence. In the pharma and biotech space, Moody’s also expected the “brisk pace of deal making” to continue in those sectors. For insurers, Moody’s expects the larger players to set the tone.
What follows is a look at the major M&A activity from March to June.
In early June, One Medical, a primary-care provider that covers commercially insured patients bought Iora Health, which operates in the Medicare Advantage space, for $2.1 billion. The combined footprint of the new company puts it in 28 markets with 636,000 members. The two sides are hoping for some synergies when combing One Medical’s fee-for-service structure, where it directly contracts with employers and health systems, with Iora’s value-based care model. In an investor presentation, the companies said they expect $350 million in revenue synergies by 2025, on the back of transitioning One Medical commercial patients to Iora’s Medicare Advantage option. One Medical has relationships with numerous health systems, employers, and health plans, while Iora has built in collaborations across Medicare Advantage plan providers. Furthermore, Iora has begun to operate a direct contracting model in April. On the personnel side, Iora Health CEO Rushika Fernandopulle will become One Medical’s chief innovation officer. The deal is expected to close in late third quarter.
Piedmont Healthcare in Georgia has a busy spring, acquiring seven different hospitals in two separate deals. In early May, Piedmont acquired four hospitals from the national chain HCA Healthcare across the Atlanta area for $950 million. One week later, Piedmont struck a deal with University Health Care System, based in Augusta, Georgia, to become a Piedmont hub in that area of the state. The University deal also saw Piedmont acquiring three skilled nursing facilities, nine urgent care facilities, rehabilitative care and more than 90 employed primary and specialty care providers. HCA Healthcare also sold Redmond Regional Medical Center to AdventHealth for $635 million. That deal was announced in mid-May and is expected to close later this year.
There were a few notable call offs in the Spring 2021 M&A space. CommonSpirit Health called off a 14-hospital deal with Essentia Health. The arrangement focused on Catholic hospitals and providers located in North Dakota and Minnesota. In a May press release, the systems said they couldn’t come to an agreement that would serve both organizations. Cone Health and Sentara Health also called off their mega deal this quarter. The two sides walked away on an agreement that would have created an $11.5 billion organization with hospitals in both Virginia and North Carolina. The deal was under scrutiny from North Carolina Attorney General Josh Stein and there was a lot of internal backlash from physicians within Cone, according to multiple news reports.
Beaumont Health, which has had its own share of potential M&A arrangements fall apart, announced it was merging with Spectrum Health, based in Michigan. The deal between the two sides would create a $12 billion system with 22 hospitals, 305 outpatient locations, more than 64,000 employees and 7,500 independent physicians. This is Beaumont’s third try at merging in recent years after proposed deals with Summa Health and Advocate Aurora Health fell through.
In the post-acute space, a major deal was announced when LifePoint Health announced it was acquiring Kindred Health. LifePoint is an $8.8 billion provider based in Tennessee, with 87 hospitals, more than 50 post-acute providers, and 35 outpatient facilities. Kindred, based in Louisville, is a $6 billion provider of post-acute facilities and long-term acute hospitals (and a home care services arm, which was sold to Humana—see below). As part of the deal, LifePoint plans to invest $1.5 billion in workforce development for Kindred’s operations. Terms of the deal were not disclosed.
Others: Value-based primary care provider Cano Health acquired University Health Care (South Florida) for $600 million. Cano recently went public through a special purpose acquisition company…Tenet Healthcare sold five hospitals to Steward Health Care for $1 billion. The five hospitals are all located in Florida…Ochsner Health, based in Louisiana, announced plans to buy seven-hospital, Rush Health Systems, based in Mississippi and Alabama for an undisclosed price in June.
The biggest deal in the health tech sector during the Spring months took place when Microsoft acquired Nuance for $19.7 billion. The acquisition, announced in April, will double Microsoft’s total addressable market to nearly $500 billion, the company said in an announcement. In June, the company received antitrust approval to move forward. Nuance, which is known for its Dragon speech products, has products used by more than half of U.S. physicians and three quarters of radiologists. The move will be part of Microsoft’s larger strategy around AI and cloud solutions. The company released a cloud-based health care product in 2020, which emphasizes the use of telehealth for companies used to providing face-to-face care. Nuance’s own cloud-based revenues increased 37 percent year over year. In terms of AI, CEO Satya Nadella said, “AI is technology’s most important priority, and health care is its most urgent application.”
Two health data behemoths— Datavant and Ciox Health—announced an approximately $7 billion merger in June. The company will stick with the Datavant name and have an ecosystem of more than 2,000 U.S. hospitals, more than 15,000 clinics, 200 health plans and 30 life sciences companies. In its three years of existence, Datavant has focused on connectivity for de-identified data while Ciox has been able to pull identifiable data across health care organizations. Travis May, CEO of Datavant, says the combination “unlocks the ability of all stakeholders to securely and privately exchange health data: powering patients, researchers, patient registries, public health agencies, clinical trial sponsors, life sciences companies, payers, providers, health analytics companies, and patient-facing apps.”
Accolade, which helps employees navigate benefits, acquired PlushCare, a virtual primary care company, for $450 million. This is Accolade’s second acquisition in the virtual care space in 2021—earlier this year it bought 2nd.MD for $460 million. The company went public in July 2020.
Not one to be outdone by Amazon, CVS Health and others, Walmart announced it was acquiring telehealth company, MeMD, in early May for an undisclosed price. Over the last few years, Walmart has rolled out a number of in-store clinics across various locations. However, the acquisition of MeMD will help the retail giant gain a foothold in the burgeoning virtual care space. Cheryl Pegus, MD, executive vice president of health and wellness for Walmart, said in a statement: “People expect omnichannel access to care, and adding telehealth to our Walmart Health care strategies allows us to provide in-person and digital care across our multiple assets and solutions.”
Others: Carbon Health announced it is acquiring Steady Health, which has a virtual diabetes platform. Carbon is primarily focused in primary care and the acquisition of Steady will give it more of a virtual presence in managing chronic conditions…Cedar acquired Ooda Health for $425 million, which combines two companies focused on the health care fintech space…Revenue cycle management company R1 RCM acquired VisitPay for its patient billing solutions at $300 million…SOC Telemed acquired Access Physicians for $194 million… UPMC spun out AI company Realyze…Iodine Software, an AI vendor, bought clinical data integration company Chartwise Medical Systems for an undisclosed price….Grand Rounds Health and Doctor on Demand, which merged earlier this year, announced acquisition of Included Health, a virtual care concierge service for LGTBQ+ patients….Ro acquired reproductive health company Modern Fertility in a deal valued at $225 million.
In the life sciences sector, Thermo Fisher Scientific announced plans to buy clinical research organization, PPD, for $17.4 billion. Adding PPD will boost Thermo Fisher’s drug development capabilities, the company said in a release. “The acquisition of PPD is a natural extension for Thermo Fisher and will enable us to provide these customers with important clinical research services and partner with them in new and exciting ways as they move a scientific idea to an approved medicine quickly, reliably and cost effectively,” stated Marc Casper, chairman, president and CEO, Thermo Fisher Scientific. The deal is expected to close at the end of 2021.
MorphoSys, a biotech firm in Germany, announced in June it will buy cancer drugmaker Constellation Pharmaceuticals in a $1.7 billion deal. The Cambridge, Massachusetts-based Constellation has two product candidates in mid-to-late-stage trials that treat for myelofibrosis as well as blood and solid tumors, respectively. MorphoSys typically licenses out drugs that it develops so the acquisition of Constellation signals a shift in strategy.
Others: Sanofi agreed to acquire Tidal Therapeutics, for $160 million to expand its presence in mRNA-based treatments for cancer…Amgen announced it will acquire Rodeo Therapeutics for up to $721 million. Rodeo develops small-molecule therapies designed to promote regeneration and repair of multiple tissues…Danaher spent $9.6 billion to acquire Aldevron, a Fargo, North Dakota-based company that manufactures plasmid DNA, mRNA, and proteins, serving biotechnology and pharmaceutical customers across research, clinical and commercial application…In late March, Merck acquired Alydia Health for up to $240 million as part of its larger plan to spinout a women’s health portfolio…Fresh off success with COVID testing, PerkinElmer made a $155 acquisition of Immunodiagnostic Systems, which offers tests for autoimmunity, endocrinology and infectious diseases.
It was a slower period for payers compared to the other sectors, but Humana made a few notable moves at the home health care market. In April, it bought the remaining 60 percent interest in Kindred at Home, the home care arm of Kindred Health. The Louisville-based insurer announced it will pay $5.7 billion for Kindred at Home, which brings its total investment into Kindred at Home up to $8.1 billion. Kindred at Home has 43,000 caregivers providing home health, hospice and community care services to over 550,000 patients annually. Bruce D. Broussard, Humana’s President and CEO: “Since our initial investment in Kindred at Home…we’ve learned a great deal about the home health space and recognize the significant value we can deliver to members and patients by integrating this asset into our holistic approach to care.”
In June, Humana acquired One Homecare Solutions from WayPoint Capital Partners for an undisclosed price. One Homecare provides infusion care, nursing, occupational therapy, physical therapy and durable medical equipment (DME) services at patients’ homes, as well as appropriate site of care placement through its skilled nursing facility (SNF) at home programs. The deal will close in the second quarter of 2021. Humana announced in February it was investing in home medical provider DispatchHealth.
Others: The merger between Tufts Health Plan and Harvard Pilgrim HealthCare was finalized and the rebranded company will be known as Point32Health… For $60 million, Molina Healthcare and Cigna Corporation entered into an agreement under which Molina will acquire Cigna’s Texas Medicaid and Medicare-Medicaid Plan (MMP) contracts…Bright Health Plan, a startup, acquired virtual care platform provider Zipnosis for an undisclosed price.