Q1 2024 Healthcare Market Overview
Comprehensive market analysis from SOLIC Capital Advisors.
To begin, here is a summary of deal activity in Q1, 2024:
Deal volume in Healthcare M&A declined slightly in Q1 2024 with 495 deals, a 2% drop from the prior quarter and 1% lower than Q1 2023.
Announced total transaction value reached $53.1 billion in Q1 2024, a steep decline of 33% compared with the prior quarter and 26% compared with Q1 2023.
Private equity remained an active buyer in the healthcare M&A marketplace, accounting for 37% of all transactions in Q1 2024.
Across different healthcare sub-sectors, Physician Medical Groups and Health Systems stood out:
Physician Medical Groups (PMG) were the most active in Q1 2024 with 132 transactions announced, an increase from the prior quarter, but a year-over-year decline of 8%
M&A in the Health System sector surged in Q1 2024 with approximately 20 transactions, the highest level since 2020
Q1 2024 was marked by thirteen $1 billion-plus transactions, including KKR’s acquisition of a stake in Cotiviti, Cigna’s sale of its Medicare business to Health Care Services Corporation, the parent of five Blue Cross and Blue Shield health insurance plans, for $3.7 billion
Home Health & Hospice sector M&A activity was down approximately 30% compared to the prior quarter and 5% compared to the same period last year as it faces reimbursement headwinds and staffing shortages
Despite continued growth in demand, M&A volume in Behavioral Health declined approximately 20% in Q1 2024 as compared to the prior quarter and the prior year, as investors continued to evaluate the effectiveness of varying delivery models *Excludes technology transactions
Sub-Sector Highlight: Behavioral Health
M&A remained relatively quiet in Q1 2024 within the behavioral healthcare sector with only 20 transactions, the fewest since Q2 2020 and the onset of the COVID-19 pandemic
Q1 M&A transaction volume was primarily driven by private equity add-ons as their remains substantial investor interest driven by a growing demand for high-quality, evidence-based care and opportunities for consolidation amidst fragmented markets
Behavioral health platforms are moving deeper into a more proactive model to reach patients earlier and provide more customized care
Notable transactions of Q1 include:
Private equity firm HCAP Partners launched a new platform company named PAX Health and acquired Behavioral Medicine Associates, Workers Compensation Psychological Network, and Reservoir Health to create one of the largest behavioral health businesses in the Northeast
Hightop Health, a new outpatient mental health platform backed by JLL Partners and SV Health Investors, acquired Roots Behavioral Health
Latticework Capital-backed Beacon Behavioral Partners acquired nine new partner clinics
Renovus Capital Partners acquired Behavioral Framework, a provider of ABA therapy for children diagnosed with autism spectrum disorder
Madison River Capital acquired Senior Care Therapy, a provider of patient-centered mental health services to the geriatric population
Sub-Sector Highlight: Outpatient Services
M&A activity in the Home Health & Hospice sector declined by approximately 30% compared to the prior quarter due to a number of headwinds including low wages, rising cost of delivering care, and staffing challenges
However, non-skilled home care has been driving M&A activity as a result of robust unmet demand, increased government Medicaid spending, and the growing use of technology to optimize care delivery
Notable transactions of Q1 include:
Vitas Healthcare Corporation acquired Covenant Care’s hospice assets for $85 million
Waud Capital Partners acquired home care franchise, Senior Helpers, one of the largest homecare service providers
Lorient Capital-backed PurposeCare, announced three Midwestern home-based care agencies acquisitions - A/Abiding Care-Elder Bridge, Michiana Home Care and Queen City Skilled Care
Nautic Partners acquired Angels of Care from Varsity Healthcare Partners
In Q1 2024, the Oregon Health Authority commenced its review of UnitedHealth Group’s proposed $3.7 billion acquisition of the home health and hospice caregiver, Amedisys, in a transaction that was announced last June
Sub-Sector Highlight: Senior Housing and Care
Senior Housing and Care M&A activity rose to 144 publicly announced transactions in Q1 2024, flat compared to the prior quarter, but up 32% from Q1 2023
M&A transactions represented $3.5 billion of spending in Q1 2024 compared to $4.0 billion in the prior quarter and $1.4 billion in Q1 2023, an impressive 150% year-overyear increase
Of the 144 M&A transactions for the quarter, 43% were assisted living followed by skilled nursing at 39%
Senior living occupancy rates exceeded 85% in Q1 2024, a 7.8 percentage point increase from a pandemic low of 77.8% in Q2 2021, marking 11 consecutive quarters of occupancy gains, driven by increasing demand, according to NIC MAP Vision from The National Investment Center for Seniors Housing & Care (NIC)
Q1 2024 occupancy rates of 85.6% are within one and a half percentage points of the Q1 2020 pre-pandemic occupancy rate of 87.1%
Notable transactions of Q1 include:
Two large not-for-profits announced that they were combining to create the 12th largest not-for-profit senior living organization in the country - Lutheran Senior Services signed an agreement to bring Diakon Senior Living operations and four CCRCs under its umbrella
Welltower (NYSE: WELL) announced its planned acquisition of 25 purposebuilt active adult communities with nearly 3,000 units from Affinity Living Communities for $969 million
One of the fastest growing SNF Operators, PACS Group, filed for an IPO with the SEC in Q1 2024 at $21.00/share for total gross proceeds of approximately $450 million
Sub-Sector Highlight: Hospital Providers
M&A in the Hospital sector surged in Q1 2024 with almost 20 transactions, the most significant Q1 since 2020
Most of the M&A activity focused on expanding outpatient care, investing in medical office buildings, home health agencies and diagnostic clinics
The quarter also included a number of for-profit conversions to not-for-profit and divestitures by national systems to regional health systems
Notable transactions of Q1 include:
Northwell Health and Nuvance Health announced their planned megamerger which would include 28 hospitals and 1,000+ sites of care and a combined revenue of over $18 billion
BJC Health System of St. Louis and Saint Luke's Health System of Kansas City closed their $10 billion nonprofit health system merger
Tenet Healthcare Corp. sold six hospitals in Q1 2024 - four to the University of California, Irvine and two to Adventist Health – in a transaction valued at over $975 million
Venture capital firm, General Catalyst’s portfolio company, Health Assurance Transformation Corporation or HATCo, executed a letter of intent to acquire Akron, Ohio-based Summa Health
MyMichigan Health announced a definitive agreement to acquire Ascension Michigan’s locations in Saginaw, Tawas, and Standish
Sub-Sector Highlight: Physician Services
The PMG sector was the most active in Q1 2024 with 132 transactions announced, an increase from the prior quarter, but a year-over-year decline of 8%
Private equity-backed platforms remained the primary buyer in the physician market, with almost 70 deals announced
Dental care accounted for the most deals in the PMG sector in Q1, representing approximately 50% of M&A transactions in the sector
The most active private equity-backed buyer in the quarter was MB2 Dental Solutions, a portfolio company of Charlesbank Capital Partners, with 20 deals in Q1 2024
Notable transactions of Q1 include:
National Cancer Care Alliance’s announced merger with 300-provider Quality Cancer Care Alliance
Arches Medical Partners acquired 11 internal medicine practices from VillageMD