Following a record-breaking first quarter, merger and acquisition (M&A) activity within the healthcare industry kept pace during the second quarter of 2021, showing no signs of slowing. Although the volume of deal activity declined slightly from the first quarter, the value of deals increased to $127.3 billion, a 40% increase over Q1, in large part due to significant activity and larger transactions within the digital health space.

Many of the factors driving Q1 activity remained relevant throughout the second quarter, including continued significant investment by private equity (PE) firms in the physician practice sector, with such practices seeking financial stability and economies of scale in their costs. Additionally, heightened demand for digital health solutions fueled by the pandemic has clear staying power, driving large-scale transactions with a focus on innovation and accessibility. As demands for innovative solutions grow, cross-sector transactions aimed at disrupting traditional industry models have increasing relevance within the industry. Finally, healthcare entities are increasingly considering mergers with special purpose acquisition companies (SPACs) to go public, continuing a trend that began in 2020, often resulting in “three tier” sale tracks for larger companies (IPO, SPAC or outright sale).

Physician Practice Management

Deal flow in the physician practice management sector remained strong in the second quarter—with PE investment leading the charge, accounting for approximately 63% of the transactions. According to reports, most of the deals were add-on acquisitions that helped existing platforms expand their regional or national footprint. After a slow year in 2020 due to COVID-19, U.S. Oral Surgery Management (USOSM), backed by RiverGlade Capital and The Thurston Group, announced three add-ons in April—Atlantic Oral Surgery and Implant Center (South Carolina), Kingwood Oral Surgery (Texas) and Oral and Maxillofacial Surgery Associates (Mississippi)—that will bolster USOSM’s presence in the South.

Similarly, after announcing four deals earlier in the year aimed at further expanding into Texas and Illinois, Waud Capital Partners-backed GI Alliance continued its westerly expansion by announcing on June 24 its first Colorado partnership with Colorado Gastroenterology for an undisclosed amount. But regional plays were not the only type in this sector in Q2. In one fell swoop, Canadian PE firm OMERS Private Equity gained national reach through its purchase of one of the largest gastrointestinal physician groups, Gastro Health, LLC, a group with more than 250 physicians spanning Alabama, Florida, Maryland, Ohio, Virginia and Washington, from Audax Private Equity.

By all accounts, investment in the physician practice management space will continue to remain strong through the end of the year, particularly for high-demand practices like dental, gastroenterology (which comprised nearly 13% of the 163 physician practice management deals announced through Q2), ophthalmology and OB-GYN. While we are starting to see signs of speed-bumps in the SPAC/de-SPAC markets, we do anticipate additional physician practice investment from SPACs (or from the resulting public companies following the de-SPAC transaction).

After going public in November 2020 via a reverse merger with Jaws Acquisition Corp, primary care operator Cano Health (NYSE: CANO) announced in June that it was buying University Health Care and its affiliates, which provide comprehensive primary care to communities in South Florida. The deal is valued at $600 million in a combination of cash and equity and will expand Cano Health’s leading market share in Florida.


We noted in our Q1 report that the number of hospital transactions declined from the previous quarter, and reports suggest that hospital deal volume remained low in Q2. However, notably, while the number of transactions may be low, their average size by the end of the second quarter (when measured by average seller size) is near a record-high–$800 million (up from an average of $676 million in Q1), which, according to some studies, is the highest average size recorded in the last decade. Among these deals was the megamerger between Beaumont Heath and Spectrum Health, who announced on June 17 their intent to join forces to create what would be the largest health system in Michigan, operating 22 hospitals and 305 outpatient centers yielding a combined $13 billion in annual revenues.

These megamergers may soon be slowing down, however, following the Biden administration’s July 9 executive order which described the detrimental impact of hospital consolidation on rural communities and other areas, including the decrease in convenient, affordable healthcare services. According to the order, “[t]hanks to unchecked mergers, the ten largest healthcare systems now control a quarter of the market. Since 2010, 138 rural hospitals have shuttered, including a high of 19 last year, in the middle of a healthcare crisis. Research shows that hospitals in consolidated markets charge far higher prices than hospitals in markets with several competitors.” The order encouraged the Justice Department and Federal Trade Commission to review and revise their merger guidelines to ensure patients are not harmed by such mergers.

Some health systems are also divesting hospitals that no longer serve the core scope of their business. In May, HCA Healthcare (NYSE: HCA) announced that it is selling four of its hospitals—all located in Georgia—to Piedmont Healthcare, a not-for-profit hospital system based in Atlanta in a deal valued at $950 million. In its announcement of the deal, HCA cited the desire to achieve additional “financial flexibility for investments in ongoing and future initiatives in core markets” as the impetus for the deal. Similarly, in June, Tenet Healthcare Corporation (NYSE: THC) announced that it is selling five hospitals in Florida (representing half of Tenet’s hospitals in Florida) to Steward Health Care System for a reported $1.1 billion, citing its desire to shift its focus to the ambulatory surgery center line of its business.

In the hospital sector, then, we expect to see two recurring themes in the foreseeable future: the consolidation of large health systems, which may be chilled in the medium to long-term given President Biden’s call for further scrutiny on these transactions, and the continued divestiture of smaller hospitals as providers look to trim down and re-focus on core competencies and markets.

Ambulatory Surgery Centers

The pandemic accelerated shifts in care settings, ultimately leading to more surgical procedures to migrate to outpatient facilities. Additionally, the narrowing gap between inpatient and outpatient revenue coupled with increased outpatient procedure approval from the Centers for Medicare & Medicaid Services (CMS) led to solid transaction activity in the ambulatory surgery center (ASC) sector. In May, Surgery Partners, Inc. (Nasdaq: SGRY) and UCI Health announced a strategic partnership in several California counties, providing patients in the UCI Health network with increased access to outpatient care.

Post-Acute Care—Home Health & Hospice

The post-acute care sector, which encompasses home health and hospice services, kept up its torrid pace in the second quarter of 2021, with several large transactions announced. In June, Amedisys (Nasdaq: AMED) announced its intent to acquire Tennessee-based Contessa Health, Inc. for $250 million. With the addition of Contessa Health’s hospital-at-home solutions, Amedisys hopes to expand patients’ in-home care options and become one of the few companies to provide such services on a national scale.

Other notable transactions include the announcement by LifePoint Health that it would acquire post-acute care provider Kindred Healthcare, LLC. Although deal terms were not disclosed, LifePoint has agreed to invest an estimated $1.5 billion in the enterprise over the next three years. We expect to see consistent continued deal activity within the post-acute care space in the coming months.

Digital Health & Healthcare Information Technology

Likewise in Q2, the industry saw robust activity in the digital health space, characterized by historically non-healthcare businesses engaging in strategic cross-sector partnerships and the use of SPACs as a vehicle to take digital health companies public. Microsoft (Nasdaq: MSFT) announced in April that it had entered into a definitive agreement to acquire Nuance Communications (Nasdaq: NUAN), an entity providing cloud-based intelligence for healthcare providers, for $19.7 billion.

In June, telehealth startup Babylon Holdings Limited announced it would go public via Alkuri Global Acquisition Corp., a SPAC, for $4.2 billion, and Pear Therapeutics, Inc., a medical technology company, announced that it would go public via the SPAC Thimble Point Acquisition Corp. for $1.6 billion.

Other notable transactions include the anticipated merger of health data company Datavant and health information technology firm Ciox Health for an estimated $7 billion, and the anticipated acquisition of PlushCare, a virtual primary care and mental health treatment company, by Accolade, Inc. (Nasdaq: ACCD) for $400 million.

Behavioral Health

Tied closely with the digital health sector is the behavioral health space, which continues to be attractive to investors capitalizing on the increased demand for accessible services and expanded coverage by payors of such services. Talkspace (Nasdaq: TALK), a virtual behavioral health company, merged with SPAC Hudson Executive Investment Corp. (Nasdaq: HECCU), and San Francisco-based cognitive therapy startup, Better Therapeutics, Inc., announced plans to go public via a merger with the SPAC Mountain Crest Acquisition Corp II.

Behavioral health transactions were not just limited to the digital space, however. In June, Birmingham-based REIT, Medical Properties Trust, Inc. (NYSE: MPW), announced its $950 million commitment to purchase and leaseback 18 inpatient behavioral health hospitals and acquire equity in behavioral health services provider, Springstone, LLC, from Welsh, Carson, Anderson, & Stowe. Nashville-based REIT, National Health Investors, Inc. (NYSE: NHI), also acquired Brookhaven Hospital, a 64-bed specialty behavioral health hospital in Tulsa, Oklahoma, for $40.3 million.

Managed Care

Consolidation continued in managed care during Q2 2021. Humana Inc. (NYSE: HUM), formerly a minority investor in Kindred at Home, acquired full ownership in the home health provider for $5.7 billion, growing its industry footprint as both insurer and provider. Molina Healthcare, Inc. (NYSE: MOH), meanwhile, committed to acquiring Cigna Corporation’s (NYSE: CI) Texas Medicaid business for approximately $60 million in cash. And Anthem, Inc. (NYSE: ANTM) closed the acquisition of Puerto Rico-based MMM Holdings, LLC, its Medicare Advantage plan (MMM Healthcare, LLC), its affiliated companies and its Medicaid plan from InnovaCare Health, L.P. MMM Healthcare, LLC is the ninth-largest Medicare Advantage plan in the country.

Additionally, Primerica, Inc. (NYSE: PRI) announced that it would acquire e-Telequote, a digital insurance marketplace for Medicare-related insurance, for an estimated $600 million.

Pharmacy & Life Sciences

The pharmaceutical and life sciences sector saw a continued return to normal deal activity in Q2 2021. For example, the quarter started strong when Global Health Opportunities, the European specialist investor in healthcare, announced on April 8 the acquisition of Velocity Clinical Research. Velocity was the only multi-site company in the United States to conduct trials for all pharmaceutical companies included in Operation Warp Speed as well as Pfizer.

The Velocity acquisition is just one example of M&A activity in the pharmaceutical and life sciences sector. Other clinical research deals included Thermo Fisher Scientific’s (NYSE: TMO) announced acquisition of PPD, Inc. (Nasdaq: PPD), a leading provider of clinical research services to the pharma and biotech industry, for $21.9 billion; leading global clinical research organization, Parexel’s, announced acquisition by EQT Private Equity and Goldman Sachs Asset Management for $8.5 billion; and the completion of Irish clinical research organization, ICON’s (Nasdaq: ICLR), $12 billion acquisition of global healthcare intelligence partner, PRA Health Sciences (Nasdaq: PRAH).

On the pharmaceutical front, in May, Jazz Pharmaceuticals (Nasdaq: JAZZ) completed its acquisition of GW Pharmaceuticals plc (Nasdaq: GWPH), a leader in the science, development, and commercialization of cannabinoid-based prescription medicines in a transaction valued by PwC at $7.3 billion. Similarly, on June 1, a subsidiary of Nordic Fund X Epsilon, Cidron Aida Bidco Limited, completed its acquisition of UK-based specialty pharmaceutical company, ADVANZ PHARMA Corp. Limited for a total value of nearly $846 million.

Other deals in the life sciences sector in the second quarter included in April both the announced acquisition of Luminex Corporation (Nasdaq: LMNX), a seller of proprietary biological testing technologies and products with leading applications throughout the diagnostics and life sciences industries, by Italian biotechnology company DiaSorin S.p.A. (FTSE MIB: DIA) for approximately $1.8 billion, and the successful completion of Amgen’s (Nasdaq: AMGN) tender offer to purchase all outstanding shares of common stock of Five Prime Therapeutics (Nasdaq: FPRX), a clinical-stage biotechnology company focused on developing immune-oncology and targeted cancer therapies, in a transaction valued at approximately $1.9 billion.

Later in the second quarter, a group of private equity firms announced that they had agreed to buy a majority stake in medical supply manufacturer and distributor Medline Industries, a transaction valued by PwC at $34 billion. Additionally, on June 2, STERIS plc (NYSE: STE), a global provider of healthcare and life sciences products and services, announced that it had completed its acquisition of Cantel Medical – a global provider of infection prevention products and services to endoscopy, dental, dialysis and life sciences customers – in a transaction valued at $4.6 billion.


On par with our prior predictions, 2021 has thus far been dominated by digital health-focused transactions, SPACs and PE investment. We don’t expect these trends to slow any time soon, and we anticipate deal volume overall to hold steady for the year; however, we are watchful of the potential additional scrutiny that may be applied to healthcare (especially hospital) consolidation under the Biden administration’s executive order calling for the vigorous application of antitrust enforcement. Stay tuned for more headlines describing strategic digital health partnerships, cross-sector transactions and blank-check mergers involving healthcare entities.

If you have questions about any of the information listed above, please contact one of the authors. In case you missed it, read our Healthcare Transactions Q1 2021 Update.

About Our Healthcare M&A Team

Since 2005, the Healthcare M&A Team at Bass, Berry & Sims has represented healthcare clients in transactions with a combined value in excess of $136 billion. Representing providers and non-providers, our attorneys have developed a thorough understanding of the legal and regulatory constraints affecting the healthcare industry. The industry engenders unique challenges in the areas of due diligence and evaluation of potential risks and liabilities. We offer an unmatched combination of sophistication and value and are focused on serving and adding value in the middle- and lower-middle markets, and are uniquely positioned to provide the cost-effective yet sophisticated transactional solutions the current environment demands. Our results-oriented, business-minded deal attorneys work seamlessly with our nationally ranked healthcare regulatory attorneys to help healthcare companies, private equity funds and their portfolio companies achieve their strategic goals. Most notably, we pride ourselves as being deal facilitators and real-world risk analyzers. As a result of this experience and depth, the firm continues to be recognized as a choice firm for healthcare transactions. To learn more about our team, industry experience and value-add, click here.