Healthcare M&A activity set to rebound in 2025 amid stricter state oversight

Editor's Note

Mergers and acquisitions (M&A) on the part of hospitals and health systems are expected to increase in 2025, rebounding from a 13% dip over the past year, Modern Healthcare January 7 reports. However, newly empowered state oversight laws are likely to temper the scale and pace of activity, shifting health systems’ focus to outpatient facilities such as ambulatory surgery centers (ASCs), according to data and expert insights.

Financially struggling hospitals or those that are part of restructuring plans present acquisition opportunities for health systems in 2025. Some systems are also divesting uncompetitive hospitals, favoring a "hub-and-spoke" model to enhance market concentration and payer negotiations. States with less stringent regulatory oversight are becoming more attractive for hospital deals, as newly enforced transaction review laws—such as those in California, Oregon, and New Mexico—prolong regulatory processes and increase associated costs.

California, for instance, now mandates reviews for mergers involving entities with over $25 million in revenue or located in shortage areas. This added scrutiny has led some systems to adopt a “wait and see” approach, particularly in regions with heightened transaction transparency and conditions like price caps or service protections.

Rising concerns over Medicaid funding “if President-elect Donald Trump and Congress follow through on his promise to move Medicaid to block grants” are adding urgency to strategic moves. Providers and lawmakers worry about reduced Medicaid coverage, which could increase uninsured patient numbers and shrink margins, prompting legal consultations on defensive M&A strategies.

To mitigate regulatory risks, health systems are increasingly turning to less complex deals involving ASCs and outpatient facilities, the article noted. This aligns with a broader industry trend toward delivering lower-acuity care in outpatient settings. Despite challenges, 2025 is poised to bring renewed M&A momentum, but the balance between opportunity and regulatory complexity will shape the market.