Hospital M&A activity drops to historic low amid economic and policy uncertainty

Editor's Note

A sharp drop in 2025 brings hospital and health system mergers and acquisitions to their lowest point in years, according to Kaufman Hall’s most recent Mergers and Acquisitions Quarterly Activity Report. Just five transactions were announced in Q1, a steep decline attributed to widespread economic volatility, concerns over new tariffs, and uncertainty around possible policy shifts from the new presidential administration.

The five transactions mark the lowest activity level since at least 2018 and fall below the previous pandemic-era low of seven transactions in Q3 2021. Four of the five transactions involved financially distressed acquirees, extending a trend identified in Kaufman Hall’s 2024 year-end report. The firm notes this points to a continued divide between financially stable systems and those that are struggling to survive.

Deal size also declined. There were no “mega mergers” this quarter—defined as involving a party with over $1 billion in annual revenue. The average seller had annual revenues of just $279.3 million, about half the average from 2024. Total transacted revenue came in under $1.4 billion, well below prior lows, according to the report.

Q1 acquirers included one for-profit, one faith-based, one nonprofit foundation arm of a for-profit entity, and two other not-for-profit entities—one independent and one governmental.

The report emphasizes that this trend mirrors broader global M&A slowdowns. Although total deal value globally rose slightly, the total number of transactions worldwide hit a 20-year low. U.S. deal volume fell by 14%, with Kaufman Hall attributing the slowdown to fears of a full-scale trade war, active global conflicts, and a flurry of regulatory and legislative proposals that affect the healthcare sector.

The continued rise in distressed-driven transactions underscores widening financial disparities across hospitals. While median performance has stabilized, Kaufman Hall notes a 44.6% spread in operating margins between the highest- and lowest-performing hospitals. These gaps suggest that the limited deals now taking place are largely driven by financial necessity.

Despite the broader chill in M&A, strategic partnerships continue. These include a joint effort by UNC Health and Duke Health to create a children’s health system, and a co-development between Kootenai Health and MultiCare Health System on a large medical campus project. Kaufman Hall positions these ventures as evidence that health systems are still pursuing growth and sustainability through creative collaborations, even amid a slowdown in traditional M&A.

Looking ahead, the report suggests that while interest in mergers remains, broader market stabilization will be necessary for a rebound. Decision-making remains hindered by the uncertain economic trajectory, potential regulatory shifts, and unpredictable valuations. Until those stabilize, M&A activity is likely to remain muted.