Hospital M&A trends report reveals financial distress, market reorganization

Editor's Note

The US hospital industry continues to face significant financial and structural challenges despite signs of stabilization in 2024, according to a January 9 report from Kaufman Hall.

Despite improved operating margins and stable credit outlooks from major rating agencies, a surge in transactions involving financially distressed organizations and high divestiture rates underscores the uneven recovery post-pandemic. Key findings include:

• A record 30.6% of 2024 transactions involved financially distressed organizations, up from 27.7% in 2023.
• The average annual revenue of sellers in these transactions reached $401 million—nearly double the $219 million recorded in 2022. This reflects a shift from smaller community hospitals being the primary participants to larger organizations increasingly seeking partnerships due to financial pressures.
• Collectively, these transactions accounted for $8.8 billion in transacted revenue, far exceeding 2023’s $2.3 billion.
• Divestitures made up 62.5% of all transactions, the highest percentage recorded and more than double the 31.1% observed in 2023.
• Only 2.8% of transactions in 2024 involved smaller parties with credit ratings of A- or higher, a steep decline from 12.3% in 2023. At the same time, high-rated organizations such as Duke Health and HonorHealth remained active buyers, acquiring regional assets to expand capabilities.
• The total number of transactions rose to 72 in 2024, up from a pandemic low point of 49 in 2021, with total transacted revenue reaching nearly $40 billion.

The full report offers additional context on all of these figures; details on how partnerships and mergers are reshaping the healthcare landscape amid efforts to adapt to financial challenges; future forecasting; and information on the impact of Steward Health’s bankruptcy.