Dive Brief:
- Policy and reimbursement uncertainty slowed the number of health services mergers and acquisitions early this year, but overall deal value has remained strong, according to a new report from consultancy PwC.
- The sector recorded $18 billion worth of M&A in the first quarter, and another $11 billion in the second quarter through the end of May. In comparison, health services M&A was worth a respective $9 billion and $8 billion in the first and second quarters of 2025. Still, deal value was down from a recent peak of $29 billion in the fourth quarter.
- Buyers are looking for assets with proven reimbursement stability, PwC said. For example, though artificial intelligence capabilities are attractive, firms will need to prove financial returns from the technology — not always an easy task for AI tools.
Dive Insight:
Coming into 2026, health services dealmaking appeared poised for a rebound, after significant policy changes and uncertainty — including from the GOP’s “Big Beautiful Bill” — pushed investors to spend more carefully.
Deal volume has softened so far this year, according to PwC’s report released last week. But that doesn’t necessarily signal a broad M&A decline. Instead, investors are looking for firms that can scale without significant labor cost increases, and those that can withstand ongoing reimbursement and cost challenges, PwC said.
“Investors are prioritizing assets with strong margin profiles, scalable operations, and measurable performance improvement potential,” Daniel Farrell, PwC’s health services deals leader, said in a statement.
Investors’ heightened focus on performance comes as the healthcare sector continues to manage a host of financial pressures. For example, increased utilization and regulatory turbulence in a variety of government programs have hit insurers’ bottom lines, pushing them to exit markets and cut back on benefits.
And Medicaid cuts from the “Big Beautiful Bill” and higher insurance costs for Americans on the Affordable Care Act exchanges will likely increase the number of uninsured — a financial hit for providers facing heightened uncompensated care costs.
The healthcare sector is rapidly adopting AI tools in a bid to contain costs and reduce strain on overworked clinicians. AI adoption is still intriguing for dealmakers, but companies will need to prove the technology is delivering a return on investment, PwC said.
“Pilot-stage claims no longer justify valuation uplift,” the report’s authors wrote. “Assets with demonstrated AI-driven cost savings or patient access improvements attract competitive interest; those without credible proof face valuation pressure.”
Determining hard-dollar financial returns can be challenging for some tools, which might show improvement in other metrics like provider satisfaction, experts say. Still, AI documentation and revenue cycle management products appear to allow providers to code for more complex care and receive higher reimbursement.
