Dive Brief:
- Mergers and acquisitions among hospitals and health systems continued to rise in the second quarter as providers seek out combinations to weather financial pressures, according to a a new report from consultancy Kaufman Hall.
- The sector recorded 18 deals during the quarter, one of the highest Q2 counts since 2018, the report published Monday found. In comparison, hospitals and health systems were involved in just eight mergers and acquisitions during the same period last year.
- Total transacted revenue rose to $7.7 billion, a significant increase from 2025, according to the consultancy. In the second quarter last year, transacted revenue was only $1.4 billion, the lowest seen in the sector since 2018.
Dive Insight:
The M&A rebound comes after hospital dealmaking cratered in the first half of last year due to heightened policy uncertainty in Washington. In early 2025, Republican lawmakers were debating a massive tax bill that included large cuts to healthcare spending — especially in the safety-net insurance program Medicaid.
The legislation — along with other financial worries like the impact of tariffs on supply costs — likely caused executives to pause potential deals, Kaufman Hall said.
But by last summer, President Donald Trump had signed the “One Big Beautiful Bill” into law, giving providers more clarity into their new operating environment. M&A began to pick up in the second half of the year, and 22 deals were announced in the first quarter — the highest Q1 amount in six years.
That deal-making momentum has continued through the second half of 2026, as providers looked to make strategic decisions to help them navigate future financial pressures, according to Kaufman’s latest report.
“Organizations are now evaluating options earlier in their strategic planning cycles, seeking complementary capabilities rather than waiting until partnerships become necessary,” Kris Blohm, managing director and co-leader of Kaufman Hall’s M&A practice, said in a statement. “We’re witnessing proactive positioning over reactive consolidation.”
Second quarter hospital M&A normalizes in 2026
The second quarter included three mega-mergers, or deals where the smaller party has annual revenue of at least $1 billion. Those transactions helped push average seller size in the quarter to around $428 million, in line with recent year-end averages, according to the analysis.
The increase in mega-mergers comes as large health systems increasingly look to partner with even bigger organizations to help them weather a more challenging operating environment, Kaufman said. One example is Quorum Health, a private equity-backed hospital operator that signed a deal in May to transition to nonprofit status through a deal with Healthside Partners.
Additionally, nearly all deals included nonprofit buyers in the second quarter, including 10 independent nonprofits and four academic buyers. Only one acquirer was a for-profit health system.
Meanwhile, increasing costs continue to plague hospitals, according to another report released Monday by Kaufman. Operating margins dipped 4% in May compared to the same month last year.
Labor expenses per calendar day rose 5%, while supplies rose 4% and drugs increased 1% compared with May 2025.
