Dive Brief:
- Hospital and health systems announced 22 mergers and acquisitions in the first quarter this year, the highest first-quarter amount in six years, according to a report from consultancy Kaufman Hall.
- Several mega-mergers, or deals in which the smaller party’s annual revenue is more than $1 billion, boosted the total transacted revenue in the quarter to $14.5 billion, the highest amount the consultancy said it’s seen in recent years.
- The M&A totals come after a low period of deal activity in 2025, especially in the first half of the year.
Dive Insight:
Hospital and health system M&A is trending upward, after a cooling period last year driven by financial stress and policy uncertainty from Washington.
Cuts to federal healthcare programs, especially to Medicaid, and changes to Affordable Care Act plans may have spooked providers off of inking deals. Hospitals and health systems announced 46 M&A transactions in 2025, compared to 72 the year prior.
However, the pace in deal-making started picking up in the back half of last year. That momentum has now carried to the first quarter.
“Health system M&A activity continues to rebound from the policy and market-related uncertainty of early 2025,” said Courtney Midanek, managing director and co-leader of Kaufman Hall’s M&A practice, in a statement. “Organizations are increasingly aware that partnerships can help them face future challenges and opportunities.”
Divestitures made up the majority of M&A this year, continuing a trend from 2025 as providers focus on shoring up their performance in the face of financial and policy uncertainty. Fifteen out of the 22 announced deals in the first quarter were divestitures, according to the report.
The largest deal in the quarter, California-based Sutter Health’s proposal to buy Minnesota-based Allina and create a $26 billion nonprofit system, may signal a return of popularity for cross-market deals, according to Kaufman Hall.
Cross-market mergers may be subject to less regulatory scrutiny than acquisitions of companies that compete in the same market. The deals may also give health systems more leverage in contract negotiations with insurers, according to a 2022 study published in Health Affairs.
Overall, the deals in the quarter represent an “industry undergoing transformation,” the report said, as hospitals divest from underperforming or non-core markets and seek partners.
