Hospital M&A talks pick up but looming cuts cloud outlook

Modern Healthcare – Tuesday, July 8, 2025
By Alex Kacik

Hospital merger and acquisition discussions are ramping up, but it isn’t clear whether talks will progress in an uncertain financial and regulatory environment.

Health systems have been hesitant to announce hospital deals so far this year as they face federal funding cuts and new state oversight laws. While the second half of the year will likely feature more hospital merger and acquisition proposals than the historically quiet first and second quarters, that tentativeness is poised to keep activity in check through 2025, advisers and antitrust experts said.

Several factors have shifted the dealmaking landscape. The hospital sector is heavily consolidated, meaning fewer high-performing acquisition targets remain. That could in part explain why hospital dealmaking has slowed over the past several years. In addition, regulatory scrutiny and the relative cost of non-hospital transactions tend to be lower than hospital mergers and acquisitions.

Related: How state laws, regulations could shape hospital deals in 2025

There were 52 hospital merger and acquisition proposals as of May 15, down 16% compared with that period in 2024, according to consultancy PricewaterhouseCoopers. But there was an uptick in other sectors including ambulatory surgery, home infusion and medical office buildings.

Casey Webb, managing director at Juniper Advisory, which predominantly works with nonprofit systems, says she has never been busier helping providers navigate merger and acquisition talks. However, she said many health systems have been wary of signing agreements, and if they do, proposed transactions are taking longer to close.

“The budget bill is going to lead to more uncertainty, with potential buyers being more prudent,” Webb said shortly before the bill cleared Congress. “The other factor drawing out talks and lengthening the time for these transactions to close is states that are developing a tighter regulatory review process.”

Financial uncertainty can trigger a range of responses.

Some health systems do not want to dedicate time and resources to integrating a hospital into their network as Medicaid cuts loom. But the threat of higher uncompensated care costs may compel others to pursue mergers and acquisitions that could reduce operating expenses and boost credit ratings.

One common theme is health systems aiming to diversify revenue so they aren’t as reliant on inpatient reimbursement from government payers and commercial insurers, said Anu Singh, managing director of consultancy Kaufman Hall.

“Simply applying inpatient scale and growth is probably going to be insufficient,” he said. “Financial, quality and patient-driven incentives are moving toward a much more sophisticated solution away from the inpatient setting.”

Health systems are increasingly looking beyond hospital deals as they try to mitigate financial pressure by expanding into less capital-intensive outpatient services, experts said.

“There is a realization that community hospitals are really struggling,” said Ken Field, an antitrust attorney at law firm Hogan Lovells. “The way to make money in healthcare these days is to have elective surgeries and more profitable services as federal funding looks to be drying up.”

For instance, Ascension and ambulatory surgery center operator Amsurg last month signed a definitive acquisition agreement reportedly worth $3.9 billion. In addition, the St. Louis-based health system sold four Michigan hospitals last week to South Bend, Indiana-based Beacon Health System.

“It’s a survival game,” said Rahul Singh, head of the provider practice at consultancy West Monroe. “Health systems are saying, ‘We have to shrink our footprint so we can focus on areas where we have market share.’ In those markets, they are expanding by opening new surgery centers and clinics.”

Many states, including Indiana, New Mexico and Massachusetts, have recently implemented more robust healthcare transaction notification and review laws. New laws have extended state-led reviews, which have deterred hospital dealmaking, advisers said.

“What I am hearing is a lot of hesitancy,” said Joe Lupica, chair and managing principal of advisory firm Newpoint Healthcare Advisors.

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