- Hospital and health system M&A fell in 2025 to 46 deals from 72 in 2024, with transacted revenue dropping to a record-low $18.5B.
- Financial distress drove activity, with 43.5% of transactions involving a distressed party amid weak credit, high debt and thin margins.
- Policy and cost uncertainty froze dealmaking early, then Q3/Q4 rebounded as Q4 generated $9.8B of revenue including four mega-mergers.
- For-profit systems largely exited rather than expanded, selling in 11 deals but acquiring in only one.
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The year 2025 for hospital and health system M&A was characterized by contraction, financial strain, and cautious strategic positioning. According to Kaufman Hall, transaction volume dropped significantly—from 72 deals in 2024 to 46 in 2025—with transacted revenue falling to $18.5 billion, the lowest on record.
A key insight is that financial distress drove nearly half of all M&A activity. Firms with distressed balance sheets, low or deteriorated credit ratings, and inability to sustain capital or operational costs were highly overrepresented among sellers. The proportion of deals with smaller parties having investment-grade ratings fell drastically, from over 12 % in 2023 to 2.2 % in 2025.
The first half of 2025 saw historically low deal flow, largely due to policy and reimbursement uncertainty—particularly around tariff regimes, ACA exchanges, Medicaid cuts—and heightened cost inflation. But the second half saw recovery; in Q4, momentum picked up with four mega-mergers and $9.8 billion of revenue materialized out of only 17 deals.
An observable trend: for-profit entities are stepping back—notably, while 11 were sellers in 2025, just one was an acquirer—suggesting exits or restructuring over expansion. Non-acute care sectors (behavioral health, ambulatory care, labs) saw more activity even as hospitals struggled.
Operationally, many distressed hospitals sought bankruptcy or acquisition to shore up liquidity or exit. Examples include Prospect Medical Holdings filing for Chapter 11 (assets and liabilities between $1 billion and $10 billion) and smaller rural or independent hospitals closing or affiliating due to unsustainable margins.
Strategic implications: Larger health systems have opportunity to selectively acquire distressed but service-important hospitals, especially in underserved or rural areas, with potential public subsidy or regulatory support. Private equity and real estate holders face scrutiny—the risk of reputational damage and regulatory intervention is heightened. The shift toward non-hospital health services reflects where investment will likely flow in 2026 under tighter capital constraints.
Open questions remain: how healthcare policy changes (federal/state reimbursement, Medicaid, ACA) will land in 2026; whether hospitals can find capital for necessary upgrades (technology, facility compliance); and how communities will be served if closures or consolidations increase. Also, will regulation constrain PE / prop-RE deals in hospitals in response to concerns about service deterioration?
Supporting Notes
- In 2025, 46 hospital and health system transactions were announced, down from 72 in 2024.
- Total transacted revenue in 2025 was $18.5 billion—the lowest amount since Kaufman Hall began tracking these deals—and more than half ($9.8 billion) came in Q4 alone.
- 43.5 % of 2025 hospital-system transactions involved a financially distressed party, up from 30.6 % in 2024 and 15-28 % earlier.
- The percentage of smaller parties in deals with credit rating A- or better fell to 2.2 % in 2025, from 12.3 % in 2023 and 30.6 % in 2024.
- For-profit organizations were sellers in 11 transactions in 2025 but an acquirer in only one.
- Examples of distress or restructurings include Prospect Medical Holdings filing for Chapter 11 with assets and liabilities between $1 and $10 billion; The Bellevue Hospital filing bankruptcy and acquired by Firelands Health; and several hospitals closing or seeking buyers due to low reimbursement, high labor costs, and payer mix issues.