Hospital merger tally increases as organizations come to grips with the policy environment

Hospital merger-and-acquisition (M&A) activity accelerated in Q3 2025, indicating that executive teams are getting a handle on the prospective impact of major healthcare policies.

“Now that the One Big Beautiful Bill has passed, hospitals and health systems have more policy clarity to inform their growth strategies,” Anu Singh, managing director at Kaufman Hall, which published the report showing 15 transactions took place in the quarter, said in a written statement.

That’s two more deals than were recorded through the first six months of 2025 and is “more in line with historical observations,” the report states.

Among deals tracked by Kaufman Hall, the quarter also saw the year’s first two hospital transactions in which the average annual revenue of the smaller party was in the billions:

• Virtua Health and ChristianaCare agreed to co-found a not-for-profit health system to serve parts of four states in the Mid-Atlantic region.
• Trinity Health agreed to sell its 49% stake in a joint venture with Emory Healthcare that was launched to provide holistic, community-based nursing care.

Those deals helped drive the average annual revenue of the selling party to $591 million for Q3, which is comparable to levels seen in 2023 and 2024 and reflects “a strong recovery in deal size and renewing energy in the market,” according to the report. The number was $279.3 million in Q1 and only $175 million in Q2.

Rethinking their M&A approach

Eight of the 15 transactions tracked by Kaufman Hall were divestitures, meaning a health system sought to optimize its portfolio by selling one or more of its hospitals.

Ongoing divestiture activity “is a big deal,” Singh said in an interview before the Q3 report was released. “What it really means is the largest regional and even national health systems are continuing to actively consider: What markets should we be in and what markets should we exit?”

The trend speaks to a deemphasis on scale as a driving force in healthcare transactions. Health systems are shifting their focus to strategic alignment and to ensuring they have the resources, capabilities and intellectual capital to thrive in each of their markets.

 “If you overexpanded [with] scale as the motive, and now you’re realizing the capabilities and resources in each one of those micro-markets is a little bit different, and maybe you don’t have the formula for success [in a market], I think you’ve got to exit those markets and redevelop a path to [assess] where you’re going to grow and be most efficient,” Singh said.

He expects more organizations to conclude that “strategically motivated M&A is always going to be better than scale-driven M&A. There may be safety in scale, but there’s long-term sustainability in strategy.”

Healthcare partnerships over acquisitions

In a complex strategic environment, health systems can be expected to increasingly examine partnerships as alternatives to acquisitions in efforts to bolster their positions.

“It’s not because partnerships are some panacea, it’s that you have to pursue every route possible,” Singh said.

In Q3, according to Kaufman Hall’s tracking, health systems struck affiliations with:

• Outpatient care companies (Baylor Scott & White with Geode Health)
• Labs (Corewell Health with Quest Diagnostics)
• Retail outlets (Sanford Health with Lewis Drug)
• Managed care (Renown Health with Kaiser Permanente)

Hospitals and health systems are “looking to diversify where they’re at and maybe fill in that care continuum a little bit more,” Singh said. “So they can control and influence overall cost and quality of care, not just on the acute [side] or in the ambulatory episode.”

Other services that may be enhanced through joint ventures, potentially in conjunction with for-profit entities, include urgent care and hospital-at-home, Singh said. The viability of the latter might hinge on a restoration of the Medicare payment waiver that has expired at least until Congress agrees on a government funding bill.

Organizations that project to be most impacted by cost and reimbursement pressures may settle on a traditional M&A strategy as the most realistic path forward, given their relative lack of bandwidth to focus on healthcare transformation and redesign, Singh said.

Providers look to enhance their offerings

Partnerships often bring together parties from different healthcare sectors, but horizontal integration also will pick up, Singh predicted, such as for providers that operate their own health plans in Medicare Advantage.

“They may want to go deeper in that model and say, look, this is a way for us to figure out how to achieve that intellectual capital, that resource to think about how to reduce overall costs,” Singh said.

He also sees reason for optimism about the prospects for strategic collaboration between providers and health plans, saying forward-looking organizations on each side have found avenues to work together in pursuit of better care and payment models.

“Right now, neither segment [providers nor health plans] is really doing all that well,” he said. “We may have reached a point in the industry lifecycle where the approach of taking from one to the other is archaic.”

The Risant Health collaborative among Kaiser Permanente, Geisinger and Cone Health may simply be an advanced version of concepts that can be seen below the surface in various markets, Singh said. A key difference with Risant is that it involved a formal transaction rather than just a partnership, possibly helped by the previous experience of Geisinger and Cone in the health plan space, allowing them to accelerate strategic initiatives.

Singh said it’s notable that Kaiser has not merely dropped its well-established business model onto its partners.

“It’s actually Kaiser reengineering, recalibrating their approach also to say, ‘We have a greater [chance] for success here if we’re looking at doing this with a health system that’s already in that market and thinking our way,’” he said.