Hospital M&A forecast to increase in 2025

Mergers and acquisitions (M&As) between hospitals are expected to increase in 2025, and non-hospital deals could jump even more, says an advisor in the field.

“Overall activity is going to increase,” said Anu Singh, managing director for Kaufman Hall, which advises hospitals on such deals.

In 2024, there were 72 hospital M&As, which was the most since the 79 deals in 2020. 

Among M&As driving the volume resurgence are two types of selling entities: financially distressed hospitals and stable organizations seeking new capabilities and resources for future growth, said Singh.

One recent change was the types of distressed organizations looking for acquisition; they are no longer mainly small, rural hospitals.

“We’re seeing organization in urban, suburban markets with a larger revenue base go down that path of having to do something,” Singh said. Post-pandemic, such organizations said, “we came back but maybe our volumes aren’t there and our expenses are a little bit higher.”

The second main type of deal involves sellers that “look to the future and start to realize that either the level of investment, the medial level of execution risk or maybe just the dearth of management bandwidth is going to create an environment where they are going to look for capabilities and resources that augment what they are doing now.”

Such arrangements include health plans merging with or joint venturing with health systems or health plans acquiring physician groups and practices or private equity acquiring hospitals.

“When you look at capabilities-based [deals], you can move away from system plus system as the default and instead you get into this terrain of arrangements with different capabilities and resources brought to the fore,” Singh said.

Non-hospital M&A

He also noted that other types of acquisitions by hospitals and health systems are much more common and will see larger increases. The volumes of such deals are not known because participants usually are not required to publicly announce them.

“There’s a significantly higher number of partnerships and ventures that are taking place than just the hospital-hospital M&A data would suggest,” Singh said about deals involving physician practices, ambulatory surgery centers, labs, urgent care centers and inpatient rehab facilities, among others.

A November survey of 500 executives from various types of healthcare organizations found 72% expect healthcare M&A levels to be higher in 2025.

“What we do know from working with our clients: that’s representing an even faster growing area of activity right now, Singh said.

COVID-19 recovery

The expected 2025 increase in hospital M&A, specifically, also is part of a continued recovery of M&A to pre-pandemic levels. There were 90 deals in 2018 and 92 deals in 2019.

“We saw a significant pause button being pressed at the beginning of COVID and rightfully so,” said Singh. “So there is still room to grow in the industry using precedent as our guide.”

Among organization types, he expects not-for-profit (NFP) acquirers to continue to lead overall volumes.

In 2024, 34 NFP organizations acquired other NFP organizations and 23 NFPs acquired for-profit organizations, according to a Kaufman Hall report. Only 10 for-profit organizations acquired other for-profit organizations, and five for-profit organizations acquired NFP organizations.

Singh said for-profit entities were expected to continue to be split between those that are “growing and actively acquiring and others that are re-evaluating their portfolios and are net sellers in the market right now.”

COPA role

Geographic divergence in deal volumes in 2025 will likely continue to be driven by state-specific policies around payment and regulations, he said.

“The other thing that happens in regions is one or two transactions can happen and spur additional activity,” Singh said.

Nineteen states have implemented Certificate of Public Advantage (COPA) programs, which allow hospital mergers that may otherwise draw opposition from the Federal Trade Commission (FTC).

Singh said it’s too early to judge their overall effect on hospital M&A. Hospital consolidation critics have highlighted higher prices that can occur after deals approved through the COPA process. But Singh said it’s much harder to quantify the positive effects of such deals.

“That’s very unfair because there are organizations doing things as a result of partnerships in the community that they could never have done before,” Singh said. “Because it can’t be measured, described and be as tangible as just pulling one data set, and as a result we don’t have a balanced dialogue around those arrangements.”

More Risants?

Singh expected more arrangements to emerge like Risant Health. Oakland, California-based Kaiser Permanente formed Risant Health in 2023 as part of its broader strategy to create a multisystem, multiregional value-based care organization. It has since acquired 10-hospital Geisinger Health and the four-hospital Cone Health in North Carolina.

“Risant is an opportunity to engage with an organization [Kaiser] that is one of the biggest and most sophisticated financers of care or operators of a health plan in the country,” Singh said. “I appreciate there’s geographic expanse between the organizations but what is driving that is not so much geography and more so the capabilities that complement” each other.

“I suspect that formula to be enticing to other health systems as well,” Singh said. “They’re going to have to test that against their market and their strategic plan and objectives. For some, that’s going to mean moving to models like Risant.”

Anti-trust outlook

Less impact in M&A volume was expected to come from anti-trust oversight. Some industry observers said they expect large increases in M&A volumes under the Trump administration because it was seen as more friendly to business, generally.

“I’m not sure that we saw a significant difference in the level of scrutiny in the first Trump presidency and the Biden presidency,” Singh said. “I’m not seeing anything to make us believe that the hospital M&A scrutiny that’s out there is going to be reversed by the second Trump presidency.”

Instead, there may be nuance differences, such as the FTC dropping its collection of data assessing the outcomes of COPA arrangements.

“There might be similarities in approach and minor differences in focus,” he said.