Hospital and health system merger and acquisition activity ended 2025 with momentum expected to continue well into this year as drastic cuts to Medicaid spending under President Trump’s One Big Beautiful Bill Act loom.
A new analysis from Kaufman Hall, a Vizient company, said a total of 46 hospital and health system transactions were announced in 2025, a decrease from 2024, but deals are already picking up. Merger activity “picked up in Q3 and showed sustained momentum with 17 announced transactions in Q4,” Kaufman Hall said.
Even more merger and acquisition activity is expected this year and into the future as reductions in federal spending loom and financial distress on healthcare providers intensifies thanks to drastic cuts from the One Big Beautiful Bill Act that Donald Trump signed into law last year. That legislation is projected to reduce federal spending by about $1 trillion over a decade.
“2025 hospital and health system M&A activity started slow given the policy and market uncertainty, but momentum returned by the end of the year,” said Anu Singh, Managing Director at Kaufman Hall. “Some of the most interesting activity in 2025 occurred outside of hospital and health system transactions, with organizations making significant deals in acquiring ambulatory care, lab services, and behavioral health providers. We anticipate this trend to continue in 2026.”
Already in the Chicago area, hospital mergers are in discussion. California-based Prime Healthcare last week said it was buying Franciscan Health and an affiliated physician group in south suburban Olympia Fields. This comes after Prime last year purchased eight other Illinois hospitals last year from Ascension Health.
“While all three rating agencies (Moody’s, Fitch and S&P) had issued stable or neutral outlooks for not-for-profit hospitals and health systems in 2025 (and have maintained those outlooks for 2026), financial distress continued to be a persistent driver of transaction activity throughout the year, with the percentage of transactions involving a financially distressed party hitting a new record high of 43.5%,” Kaufman Hall said in its report.
The percentage of financially distressed hospitals being a part of merger activity has been steadily increasing since 2022 and will likely continue into 2026, Kaufman Hall said in its analysis. The most recent data from Kaufman Hall’s most recent National Hospital Flash Report showed hospital financial and operational performance declined in November, with lower volumes across all services.
“While month-to-month hospital performance softened in November, on a year-to-date basis, revenue and margins are still strong compared to previous years,” said Erik Swanson, Managing Director and Data and Analytics Group Leader at Kaufman Hall. “The continued rise in expenses requires attention. For hospital leaders, managing overall spend as patient volumes fluctuate is an ongoing challenge.”
