M&A Expert: The Landscape of Mergers and Acquisitions Is Clearly Changing

The leaders at the Chicago-based consulting and advisory firm, Kaufman Hall, a Vizient company, in October released their latest report on healthcare mergers and acquisitions, their “M&A Quarterly Activity Report: Q3 2025.”

The report’s authors, Kristofer Blohm, Courtney Midanek, and Anu Singh, noted that, “Following a modest uptick in hospital and health system M&A activity in Q2 2025, with eight announced transactions, Q3 continued to trend upwards, with 15 transactions announced—an activity level more in line with historical observations. This trend suggests that policy clarity following passage of the One Big Beautiful Bill in July is beginning to (re)shape transaction strategy.”

What’s more, they wrote, “Continuing trends that we reported in our year-end 2024 report, eight of the 15 transactions were divestitures (53 percent of announced Q3 transactions) and eight involved a financially distressed party (also 53 percent of announced Q3 transactions). These data points reflect an ongoing realignment in transitioning or relatively less attractive market models, as well as continued financial and operational headwinds for the industry. At the same time, Q3 saw the first two mega mergers of 2025, and a return to more robust figures for total transacted revenue and seller size.”

Shortly after the release of the report, Anu Singh, a managing director at Kaufman Hall, spoke with Healthcare Innovation Editor-in-Chief Mark Hagland, regarding his and his colleagues’ findings in the report. Below are excerpts from that interview.

Let’s start at a 40,000-feet-up view: what do you see as the most important trends emerging right now?

It’s important to look at our broader time series to see what’s going on. But now we are up to 15 transactions in the quarter, and that is quickly approaching pre-pandemic levels. We made note of a variety of large systems that are exiting some markets and buying into new markets. We’ve had a significant number of hospitals that are financially distressed seeking new partnerships, and that’s at a higher level. And then we’re seeing some hospital systems that aren’t feeling compelled to partner that are doing so anyway. They probably are seeing real possibilities.

So we’re running the full gamut here. And while we continue to be able to track very clearly and discreetly all the hospital M&A transactions, urgent care centers, lab companies, private developers, and others are now involved at a higher level. And while regulatory requirements force a disclosure of motives, there are many elements.

It seems to me that many hospital and health system leaders are experiencing some anxiety now because of policy issues. And how might those elements play into the M&A landscape and potential activity?

Here’s what I would say: organizations that are in financial distress or experiencing more financial distress than in the past, should be more concerned. Why is that? We used to operate in an environment in which tax-exempt debt was generally available to all levels of credit of mission-based organizations. But now, that capital may not be available to some. Lisa Goldstein, one of my fellow partners at Kaufman Hall, who was at a ratings agency, pointed out to me that agency rating downgrades are operating at a ratio of 3 or 4 to 1 to upgrades. Number two, from an operating standpoint, we had a capital markets crisis, a recission, and government-based challenges.

But today, we’re seeing labor costs, supply costs, costs for imported goods nd services, rising to the point where such high cost levels are becoming semi-permanent, and may become permanent. So the capital fix isn’t there, the cost fix isn’t there. And some organizations are getting to the point of bankruptcy or closing certain services, and are finding that some distressed hospital organizations may not find a buyer. So all three of those solution sets are at least more challenged than in the past. So that’s a reason for anxiety for those approaching or living in, some level of financial distress.

In other words, some distressed standalone hospitals may not be bought up by large systems after all?

Every market is different, but in certain markets, being the community hospital that’s always been there for the past 80 years, doesn’t mean you’ll be able to survive the next 15-20 years.

Per that, I spoke recently with the CEO of a hospital, 70 percent of whose revenue is already coming from the outpatient clinic space. So for organizations with a high reliance on the outpatient sector, all of those things are going to be looking to be pushed out of the inpatient sector. So organizations have to be really cognizant of what their core business is. That client I spoke with yesterday, a $250-million organization, and the question was, how will you prepare your organization to meet the future? And if they make the pivot towards outpatient care, they may get past the inpatient hospital basis for survival. We sometimes look at community hospitals and leap to say, they’ve lost market share. Perhaps, but in certain markets, the referral markets and consumer preferences might be compelling them towards different realities. It’s not necessarily the failure of the community hospital per se. Each hospital’s solution set will be different.

Some might have a credible plan to increase inpatient services, while others might have to shift more towards outpatient. The key is that you must understand what’s happening in your marketplace. And those hospital leaders will know what’s going on in their communities, and preserve and maintain the best relationships with their communities.

What will the next few years look like in this landscape?

One trend that will not slow down, I think, is that we are headed towards transformation and not just consolidation. There’s a lot of confusion around the idea that this is a consolidating industry. But that’s actually not really what’s happening. We see organizations growing with complementary capabilities and resources in mind. Organizations are getting into value-based contracting and etc. Another organization is diving into data analytics to figure out what they’re doing. Are there Lean principles we can adopt?

And if you’re not going to get to where you need to get to organically, you’re going to have to look at partnership or collaboration. What we’re seeing is that health systems are not just growing to grow; they’re looking at potential partners to find more additive types of partnerships and collaborations. So then we’re longer pursuing size, we’re pursuing specialty. How do you get better at what you’re doing? And how do you prevent more problems from happening? That’s where we’re headed, and it will only accelerate.

In our reporting, we’re seeing a growing gap between haves and the have-nots in terms of being able to leverage advanced analytics for change. What’s your view of that gap?

I believe we’re already halfway through that transition; and the organizations that have already been using advanced analytics, will stay in the lead. Also, when we got into the Internet, we saw incredible advances: organizations went into offsite storage and data mining, for example. And looking back at the old HMO-based claims management, the health plans had all the data. Where are we now? Because those old mainframe, disaggregated systems came together in cloud-based platforms, because of solutions like those from Oracle Cerner, organizations are becoming more agile. To date, the data has told us what has happened. And now with AI, you’re looking at concepts, trends, and expectations, and looking towards the future. And some organizations have gotten big in the Information Age.

But what I don’t know yet, I don’t think anybody knows yet, is whether the potential of AI will reach everyone. Perhaps organizations will be able to collaborate or partner in ways they were prepared for. You’re right in that AI will be significant; but there may actually be more accessible ways for smaller organizations to be able to access and leverage as well.

Is there anything you’d like to add?

I think this core-business component is really important; no organization should be saying, whatever we’ve been doing in the past five or ten years, we should just be doing in the future. We all have a fiduciary duty to look at this changing operational environment and to test what is true or not. It’s possible that prior strategies could work, but that thesis has to be tested; and odds are that changes will have to be made.