Kaufman Hall Reports Hospital M&A Decline in 2025 Amid Financial Stress and Policy Uncertainty

Hospital and health system merger and acquisition activity declined in 2025 as providers navigated ongoing financial headwinds and heightened policy uncertainty, according to a recent report from Kaufman Hall. The sector recorded 46 announced transactions during the year, a notable decrease from the 72 deals reported in 2024, reflecting a more cautious dealmaking environment across the provider landscape.

Deal activity was uneven throughout the year, with nearly 70% of transactions announced in the second half of 2025. Kaufman Hall attributed the slow start to uncertainty stemming from federal policy debates in Washington. Early in the year, lawmakers considered sweeping tax and healthcare policy changes that created hesitation among hospital operators and boards. By midyear, clarity began to emerge following the passage of the One Big Beautiful Bill Act, which introduced historic reductions in federal healthcare spending, particularly affecting Medicaid.

These policy changes have raised concerns about coverage losses and revenue pressure. The Congressional Budget Office has projected that millions of individuals could lose insurance coverage under the new law, while the expiration of enhanced Affordable Care Act subsidies at the end of 2025 is expected to further increase uncompensated care. In parallel, newly introduced tariffs have prompted health systems to reassess supply chain costs and inflationary risk.

Despite these challenges, transaction volume accelerated later in the year as providers adjusted to the evolving policy environment. Fifteen deals were announced in the third quarter, followed by 17 in the fourth quarter. Even so, total transacted revenue for 2025 fell to $18.5 billion, the lowest level since 2018, largely due to a continued decline in the size of acquired organizations. More than half of that revenue was generated by transactions announced in the final quarter.

Financial distress remained a central driver of consolidation. A record 43.5% of transactions involved at least one financially distressed party, underscoring persistent strain across the sector. The average annual revenue of the smaller party in distressed deals was $345 million, suggesting that financial pressure has extended beyond small community hospitals to mid-sized and larger systems. Kaufman Hall cautioned that overall market stress may be understated, noting that “the exclusion of these transactions means that the full extent of market stress is likely understated, particularly in rural and underserved communities, underscoring the fragility that persists beneath headline stabilization metrics.”

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