Hospital and health system merger and acquisition activity slowed to its lowest level in more than a decade in 2025 as boards waited out federal policy fights. It came back fast.
Twenty-two transactions were announced in the first quarter of 2026, the most in any quarter since early 2020, followed by 18 more in the second quarter, according to Kaufman Hall. The deals are getting larger, the sellers are getting bigger, and a record share of them involve an organization in financial distress.
What has changed since 2024 is not the direction of travel but the motive. Fewer systems are buying to grow. More are selling to survive, trimming portfolios or handing over the keys before the 2027 reimbursement cuts land.
Here are 50 things to know about hospital consolidation and what it means for the future of healthcare:
Where the market stands
1. Hospital M&A has rebounded sharply in 2026. Kaufman Hall counted 22 announced transactions in the first quarter — the most in a single quarter since early 2020 — followed by 18 in the second quarter. That compares with eight in the second quarter of 2025.
2. The rebound follows the slowest year on record. Forty-six transactions were announced in 2025, down from 72 in 2024 and the lowest total since Kaufman Hall began tracking hospital deals in 2011. Nearly 70% of them came in the second half of the year, after activity picked up in the third quarter.
3. Deal value tells the same story. Total transacted revenue was $18.5 billion in 2025, an eight-year low, down from $39.7 billion in 2024.
4. Transacted revenue in the first quarter of 2026 reached $14.5 billion, the highest quarterly figure Kaufman Hall has recorded since it began tracking the measure in 2018. The average annual revenue of the smaller party was $657 million, the second highest since 2018.
5. Second-quarter 2026 transacted revenue was $7.7 billion, up from $1.4 billion a year earlier, with average seller size of roughly $428 million.
6. Megamergers are back. Kaufman Hall counted three in the first quarter of 2026 and three in the second, after just two in all of 2025. The firm defines a megamerger as a deal in which the smaller party has at least $1 billion in annual revenue.
7. Divestitures drove the market into 2026, accounting for 45.6% of announced transactions in 2025 and more than two-thirds in the first quarter. That share fell back in the second quarter, when six of 18 deals involved a divestiture and two-thirds involved independent systems proactively seeking a partner.
8. Financial distress hit an all-time high in 2025, with 43.5% of transactions involving a distressed party. The average smaller party in those deals had $345 million in annual revenue, indicating that strain has moved beyond small community hospitals into mid-sized and large systems.
9. Boards are moving earlier in the cycle. “Organizations are now evaluating options earlier in their strategic planning cycles, seeking complementary capabilities rather than waiting until partnerships become necessary. We’re witnessing proactive positioning over reactive consolidation,” Kris Blohm, managing director and co-leader of Kaufman Hall’s M&A practice, said in the firm’s second-quarter report, published July 13.
10. Advisers warn that rising volume brings a familiar risk. “Don’t pursue a transaction, pursue a solution,” Tracea Saraliev, a board member at Los Angeles-based PIH Health and Santa Cruz, Calif.-based Dominican Hospital, said during a panel at Becker’s Annual Meeting. “What problem are you trying to solve? Once you figure out what the problem is that you’re trying to solve, think about what is the right structure, and then the right partner. The sequence should follow in that order. I think a lot of times we have it inverted the wrong way.”
What is driving the deals
11. Federal policy is the largest single variable. The Congressional Budget Office estimates HR 1 will cut federal Medicaid spending by $911 billion over 10 years and leave 10 million more people uninsured by 2034. The nearer-term figure matters more for deal math: CBO projects 5.2 million more uninsured in 2027 than under its baseline.
12. The $50 billion Rural Health Transformation Fund offsets a fraction of that. “Hospitals are already underpaid for the care they provide, and payment cuts through the federal reconciliation process haven’t even been implemented yet,” Nicole Stallings, president and CEO of the Hospital and Healthsystem Association of Pennsylvania, told Becker’s. “Hospitals have plans for every scenario, ranging from service reductions to reductions in force, to potential consolidation and even closure.”
13. Three reimbursement changes converge in the same fiscal year. CMS’ proposed 2027 outpatient rule would pay for 340B-acquired drugs at average sales price minus 33.4%, cutting Original Medicare drug payments by an estimated $4.55 billion in year one. It would also raise the annual 340B remedy offset from 0.5% to 3% and extend site-neutral rates to imaging without contrast. Medicaid work requirements begin the same year.
12. The cushion is gone. National operating margins fell 5% year over year through the first five months of 2026, with the West down 12%. An Urban Institute and Robert Wood Johnson Foundation analysis found 39% of hospitals were already losing money before any of the federal changes took effect, and bad debt and charity care per calendar day rose 16% year over year in May.
13. Premier estimates hospitals will lose $68.6 billion in revenue across 2026 and 2027 from rising uninsurance. The Commonwealth Fund projects work requirements alone could cut operating margins by an average of 13.3% in expansion states and by as much as 29.6% at safety-net hospitals.
14. Enhanced ACA premium tax credits expired at the end of 2025, and large for-profit systems have already acknowledged underestimating the effect on their 2026 results. Kaufman Hall named that uncertainty, alongside HR 1, as the two forces weighing most heavily on capital deployment decisions.
15. Roughly 720 rural hospitals are at risk of closure, about one-third of all rural facilities, according to the Center for Healthcare Quality and Payment Reform. Becker’s is tracking rural hospital closure risks by state and a growing list of hospitals and health systems cutting jobs, among other lists.
16. The pool of acquisition targets keeps shrinking. In 2022, 68% of hospitals were part of larger systems, up from 53% in 2005, according to an April 2026 Paragon Health Institute report. Becker’s is separately tracking a growing list of independent hospitals that have moved to join larger organizations.
17. Leverage with commercial payers remains a core motivation, particularly for cross-market deals that combine systems serving distinct patient populations but overlapping payer and employer customers, part of the multi-region model many systems now pursue.
The deals defining 2026
18. The largest pending transaction is Sacramento, Calif.-based Sutter Health’s plan to acquire Minneapolis-based Allina Health. The combination would create a $26 billion nonprofit with 39 hospitals, more than 400 care sites, 18,000 physicians and 88,000 employees across California, Minnesota and Wisconsin. The systems signed a letter of intent in March and a definitive agreement in June, with closing expected by the end of 2026 pending regulatory review.
19. Allina Health would become Sutter’s Upper Midwest Division, keeping its name, brand and Minneapolis headquarters. Sutter has committed more than $2 billion to Minnesota and western Wisconsin for ambulatory expansion, specialty institutes and digital tools. Sutter President and CEO Warner Thomas would lead the combined system; Allina President and CEO Lisa Shannon would continue to lead the division. The Minnesota Nurses Association said it is reviewing the transaction’s effect on labor agreements, staffing, affordability and the use of AI in care delivery.
20. The deal is the clearest signal yet that California’s largest nonprofits intend to grow outside the state, a pattern Becker’s has tracked as systems cross state lines in 2026. Sutter named Scott Nordlund executive vice president of corporate development and partnerships to lead national M&A earlier this year, and Oakland, Calif.-based Kaiser Permanente named Jim Marcotte vice president of mergers and acquisitions.
21. Morgantown, W.Va.-based West Virginia University Health System is set to grow from 25 to 31 hospitals through its acquisition of Greensburg, Pa.-based Independence Health System and Fulton County Medical Center in McConnellsburg, Pa. WVU has committed $800 million over five years to modernize Independence’s five hospitals, including an Epic implementation and upgrades at Butler (Pa.) Memorial Hospital and Westmoreland Hospital in Greensburg.
22. Large systems are also picking up single critical access hospitals. WVU Health signed an agreement Aug. 6 with the 21-bed Fulton County Medical Center in, committing up to $17 million over seven years. Marietta, Ga.-based Wellstar Health System closed its acquisition of the 25-bed Mountain Lakes Medical Center in August.
23. West Orange, N.J.-based RWJBarnabas Health signed a definitive agreement Jan. 5 to acquire Englewood (N.J.) Health, investing about $500 million. Englewood would become RWJBarnabas’ 15th hospital. Both organizations previously had mergers blocked by the FTC: RWJBarnabas with Saint Peter’s Healthcare System and Englewood with Hackensack Meridian Health, each abandoned in 2022.
24. Atrium Health, part of Charlotte, N.C.-based Advocate Health, plans to merge with Raleigh, N.C.-based WakeMed Health & Hospitals. Atrium would invest $2 billion in Wake County, N.C., add more than 3,300 jobs over five years and build North Carolina’s largest nonprofit behavioral health network.
25. That deal drew a rare competing bid. WakeMed confirmed it received an unsolicited proposal from UNC Health days after the Atrium transaction became public and declined it, arguing a UNC Health combination would give the two systems 80% of the Wake County market. Antitrust exposure, in other words, is now a factor sellers weigh when choosing among suitors.
26. Pittsburgh-based UPMC signed a definitive agreement May 4 to acquire Steubenville, Ohio-based Trinity Health System from Chicago-based CommonSpirit, with closing expected this fall. The deal would mark UPMC’s entry into the Ohio hospital market and is a divestiture for CommonSpirit, illustrating how one system’s retrenchment becomes another’s expansion.
27. New York City’s public system is also consolidating. NYC Health + Hospitals plans to acquire Brooklyn, N.Y.-based Maimonides Health, which would receive up to $2.2 billion over five years through a state grant. The combination would create a 14-hospital public system.
28. Chattanooga, Tenn.-based Erlanger Health System signed a nonbinding letter of intent July 22 to join Greenville, S.C.-based Prisma Health, which has proposed $2 billion in investment over 15 years. The parties entered a 120-day due diligence period, and any final agreement requires approval from Erlanger’s board, the Erlanger Health Oversight Panel, Hamilton County commissioners and state and federal regulators.
29. Sioux Falls, S.D.-based Sanford Health completed its merger with Marshfield (Wis.) Clinic Health System on Jan. 2, 2025, creating a 56-hospital, roughly $10 billion nonprofit with nearly 56,000 employees across seven states. Sanford has since signed a definitive agreement to combine with Robbinsdale, Minn.-based North Memorial Health, which would anchor a new Twin Cities region.
30. Risant Health, the nonprofit created by Kaiser Permanente, has held at two systems since acquiring Danville, Pa.-based Geisinger in March 2024 and Greensboro, N.C.-based Cone Health on Dec. 1, 2024. Risant has said it plans to add three to four more community-based systems and reach $30 billion to $35 billion in revenue. Cone Health CFO Andy Barrow told Becker’s the arrangement has accelerated the system’s value-based care work.
31. Academic health systems have become among the most active acquirers. Becker’s is tracking 32 academic systems buying or absorbing hospitals, a shift that puts teaching institutions in direct competition with national for-profit operators for community assets.
32. Not every affiliation is an acquisition. Buffalo, N.Y.-based Kaleida Health became the passive parent of two independent New York hospitals in August, leaving them in control of daily finances, operations and services. Little Rock-based University of Arkansas for Medical Sciences finalized a membership substitution agreement with Pine Bluff, Ark.-based Jefferson Regional the same week.
Portfolio rationalization
33. For-profit systems have flipped from buyers to sellers. They were the seller in 11 transactions in 2025 and the acquirer in only one, a pattern Kaufman Hall called a signal of financial pressure and a shift of for-profit capital into other healthcare subsectors. Becker’s reported on 15 for-profit hospital deals last year.
34. Franklin, Tenn.-based Community Health Systems has driven much of the divestiture volume. The system sold Crestwood Medical Center in Huntsville, Ala., to Huntsville (Ala.) Hospital Health System for $450 million, closing April 1, and has planned sales of nine hospitals across Alabama, Tennessee, Arkansas and Pennsylvania for more than $1.2 billion. CHS ended 2025 with its lowest debt in more than a decade, and CEO Kevin Hammons has described the strategy as refocusing on markets where the system can leverage scale.
35. St. Louis-based Ascension has shrunk from about 139 hospitals in 2022 to roughly 90, redeploying proceeds into ambulatory assets (more on that in the next section). Recent divestitures include four Michigan hospitals to Beacon Health System and nine Chicago-area hospitals to Prime Healthcare Services.
36. CommonSpirit and Renton, Wash.-based Providence are running similar plays. CommonSpirit is transferring Trinity Health System to UPMC and selling North Dakota hospitals to Grand Forks, N.D.-based Altru. Providence is selling Queen of the Valley Medical Center in Napa, Calif., to NorthBay Health and is shutting down its health insurance arm after no bidders appeared interested in buying.
37. Kaufman Hall attributes the trend to a growing realization that “scale alone is no longer a sufficient growth or margin strategy, particularly without scale at the market or regional level.” Ms. Saraliev put it more bluntly, telling Becker’s that larger systems are “suffering from diseconomies of scale.”
38. One system is reversing ownership models entirely. Brentwood, Tenn.-based Quorum Health, a private equity-backed operator, signed a definitive agreement in May to transition its 11 hospitals in nine states into a new nonprofit, Healthside Partners. The conversion would unlock an estimated $11 million a year in 340B savings and $13 million a year in tax exemptions and fund more than $300 million in capital projects through 2029. About 75% of Quorum’s hospitals are sole community providers or critical access hospitals.
39. Quorum CEO Chris Harrison was blunt about the rationale. “All those decisions, and even this decision, are about survival and how to keep the company viable and keep the company going,” he told Becker’s.
40. The private equity hospital model remains under scrutiny after two recent collapses. Dallas-based Steward Health Care filed for Chapter 11 in May 2024, and Los Angeles-based Prospect Medical Holdings followed in January 2025. Crozer-Chester Medical Center in Upland, Pa., and Taylor Hospital in Ridley Park, Pa., closed in spring 2025, eliminating more than 2,600 jobs. Prospect Medical filed for bankruptcy last year and offloaded several hospitals. Steward Health Care became defunct after filing for bankruptcy in May 2024, but the ripple effects of its closure is still being felt. Some of its former hospitals were snapped up by health systems. Some closed and left substantial access gaps in certain communities.
Consolidation beyond the hospital
41. Some of the most consequential deals of the past year happened outside acute care. The biggest one that grabbed headlines was Ascension’s $3.9 billion acquisition of Amsurg in June. The deal added more than 250 ASCs to Ascension and made it the country’s third-largest ASC platform with more than 300 locations across 34 states.
42. Hospital assets are moving in both directions. Brentwood, Tenn.-based Surgery Partners agreed to sell its interests in two Idaho hospitals to Salt Lake City-based Intermountain Health for about $1.15 billion, an ASC operator handing inpatient assets back to a health system.
43. Payer-led consolidation continues to reshape the physician market. UnitedHealth Group’s Optum employs or contracts with more than 90,000 physicians, roughly 10% of the U.S. physician workforce, and controlled 2.71% of the national primary care market by service volume in 2023, according to a Health Affairs Scholar study. Optum has since said it will work with fewer affiliated physicians in 2026 and move toward employed or contractually dedicated arrangements.
44. Physician practice consolidation continues to outpace hospital consolidation. In 2024, 42.2% of physicians worked in private practice, down from 60.1% in 2012, according to the American Medical Association. At least 47% were employed by or affiliated with hospital systems, up from about 30% in 2012, per the Government Accountability Office, and corporate entities including insurers and private equity-backed companies employed 23%, up from 15% in 2019. Becker’s has compiled 50 statistics on the trend.
The regulatory picture
45. FTC Chair Andrew Ferguson launched a Healthcare Task Force March 20, coordinating enforcement across the agency’s competition, consumer protection and economics bureaus. In a memorandum to staff, Mr. Ferguson wrote that “consolidation and anticompetitive conduct have distorted the economic landscape in many healthcare markets.”
46. The agency’s preferred tool under the current administration is the structural remedy rather than the block. The FTC published a consent order June 2 requiring Ascension to divest seven Amsurg centers in Nashville, Tenn.; Panama City, Fla.; Tulsa, Okla.; Waco, Texas; and Wichita, Kan. Six went to an affiliate of Optum’s SCA Health. The order runs 10 years and requires prior notice of future ASC acquisitions in those markets.
47. Contracting conduct, not just deal structure, is now an enforcement priority. The Justice Department and Ohio attorney general sued Columbus, Ohio-based OhioHealth on Feb. 20, alleging the 16-hospital system used payer contract restrictions to block lower-cost plan designs. The department filed a proposed settlement June 16 that carries no fine and no admission of wrongdoing. A similar suit against New York City-based NewYork-Presbyterian, filed in March, remains pending.
48. States have become the more active regulators. At least 35 require notification of proposed mergers, closures or affiliations, and 2026 brought a new wave: Washington broadened its transaction review law and Connecticut, Vermont and California added private equity restrictions and premerger filing requirements. Meanwhile, regulators are showing flexibility where closure is the alternative: the Oregon Health Authority granted Salem (Ore.) Health Hospitals & Clinics and Stayton, Ore.-based Santiam Memorial Hospital an emergency exemption from full market review in August after finding Santiam was projected to become insolvent during the third quarter. Kaufman Hall has noted that states appear to be taking a more conciliatory approach where distress raises the prospect of a closure.
What the evidence still says
49. The research remains unfavorable to consolidation on price, and the FTC has never challenged a cross-market hospital merger in court. Horizontal mergers in concentrated markets can raise prices 6% to 65%, and hospital acquisition of physician practices raises physician service prices by an average of 14%, according to HHS data. The Paragon Health Institute puts in-market merger price effects at 20% to 50% and cross-market effects at 6% to 17%.
50. An analysis of 1,164 mergers between 2000 and 2020, published in American Economic Review: Insights, found an average price increase of 5.2% and determined that 90% of hospital markets are highly concentrated. Evidence on quality remains thin, with at least one study finding consolidated systems deliver marginally better care at significantly higher costs.
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