After a sluggish few years, hospital and health system dealmaking is gearing up for a resurgence in 2025 — driven by labor headwinds, tightening margins and the urgent need to modernize, according to BRG’s “2025 US Healthcare & Life Sciences Transactions Outlook” report published March 31.
Eleven takeaways from the report:
1. Deal activity to accelerate: 82% of hospital and health system executives surveyed expect increased transaction activity in 2025, signaling a rebound from the M&A slowdown of recent years.
2. Hospital closures create acquisition opportunities: Struggling nonprofit hospitals, especially in states like California and New York, may present acquisition targets as consolidation becomes a strategy for survival and scale, according to the report.
3. Labor pressures driving consolidation: Workforce shortages and rising labor costs are the top reasons providers are exploring mergers, partnerships and divestitures — particularly in home and community-based care.
4. Hospitals returning to core services: Many systems are reevaluating or shedding underperforming vertical business lines in favor of bolstering high-margin, foundational services through strategic partnerships or divestitures.
5. Strategic partnerships overtake traditional M&A: Joint ventures and collaborations with payers, private equity firms and digital health startups are picking up steam, according to the report. These partnerships aim to expand technological capabilities and improve care delivery models.
6. Technology-centric transactions are on the rise: 84% of provider respondents anticipate engaging in AI or cybersecurity-related transactions. High-priority areas include clinical decision support, revenue cycle management and patient engagement platforms.
7. Regulatory uncertainty still a top concern: Less than 5% of providers expressed no concern about regulation. Key worries include reimbursement compliance, data privacy and looming changes to state-level antitrust scrutiny.
8. Primary care and hospital settings are transaction hotspots: Over half of provider respondents identified adult/pediatric primary care and hospital-based services as priority areas for deal activity, reflecting a focus on core clinical functions and margin-positive services.
9. Private equity interest remains strong: Despite scrutiny, private equity capital continues to flow into outpatient services and specialty care such as nephrology and ambulatory infusion services.
10. Access to capital may improve: Declining interest rates and potential policy shifts under the new administration could ease capital access for health systems, enabling more organizations to reinvest or pursue strategic growth.
11. Medicare Advantage enrollment trends shape market dynamics: Decreasing Medicaid rolls and the rise of Medicare Advantage are shifting the patient mix and may drive provider interest in aligning with payers through VBC-focused models.
Editor’s note: BRG’s online survey, conducted in November and December, included 150 executive or board-level respondents: 50 each from healthcare providers, payers and life sciences/pharmaceuticals. All participants had insights into their organization’s corporate decision-making. Responses were anonymous, and some data totals may exceed 100% due to rounding or multiple-response questions.
Click here for more details on the BRG report.
