Hospital merger activity rebounds in first quarter

After a period of low activity last year, more hospitals and health systems are pursuing mergers and acquisitions.

In the first quarter of 2026, there were 22 announced hospital mergers and acquisitions, according to data released Thursday by Kaufman Hall, a healthcare consulting company. That’s the biggest first quarter number since 2020, Kaufman Hall says.

Early in the year, the number of hospital deals is just about half of the total for all of last year, reflecting both a busy quarter and a slowdown in deal-making a year ago. In 2025, there were 46 announced hospital mergers or acquisitions, which was the lowest number in 15 years.

Analysts say much of the pause in merger activity was due to health systems wanting to get a handle on President Trump’s policies in his second term, particularly in the first half of the year. Last year, there were only five hospital mergers in the first quarter. Analysts have said they expect an uptick in hospital merger activity this year, but have been unsure about the size of the comeback.

Moving carefully

Hospitals are eyeing the possibility of looking at mergers and acquisitions, but they are doing so carefully, says Carl Boccuti, head of commercial specialty banking leasing channels at TD Equipment Finance.

He tells Chief Healthcare Executive® that many health systems are focusing on keeping cash on hand, particularly in light of financial headwinds. But he says there are health systems that certainly are weighing strategic opportunities.

“While they're all cautious in terms of expansion mode, they realize there could be opportunities for some of the other not-so-financially stable players, potentially being an acquisition target for them,” Boccuti says.

Boccuti also says larger hospital systems may look to acquire systems in different areas.

“You've got the big multi-systems going out of the state, where, in the past, you didn't, and most of the nonprofits stayed within their tri-state area or direct state area,” Boccuti says.

One especially noteworthy deal emerged in the first quarter. Sutter Health and Allina Health announced plans to come together to create a 39-hospital system. Assuming the deal is finalized, Allina would become the Upper Midwest Division of Sutter Health.

The planned Sutter-Allina merger is a deal with systems in different regions, with Sutter Health based in California and Allina’s headquarters in Minnesota. It follows the blueprint of deals such as the merger of Atrium Health and Advocate Aurora Health to form Advocate Health, and Kaiser Permanente’s acquisition of Geisinger in Pennsylvania and Cone Health in North Carolina.

Also in March, the Freeman Health System, based in Missouri, announced it had reached a deal to buy four Arkansas hospitals from Community Health Systems, Inc. in a $112 million deal.

Wary of turnarounds

Vince Vickers, the U.S. healthcare advisory leader for KPMG,told Chief Healthcare Executive® in a March interview that he saw the potential for larger health systems to look for acquisition opportunities in different markets.

“The growth that we see is a little different,” Vickers said. “I would say it's more geographic expansion. So what are some other markets, key markets that are available to them to be competitive in, and where can I buy not a small, rural system, but another pretty sizable system that may even be of equal size?”

Some larger systems are less interested in buying hospitals or health systems that are in serious financial turmoil.

“They don't want to put in the level of work that it may require at those smaller systems,” Vickers says.

Vickers says there is also less appetite for troubled systems and rural hospitals that are struggling financially. He says it may have been better for some rural hospitals to find partners years ago, when larger systems were more willing to acquire organizations in trouble.

“I don't know ultimately what their answer is going to be. It's going to be a challenge for them. They mostly missed that kind of acquisitive period that they could have been involved in,” he says.

Last year, a good number of deals involved organizations in financial trouble. Nearly half (43%) of the hospital mergers that took place in 2025 involved an organization in distress, according to Kaufman Hall.

But analysts also say that health systems will pursue deals with systems in financial trouble if the market has some value. And again, it depends on how much effort is required to turn around the system.

‘Writing on the wall’

Some hospitals and systems that are facing headwinds may be more receptive to seeking out a partner before they become less desirable to larger systems, Boccuti says.

He says that there is some urgency for systems as they face looming cuts in Medicaid from the HR 1 tax package President Trump approved last year. Healthcare leaders have said they fear some hospitals may have to reduce services or close facilities.

“They are definitely looking for somebody to grab on to, because they can see the writing on the wall potentially,” Boccuti says.

Some health systems are also divesting hospitals to shore up their finances or to pull back from markets where they aren’t in a leading position. Community Health Systems has moved to sell its hospitals in Pennsylvania and in some other markets.

Courtney Midanek, managing director and co-leader of Kaufman Hall’s M&A practice, said in a statement that the first quarter does show more willingness to pursue deals after the “market-related uncertainty of early 2025.”

“Organizations are increasingly aware that partnerships can help them face future challenges and opportunities,” Midanek said.

Hospitals continue to see higher expenses, in terms of labor and drugs and other supplies, and they are also seeing more patients who are uninsured or underinsured.

• Read more: Why hospitals must prepare now for Medicaid cuts