Hospital merger reviews miss key points, report says

When federal or state regulators review planned hospital mergers, they weigh the potential of higher prices for patients due to reduced competition.

Regulators are often troubled by planned hospital consolidations involving two organizations in the same market. The Federal Trade Commission has often taken action to stop such deals, leading hospitals to abandon their plans.

But a new report from Kaufman Hall, prepared for the American Hospital Association, argues that evaluations of hospital mergers are not considering critical factors.

Regulators need to account for the fallout of hospitals that suffer losses or reduce services if a planned deal is dropped, particularly if the hospitals are in vulnerable communities, the report states. Plus, a large portion of hospital patients are covered by government programs that wouldn’t be affected by a merger.

Chad Golder, president of the American Hospital Association, wrote in a blog that regulators should also weigh the consequences to a local hospital that is blocked from joining another organization.

He wrote, “The public discourse on hospital consolidation should ask a question that too often receives insufficient attention: What is likely to happen if a transaction does not occur?”

Financial impacts

Many hospitals that were blocked from merging with other organizations saw their finances decline, according to the report, which was released earlier this week.

Among 88 hospital deals that collapsed, the hospitals that weren’t acquired saw their operating margins drop by a median of 52%, with their cash on hand falling by 38%, the report states.

“Those measures bear directly on a hospital’s ability to maintain services, retain caregivers and invest in facilities and equipment,” Golder wrote in the blog.

Dropping services

Kaufman Hall examined the ripple effects of 12 hospitals that were part of merger plans that were upended by regulators.

Half of the hospitals closed a facility, while one third reduced their staff or cut some services, according to the report.

In many cases, these hospitals are in vulnerable communities, the report notes.

Payer mix

The FTC and state regulators have moved to block hospital deals involving entities in the same county, region or market, if they see the potential for higher prices for consumers. If only two hospitals are in the same county, and they are planning to merge, regulators have said patients with commercial insurance will likely see higher premiums.

But the Kaufman Hall report says regulators are neglecting a key consideration: many of their patients are covered by Medicare and Medicaid. Prices for Medicare and Medicaid wouldn’t be affected by a merger.

The report points out that roughly 60% of patient days involve patients covered by Medicare, Medicaid, or Medicaid Advantage, with MA plans having a growing impact.

“None of these patients is likely to experience any pricing impacts from hospital M&A transactions, as the prices for services provided to Medicare and Medicaid patients are directly set by government payers or, in the case of Medicare Advantage and Medicaid managed care, are based on government-set rates,” the report states.

More mergers

More hospital mergers are happening this year, with 40 announced hospitals and mergers in the first half of the year, according to Kaufman Hall data. In all of 2025, there were 46 hospital consolidations, which was the lowest number in 15 years.

Industry analysts have said that some health systems may have paused plans to pursue mergers last year, until they had a better handle on President Trump’s healthcare policies. Now, analysts see a greater interest in mergers among health systems.

More criticism

Members of Congress have chided hospitals over rising prices. Some lawmakers, Republicans and Democrats alike, have pointed to hospital mergers as a factor in higher hospital costs.

During a House Ways & Means Committee hearing in April, U.S. Rep. Darin LaHood, a Republican from Illinois, said his constituents are worried about hospital consolidation.

“I regularly hear in my own district from families and employers and providers across Illinois who are concerned about hospital consolidation, higher facility fees and billing practices that are increasingly difficult for patients to navigate or to understand,” LaHood said.