Why analysts now expect fewer hospital mergers

At the beginning of the year, hospital industry analysts expected to see more mergers and acquisitions in 2025.

After all, there had been a steady increase in mergers over the past couple of years, with 72 announced hospital mergers in 2024, up from 65 deals in the previous year. Plus, analysts pointed to the likelihood of more relaxed reviews of mergers with President Trump’s administration, and potentially a more favorable tax climate.

However, only a handful of deals have taken place this year, and analysts now say they expect fewer hospital mergers and acquisitions in the coming months.

With an unpredictable economic climate, health systems that may have been looking to acquire additional hospitals may now be more inclined to wait and hold onto their money, analysts say. Some organizations may also have less money to spend.

Hospitals are worried about how much federal aid they will get from the federal government. They’re concerned about President Trump’s tariffs, which have been paused on most countries but are in effect on China, a major producer of medical supplies. And there’s uncertainty in the markets, which could impact health systems’ investments.

Combine all of those factors, and hospitals may be more cautious about mergers, says Mark Pascaris, senior director and analytic lead for nonprofit healthcare at Fitch Ratings.

“I think you're going to see plenty of health systems say, ‘There's a lot of uncertainty out there. We need to put the brakes on.’ That is absolutely a conversation,” Pascaris tells Chief Healthcare Executive®.

Analysts don’t dismiss the possibility that some health systems may move forward with merger plans, but analysts say the outlook for hospital mergers is much harder to predict than it was just a few months ago.

• Read more: Hospitals are facing what they dread: Uncertainty

Mounting financial pressures

In the first quarter of 2025, only five hospital mergers were announced, according to an analysis from Kaufman Hall, the healthcare consulting firm. It’s the fewest hospital mergers in a first quarter since at least 2018. Four of the five deals involved a hospital in financial difficulty, and distress could drive more deals.

The slowdown in merger activity is being seen beyond the hospital sector. Across all industries, there were 6,955 mergers and acquisitions in the first quarter of 2025, which represents a 20-year low, according to an analysis by Ion Analytics.

If hospitals see reduced federal aid or see higher prices on medical supplies, some smaller systems may find themselves in serious financial distress and may be looking to join a bigger organization. Greater financial pressures could lead some hospitals that had balked at mergers and wanted to remain independent looking for a partner to stay afloat.

If there are downturns in federal aid to hospitals, including the possibility of cuts to Medicaid, some smaller hospitals and some rural providers are going to be fighting to stay open, analysts say.

“There are a lot of independent health systems and hospitals out there, and frankly, even some small systems that, maybe a decade ago, would never have considered joining another health system,” Pascaris says. “And now, just out of necessity, they have to be open to that conversation.”

However, hospitals that now are open to discussions about mergers may find it harder to find a partner, says Kevin Holloran, senior director and leader of the nonprofit healthcare sector at Fitch Ratings.

“I think if you're that smaller, regional place, unless you're bringing something very interesting, very material to the table … I think there are a lot of people who say, ‘Hey, thanks, but no thanks,’” Holloran tells Chief Healthcare Executive®.

Smaller hospitals or systems looking to join larger organizations will have better odds of finding a partner if they can bring some strong selling points, such as an appealing geographic market, specific skills, strengths in specialty care, or a good mix of payers, he says.

Some larger health systems regularly get calls from struggling hospitals seeking partnerships, and typically those overtures are rejected, Pascaris says. So unless hospitals really have something enticing to offer a larger system, it may not be easy to find a partner.

“Asking for help is not sufficient right now,” Pascaris says. “You have to bring something to the table.”

Being more selective

Some academic medical centers have been more active in acquiring community hospitals over the past couple of years, and that could continue, says Steve Wasson, chief data and intelligence officer for Strata Decision Technology.

“They’re picking up facilities that really aren't academic sites,” Wasson says.

However, academic medical centers are facing the prospect of cuts in federal research funding, with the National Institutes of Health already looking to cap spending on administrative costs that support scientific studies.

Analysts acknowledge that there could be an uptick in merger activity. As some larger health systems look to enter different markets, they could move forward even with the uncertainty in the economy, especially if some smaller hospitals or organizations look for partners.

For hospital systems with deep balance sheets, Pascaris says it “may be the best time to leverage that and look for opportunities to deepen your position within existing markets, or to add new markets that you think would be accretive to your portfolio. This is probably the time to do it.”

Hospital industry analysts say the uncertainty today rivals the height of the COVID-19 pandemic, which led to a slowdown of merger activity.

In its analysis of hospital mergers in the first quarter, Kaufman Hall said, “revival of activity in 2025 will likely be dependent on a restoration of some certainty about the nation’s economic direction and the financial stability of the healthcare sector.”

In an interview with Chief Healthcare Executive®, David Wildebrandt, a managing director at BRG, said more hospitals may look for partners to stay afloat. But he also said health systems may be less “opportunistic” and may be more hesitant about acquiring other hospitals.

“The people that are the purchasers are going to be more selective,” he says. “It’s going to take more working capital and take longer to get profitable. So you could see them being very picky about the deals.”