Doing more with less isn’t new. But, for many hospitals, doing it alone is no longer sustainable.
Demand for care continues to rise while labor and supply costs climb. At the same time, reimbursement rates from Medicare, Medicaid and increasingly commercial insurers lag behind inflation—leaving hospitals to bridge the gap.
With the passage of the One Big Beautiful Bill Act (OBBBA), that gap just widened. Hospitals now face deep cuts that will strip away billions in federal support. Millions of people will lose Medicaid coverage, yet hospitals will continue treating these patients—without reimbursement.
For providers already operating on razor-thin margins, these cuts aren’t just another headwind—they’re a direct threat to access and sustainability, especially in rural and underserved areas.
Add in new tariffs on medical supplies, the potential expiration of enhanced Affordable Care Act premium tax credits, the continued surge in payor denials and the implications become clear: Scale is no longer a strategic advantage—it’s a lifeline.
While hospital consolidation often draws scrutiny, the full picture deserves a closer look. When done right, M&A is not about monopolizing markets—it’s about building the operational and financial strength to negotiate fairly, operate efficiently and invest meaningfully in patient care.
Cost pressures driving consolidation
One of the most underappreciated forces driving hospital consolidation is the growing imbalance in how care is reimbursed. Commercial rate increases typically fall in the 3% to 5% range—well below what’s needed to offset government shortfalls and rising costs.
At the same time, hospitals are facing a sharp rise in administrative denials, delayed payments and restrictive prior authorizations. These tactics tie up cash flow, slow care delivery and increase costs. According to the American Hospital Association, commercial payer denials rose over 20% in 2023, while Medicare Advantage denials surged nearly 56%. Claim processing times also increased by 20%—placing even more strain on hospitals already operating under tight margins.
For independent hospitals and smaller systems, it’s an increasingly uneven playing field. The largest insurers have consolidated national reach and deep resources. Partnerships give hospitals the scale to level the negotiating table, invest in infrastructure and manage today’s administrative complexity.
But scale alone isn’t the answer. Integration must be purposeful.
When thoughtfully executed, consolidation can improve the way care is delivered. Standardized clinical protocols reduce variation and improve outcomes. Shared electronic health records enhance care coordination. Combined purchasing power reduces supply costs. And broader footprints allow health systems to bring specialty care to rural and underserved areas that couldn’t support it alone.
Integration also enables investment in workforce development and technologies that streamline administrative tasks and make care safer—a critical need as healthcare workers continue to shoulder the burden of doing more with less.
From scale to impact
While some worry that consolidation reduces competition and drives up prices, studies show that when integration is clinically driven and transparently managed, it can reduce costs and improve outcomes. For example, a Kaufman Hall analysis found that nearly 40% of hospitals added new services following affiliation, with a significant number expanding access to specialties in rural and underserved communities.
Research from the American Hospital Association shows a 3.3% reduction in operating expenses per admission and a 3.7% decrease in net patient revenue per adjusted admission for acquired hospitals—clear evidence that integration, when done right, can yield efficiencies and improve patient care. These are the kind of advantages health systems need to navigate today’s regulatory reforms and financial headwinds.
But achieving these results requires more than just scale. It requires careful planning and a relentless focus on execution. Without safeguards, growth can undercut affordability; without discipline, it can fall short of its promise. The systems that succeed pair a clear strategy with accountable leadership and a strong commitment to delivering results.
Purposeful integration starts with a shared vision, measurable goals and early alignment at the top—backed by rigorous project management to track progress and turn plans into action. When this level of discipline is applied, integration can strengthen resilience, broaden access and create lasting value for patients and communities. It also gives health systems the agility to weather disruption, invest in innovation and support front-line caregivers in an ever-changing healthcare landscape.
Of course, not every merger lives up to its potential. Some fail to integrate effectively; others pursue growth without a clear strategic or clinical purpose. But dismissing consolidation entirely ignores the very real pressures hospitals face—and the advantages that purposeful integration can offer in delivering more efficient, effective care.
Given the enormous pressures facing our industry, it’s time for the debate over hospital M&A to move beyond ideology. The focus should be on outcomes: Are patients getting better care? Are hospitals able to invest in purposeful innovation? Are communities retaining access to critical services?
In many cases, the answer is yes, because two organizations together can often do more than either could alone.
Consolidation isn’t a silver bullet. But done well, it can help ensure the care we deliver today is sustainable tomorrow.
Marty Bonick is president and CEO of Nashville, Tennessee-based Ardent Health, a publicly traded company operating 30 hospitals and approximately 280 sites of care across six states.