Even if things sped up in the final quarter, 2025 was a down year for hospital merger and acquisition activity in which financial distress drove an outsized portion of the dealmaking, healthcare advisory firm Kaufman Hall wrote in a year-end report.
Forty-six hospital and health system transactions were announced across the entirety of 2025, well below 2024’s 72 and the lowest since Kaufman Hall began tracking such deals back in 2011. Total transacted revenue was $18.5 billion, below the $39.7 billion of 2024 and an eight-year low.
Those numbers come despite a comeback in dealmaking that began in Q3 and picked up more steam in the final quarter with 17 new announcements. Four of these were “mega mergers” where the smaller party has more than $1 billion annual revenue, contributing to the quarter’s $9.8 billion in total transacted revenue.
“This activity level suggests that M&A activity is beginning to return to levels more consistent with recent historical averages,” the firm wrote of the year-end acceleration.
The slow start to the year was attributed to uncertainty around shifting healthcare policies and general economic uncertainty, which settled over time and became particularly clear with the summer’s H.R. 1, according to the report.
Across the whole year’s 46 deals, there were five mega mergers and 10 relatively small deals in which the seller recorded less than $100 million in annual revenue. Nonprofits comprised most of the activity, with only one deal in which a for-profit was the acquiring party.
2025 was the third consecutive year in which the share of financially distressed parties grew, starting at 15% in 2022 and now landing at a record-high of 43.5%. Kaufman Hall expects activity among distressed systems to continue into 2026.
The firm’s report also noted the increased involvement of state governments in facilitating, funding or shifting policy for hospital deals as well as ongoing portfolio rationalization and divestitures among larger organizations.
Additionally, “some of the most interesting activity in 2025 occurred outside of hospital and health system transactions, with organizations making significant deals in acquiring ambulatory care, lab services and behavioral health providers,” Anu Singh, managing director at Kaufman Hall, said in a release. “We anticipate this trend to continue in 2026.”
Volumes, margins drop in November
The M&A report was joined by Kaufman Hall’s latest monthly check-in on hospitals’ financial and operational performances. Based on data from over 1,300 hospitals, November was a down month for the sector.
The firm’s operating margin index was 0.4% (including health system allocations for the cost of shared services) in November, down from 1.9% a month prior. The calendar-year-to-date operating margin index was 2% in November.
The monthly report highlighted month-over-month volume drops—potentially due in part to November holidays—that resonated across nearly every other operating metric.
Daily discharges fell 3%, daily adjusted discharges by 7%, daily ED visits by 5% and daily operating room minutes by 11%. That led to month-over-month drops in daily net operating revenue (-6%), daily inpatient revenue (-4%), daily outpatient revenue (-9%) and daily total expense (-2%).
Throughput and efficiency metrics also trended poorly for hospitals in November, as average length of stay rose 3%, total expense per adjusted discharge rose 4% and net patient service revenue per adjusted discharge remained flat.
“While month-to-month hospital performance softened in November, on a year-to-date basis, revenue and margins are still strong compared to previous years,” Erik Swanson, managing director and data and analytics group leader at Kaufman Hall, said in a release. “The continued rise in expenses requires attention. For hospital leaders, managing overall spend as patient volumes fluctuate is an ongoing challenge.”