Hospital and Health System Mergers and Acquisitions Review: Trends and Analysis
In 2024, the healthcare industry seemed to find some stability, with operating margins improving and positive outlooks from rating agencies Moody’s, Fitch, and S&P Global Ratings for not-for-profit hospitals and health systems in 2025. Despite these positive signs on the surface, a closer look revealed ongoing challenges.
S&P’s 2025 outlook described the industry as “stable but shaky for many amid uneven recovery.” Moody’s reported a median operating cash flow margin of nearly 7% but noted that not all hospitals had reached this level of profitability. Fitch highlighted a “trifurcation” in credit quality, with some organizations doing well, some showing mixed results, and others continuing to struggle.
The numbers from hospital and health system mergers and acquisitions (M&A) in 2024 reflect the uneven recovery and the obstacles many organizations face. A record-high percentage of announced transactions involved financially distressed parties, with 62.5% of transactions involving divestitures—a significant increase from 2023. Additionally, the percentage of transactions where the smaller party had a credit rating of A- or higher hit an all-time low.
New partnership models emerged in 2024, such as General Catalyst’s Health Assurance Transformation Corp. (HATCo) acquiring Ohio-based Summa Health and Kaiser Permanente’s Risant Health acquiring North Carolina-based Cone Health.
Financially distressed announced transactions in 2024 reached new highs, with 30.6% involving financially distressed parties and the average revenue of sellers in such transactions doubling from the previous year. The percentage of transactions involving divestitures also soared, while the percentage of transactions with a smaller party credit rating of A- or higher decreased significantly.
Overall, the M&A trends in 2024 continued to show the impact of financial distress on the healthcare industry, with larger organizations seeking partners and market reorganization through divestitures. Despite challenges, organizations are making bold moves towards transforming health system operations and care delivery through innovative partnership models.
