Uncertainty in economy hampers hospital mergers and acquisitions

Visits are on the rise, posing challenges with ED boarding for many healthcare organizations. Data indicates that inpatient revenue is increasing while outpatient revenue growth has slowed, suggesting that the rapid expansion of outpatient care in recent years has reached a peak.

The first quarter of 2025 saw a significant slowdown in mergers and acquisitions within the healthcare sector, with only five transactions announced, primarily involving financially troubled organizations. This decline reflects a broader global trend across various industries, with economic uncertainty surrounding tariffs and healthcare policies likely contributing to the subdued activity. Anu Singh, Managing Director at Kaufman Hall, highlighted the impact of these uncertainties on hospital M&A transactions, attributing the low numbers to the challenging economic environment.

Despite the sluggish M&A activity, hospital financial and operational performance has remained steady in the early months of 2025. The latest National Hospital Flash Report from Kaufman Hall, a Vizient company, indicates consistent volume performance across the board. Notably, there has been a notable increase in ED visits, leading to issues with ED boarding for many healthcare facilities. Concurrently, inpatient revenue continues to grow, while outpatient revenue growth has slowed down, indicating a potential plateau in the expansion of outpatient care services.

Drawing on data from over 1,300 hospitals provided by Strata Decision Technology, LLC, the National Hospital Flash Report offers valuable insights into the state of the healthcare industry. Erik Swanson, Managing Director and Data and Analytics Group Leader at Kaufman Hall, emphasized the positive trend in hospital volumes, reflecting the ongoing demand for healthcare services. With ED visits rising steadily, hospitals are grappling with the challenge of managing patient flow effectively to ensure quality care delivery.

Kaufman Hall, a Vizient company, has been at the forefront of providing management consulting solutions to support institutions in navigating dynamic market conditions. With a history dating back to 1985, Kaufman Hall has established itself as a trusted advisor to corporate boards and executive teams, offering strategic planning and financial management expertise. Their services encompass a broad range of areas including strategy development, financial planning, performance improvement, treasury management, and M&A transactions, among others.

In conclusion, while the healthcare sector may have experienced a slow start in M&A activity due to economic uncertainty, hospitals have maintained a stable operational performance in the early months of 2025. As the industry continues to evolve, organizations will need to adapt to changing market dynamics and consumer demands to ensure sustained success in an increasingly competitive landscape.