Last year’s M&A activity in the healthcare sector signaled an unsteady financial recovery for the nation’s hospitals, according to a new report from Kaufman Hall.
The report found that there were 72 M&A deals among hospitals and health systems in 2024. More than 60% of the deals involved a divesture — meaning a health system or governmental entity was selling off a portion of its assets.
The report pointed out that was the highest percentage the sector has ever seen — and more than double last year’s percentage, when only about a third of M&A deals involved a divesture.
There is a good chance that the rate of divesture could remain high in 2025, noted Anu Singh, managing director at Kaufman Hall.
“I think we’re going to continue to see all types of M&A activity, including divestures. Part of the reason for that is there are organizations — larger super regionals, and even nationals — that will continue down the path of assessing where they are going to be most successful and where they can really make a move in a market to be successful. In some cases, hospitals are going to determine that putting their assets in the hands of another owner may be more beneficial to their overall aim,” he explained.
Last year also saw the rise of new M&A partnership models in the healthcare space — namely Kaiser Permanente’s Risant Health and General Catalyst’s Health Assurance Transformation Corporation (HATCo).
Kaiser Permanente launched Risant Health in 2023 as a company designed to acquire and operate nonprofit health systems under value-based care models. Risant completed its purchase of Pennsylvania-based Geisinger last April, and then later finalized its acquisition of North Carolina-based Cone Health in December.
Venture capital firm General Catalyst also launched an innovative M&A model in 2023. General Catalyst announced that it was seeking to acquire and operate a health system through HATCo — a new company that would help “demonstrate the blueprint” of digital transformation in the healthcare industry. Last January, HATCo announced Ohio-based health system Summa Health as its first acquisition target, and the deal was finalized in November.
Singh noted that both of these models highlight a shift in how hospitals are approaching partnerships. Instead of pursuing traditional M&A deals, organizations are now looking at strategic partnerships that involve intellectual capital and specific capabilities, oftentimes in the categories of digital health or value-based care, he said.
In other words, health systems are seeking partners that add new expertise or resources, rather than just expanding geographic reach or capacity.
Historically, health systems might partner with or acquire other health systems to grow. But in this day and age, hospitals are turning to payers, advisory groups and private equity firms to fill gaps in their offerings or to enable new solutions, Singh added.
This reflects a shift in thinking in the healthcare industry — that the next great innovations in healthcare delivery may come from outside the traditional health system ecosystem.
Singh predicted that this type of thinking could become even more common in 2025. In his view, models like HATCo and Risant Health suggest that health systems might continue to pursue partnerships with a broader array of organizations to solve challenges.
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