Hospital M&A keeps pace in Q2, Kaufman Hall finds

Hospital and health system mergers and acquisitions continued to move higher in the second quarter as providers looked for partnerships that could help them manage financial pressure, according to a new report from Kaufman Hall.

The consultancy said hospitals and health systems recorded 18 transactions during the quarter. That was one of the highest second-quarter totals since 2018, according to the report published Monday. The pace was well above the same period last year, when hospitals and health systems were involved in just eight mergers and acquisitions.

Total transacted revenue also increased sharply. Kaufman Hall said the second quarter reached $7.7 billion, compared with $1.4 billion in the second quarter of 2025. The consultancy said last year’s figure was the lowest the sector had seen since 2018.

The report said the rebound in hospital M&A follows a slowdown in dealmaking during the first half of last year, when policy uncertainty in Washington weighed on the sector. In early 2025, Republican lawmakers were debating a large tax bill that included major cuts to healthcare spending, especially Medicaid. Kaufman Hall said that proposal, along with other concerns such as the effect of tariffs on supply costs, likely caused executives to hold off on possible deals.

By last summer, President Donald Trump had signed the “One Big Beautiful Bill” into law, which Kaufman Hall said gave providers greater clarity about their operating environment. Deal activity began to recover in the second half of the year, and the first quarter brought 22 announced transactions, the highest first-quarter total in six years. Kaufman Hall said the momentum carried through the second quarter of 2026 as providers continued making strategic decisions aimed at handling future financial pressure.

Kris Blohm, managing director and co-leader of Kaufman Hall’s M&A practice, said in a statement that organizations are now considering options earlier in their strategic planning cycles and are looking for complementary capabilities rather than waiting until partnerships become necessary. “We’re witnessing proactive positioning over reactive consolidation,” Blohm said.

The second quarter also included three mega-mergers, which Kaufman Hall defined as deals in which the smaller party has annual revenue of at least $1 billion. Those transactions helped lift the average seller size to about $428 million, which the consultancy said was in line with recent year-end averages.

Kaufman Hall said the rise in mega-mergers reflects a trend in which large health systems increasingly seek out even bigger partners to help them navigate a more difficult operating environment. The report pointed to one example: Quorum Health, a private equity-backed hospital operator, signed a deal in May to transition to nonprofit status through a transaction with Healthside Partners. Details beyond that were not reported in the source.

Nonprofit organizations made up nearly all of the buyers in the quarter. Kaufman Hall said the buyer side included 10 independent nonprofits and four academic buyers. Only one acquirer was a for-profit health system.

The report also placed the M&A activity in the context of continuing financial strain for hospitals. In a separate report released Monday, Kaufman Hall said operating margins fell 4% in May compared with the same month last year. Labor expenses per calendar day increased 5%, supplies rose 4%, and drugs were up 1% from May 2025.

The report did not say whether those cost pressures directly influenced any specific transaction in the second quarter, but it connected the broader increase in dealmaking to the need for providers to strengthen their finances. In that sense, the latest data suggest hospitals and health systems are still using M&A as a strategic response to ongoing uncertainty, even as deal volume continues to climb from last year’s low point.

Kaufman Hall’s latest numbers show that the market remains active after a weak stretch early last year. The second quarter’s 18 deals do not match the most active periods in the sector’s recent history, but they do place 2026 among the stronger second-quarter years since 2018. The jump in total revenue from the prior year also indicates that larger transactions are playing a bigger role in the current cycle.

That shift matters because larger deals can reshape the competitive landscape more quickly than smaller transactions. Kaufman Hall said the quarter’s three mega-mergers contributed to the higher average seller size, and it said large systems are increasingly looking for larger partners rather than only smaller ones. The report did not provide additional detail on the specific terms of those transactions.

Even with the renewed pace of dealmaking, Kaufman Hall said hospitals continue to face rising expenses. The consultancy’s separate margin report showed labor, supplies, and drug costs all increasing in May compared with the year before, underscoring the pressures that have pushed many providers to explore partnerships.

The article from Healthcare Dive said hospitals and health systems are looking to partner up to bolster their finances. Kaufman Hall’s report supports that framing, showing that transactions are rising while operating conditions remain challenging. The source did not report any forecast for the rest of the year, and it did not identify how many more deals may be in progress.

For now, the second quarter adds to evidence that hospital M&A has regained momentum after a quieter period. The combination of a higher transaction count, much larger transacted revenue, and several mega-mergers suggests providers are acting on strategic concerns earlier than before, while still contending with a tough financial environment.

Kaufman Hall’s findings indicate that the sector’s recent rebound is being shaped by both external policy clarity and internal cost pressures. The report connected the earlier slowdown to uncertainty around federal spending and supply costs, then described the recent period as one in which providers are evaluating combinations more proactively. The source did not report reactions from hospitals, health systems, or payers beyond Blohm’s statement.

In all, the second quarter brought 18 hospital and health system deals, $7.7 billion in transacted revenue, three mega-mergers, and a buyer mix dominated by nonprofits. Those figures mark a notable improvement from a year ago and reinforce the idea that M&A remains an important tool as providers seek stability in a changing operating environment.