Hospital M&A remained active in Q2 as systems plan ahead

Hospital dealmaking stayed active in the second quarter of 2026, extending a rebound in merger and acquisition activity that has increasingly drawn mid-to-large independent systems looking to strengthen financial security and support future growth, according to Kaufman Hall.

In its latest quarterly M&A report, the healthcare advisory firm said 18 new hospital transaction announcements were made from April through June. That total was well above the eight transactions announced in the same period last year and remained higher than the average the sector has posted across the 2020s.

Kaufman Hall said total transacted revenue for the quarter reached $7.7 billion. That was a sharp increase from $1.4 billion in the same quarter a year earlier, although it still fell short of most prior years.

The quarter also included three mega merger transactions, defined in the report as deals in which the smaller party has more than $1 billion in annual revenue. Those transactions helped lift average transacted revenue to $428 million for the quarter. That was higher than the Q2 average of $401 million last year, but still below the averages seen in earlier years.

The firm said the common theme across the quarter’s deals was proactive strategic positioning. In the report, Kaufman Hall wrote that organizations are increasingly making strategic decisions over a longer time frame and making near-term structural changes now to support future goals.

Several of the transactions cited in the report reflect that approach. Quorum Health, which operates 11 hospitals, said it plans to move through what it described as a first-of-its-kind transition into a nonprofit through acquisition by a newly formed entity. Quorum said that move would help support sustainable operations.

Elsewhere, North Memorial Health and WakeMed Health shared plans to join, respectively, Sanford Health and Atrium Health in efforts aimed at future capabilities and complementing strengths, according to the report.

The report also showed that the types of sellers participating in the quarter varied. Of the 18 transactions announced in Q2, six were divestitures, seven involved an independent nonprofit seller, and only three involved a financially distressed seller.

Kaufman Hall said the volume of mega mergers this year has already surpassed the full-year total for 2025. The firm said that reflects a broader shift in the market, with larger organizations becoming more active in pursuit of partnerships.

According to the report, the organizations entering these partnerships are significantly larger than those seen in prior transaction cycles. Kaufman Hall said more scaled organizations in the $500 million to $3 billion revenue range are proactively pursuing partnerships to accelerate capabilities and advance long-term strategy, rather than waiting until they have no other choice.

Alongside the M&A update, Kaufman Hall released new operating data for hospitals in May that pointed to a modest decline in margins, both compared with April and compared with the prior year.

Among the 1,300 hospitals Kaufman Hall uses for its monthly sector benchmarks, the firm reported a calendar year-to-date operating margin index of 2.9% and a single-month operating margin index of 2.7%. Both figures include health system allocations for the cost of shared services.

The year-to-date margin index reflected a 6% decline from April’s data and a 4% drop from May of the previous year. The single-month year-to-date margin was down 5% from the same point in the prior year.

On the revenue side, May’s daily net operating revenue was up 5% year over year, while gross revenue rose 6%. Daily revenue from both inpatient and outpatient activity increased 6% from the prior year.

Expenses also moved higher. Total expenses rose 5% compared with May of last year, with the increase split about evenly between labor and non-labor costs. Kaufman Hall highlighted purchased services spending as an area for improvement, noting it was 4% higher year over year.

On a per adjusted discharge basis, total expense rose faster than net patient service revenue, increasing 5% compared with a 4% increase in revenue.

Year over year, daily discharges in 2026 were flat, while adjusted discharges increased 2%. Kaufman Hall said those patterns point to the continued shift of care delivery to outpatient settings.

The firm said the trends should prompt hospitals and health systems to review spending and strategy in light of changing care delivery patterns. Erik Swanson, managing director and leader of the Data and Analytics Group at Kaufman Hall, said health systems must adapt their portfolios and operations to support the future of care delivery.

Swanson also said reevaluation of organizational strategies and resource allocation may unlock new opportunities to maximize effectiveness going forward.

Taken together, the quarter’s M&A activity and the latest operating data suggest that hospitals are navigating a market in which strategic partnerships, portfolio changes and cost management remain closely connected. Kaufman Hall’s report indicates that many organizations are moving earlier to position themselves for future needs, even as margins and outpatient shifts continue to shape day-to-day operations.