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Health care mergers and acquisitions return to pre-pandemic levels


Total number of deals and total revenue both return to pre-pandemic norms

The number of quarterly health care deals in the mergers and acquisitions market has returned to pre-pandemic levels, according to a report from Kaufman Hall. In the second quarter of the year, there were 20 transactions, which matches pre-pandemic norms, and this also included the total transacted revenue for the quarter.

Mergers and acquisitions: ©Nastassia -

Mergers and acquisitions: ©Nastassia -

There were also three mega-mergers, defined as a transaction where the seller has annual revenue greater than $1 billion, according to the report. They were:

  • Froedtert Health and ThedaCare announced a letter of intent to combine as a single organization in Wisconsin
  • Kaiser Foundation Hospitals and Geisinger Health announced the launch of Risant Health, a not-for-profit organization created by Kaiser Foundation Hospitals, with Geisinger as its first member
  • BJC HealthCare and St. Luke’s Health System signed a non-binding letter of intent to form an integrated, academic, Missouri-based health system

According to the report, the 20 announced transactions in the second quarter were the highest number seen since the first quarter of 2020, when the COVID pandemic began, and were on par with the 19 transactions announced in the second quarter of 2019 and the 21 transactions announced in the second quarter of 2018.

The average size of the selling party as measured by annual revenue remained high by historical standards at $664 million, according to Kaufman Hall. This was down from the record-breaking 2022 year-end average of $852 million, reflecting the impact of a higher total number of announced transactions in the quarter.

The 20 announced transactions for the second quarter were made up of:

  • Eight not-for-profit health systems
  • Four investor-owned health systems
  • Two religiously affiliated organizations
  • Four academic/university-affiliated organizations
  • One governmental organization
  • One academic organization partnering with multiple not-for-profit organizations

Kaufman Hall noted that a major driver in recent large system transactions has been the intent to combine, complement, expand, and optimize organizational capabilities. The combination of Froedtert Health and ThedaCare in Wisconsin and the creation of Risant Health by Kaiser Hospital Foundation with the acquisition of Risant’s first member, Geisinger Health, both reflect this trend. According to the report, the CEOs of the two systems clearly noted that their combination is not the product of financial pressures, but instead an opportunity to combine the best of both systems in a way “that makes both of us better to deliver health care in Wisconsin and the communities we serve.”

Another driving factor is the goal of organizing regional markets, according to Kaufman Hall. The combination of surging labor expenses, continued movement of care into outpatient settings, and reduced operating margins continue to squeeze health system finances. By organizing regional markets, health systems can reposition with complementary capabilities to deliver on expanded and more coordinated care across a combined system.

For example, BJC HealthCare and St. Luke’s Health System, which have collaborated on cost-saving measures for years as members of the BJC Collaborative, note that their combination will create “an even stronger financial foundation,” enabling the systems to “further invest in our teams, advance the use of technologies and data to support our providers and caregivers, and improve the health of our communities.”

“As capabilities become an increasingly compelling factor in partnerships and mergers, hospitals and health systems should focus on developing unique capabilities that would make them a strong partner, whether or not they are currently seeking a partnership,” the report reads in part. “This strategy will help organizations differentiate themselves within an increasingly competitive healthcare market and enhance their options as that market continues to evolve.”

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