How M&A Is Reshaping U.S. Healthcare Systems

U.S. hospitals have faced financial and operational challenges since the COVID pandemic, spurring a wave of M&A that is reshaping the future of healthcare systems. Some national for-profit and not-for-profit systems that are struggling with declining income, labor shortages and rising expenses are divesting hospitals. At the same time, regional systems are acquiring assets to expand their geographic reach and increase their market presence. Finally, academic medical centers are also growing and expanding their patient base.

“In this post-COVID operating environment, hospital systems are reviewing their portfolios and either leaving markets or assessing them for acquisition opportunities,” said Adam Bryan, Co-Head of Not-for-Profit Healthcare at Morgan Stanley.

Total announced hospital and health system M&A transaction volume grew steadily from 2021 to 2024, according to data from Kaufman, Hall & Associates LLC. However, there has been a sharp decline in announced transactions in the first quarter of 2025, as the market digests changes in the global macroeconomic environment, as well as potential impacts to healthcare reimbursement from Congressional budget negotiations.

Understanding these M&A dynamics is crucial for market players to anticipate how healthcare access, affordability, profitability and economic value may evolve in coming years. The shifting M&A landscape will affect hospital systems’ expansion opportunities and competitive threats, while investors will need to assess any impact on company valuations. For patients, the wave in deal making could affect care availability, cost and quality, whether through hospital closures or improved services due to operational efficiencies or fundraising.

National Systems Are Divesting Assets

During and after COVID, hospital staff burnout led to labor shortages, which forced providers to raise wages and offer other benefits, increasing their costs. Compounding these challenges, hospitals are facing potential cuts to Medicaid reimbursement, as Congress looks to offset the cost of extending provisions from the Tax Cuts and Jobs Act. These financial pressures have caused some national healthcare systems to conduct deep reviews of their hospital portfolios, which have resulted in a number of divestitures.

Several hospital divestitures have occurred in recent years. In April 2025, Ascension announced plans to sell four Michigan hospitals to Indiana’s Beacon Health System. The sale will cap a string of other Ascension transactions in Michigan—including a sale of hospitals to MyMichigan Health and a joint venture with Henry Ford Health—that has downsized its presence in the state. Ascension has completed, or is currently in the process of completing, several other divestitures across the country, including  a November 2023 sale of its 50% interest in a health plan to Froedtert Health, for which Morgan Stanley served as buy-side advisor.

In August 2024, CommonSpirit Health sold two San Francisco hospitals to UCSF Health for $100 million ending CommonSpirit’s hospital presence in the city. Though CommonSpirit divested these assets and others in recent years, it has also made several acquisitions, including five of Steward Health’s hospitals in Utah, adding to CommonSpirit’s existing operations in Colorado and Kansas. In this environment, health systems pursuing a mix of divestitures and acquisitions isn’t uncommon, according to Bryan. “As for-profit and not-for-profit systems seek to focus on more profitable markets with a stronger presence, a wave of divestitures is also resulting in acquisitions,” he said.

The divestiture of assets by national systems creates opportunities for hospital systems to acquire facilities or form strategic partnerships, and investors will need to assess how these sales impact the financial health of sellers and buyers. For patients, divestitures may mean changes in hospital ownership that could impact availability of care and services.

Regional Systems Pursue Acquisitions

Some regional systems have been acquiring divested assets from national systems and betting on economies of scale in service areas that do not overlap. “Contrary to the divesture trend among large national systems, some regional systems are focused on increasing scale and expanding geographic presence,” said David Stephan, Co-Head of Not-for-Profit Healthcare at Morgan Stanley.

Among recent examples of regional systems making acquisitions: In July 2024, Florida-based not-for-profit BayCare Health System bought its full ownership as it terminated a joint operating agreement with Trinity Health, to enhance operational effectiveness and patient access.¹ In June 2024, Morgan Stanley provided a $500 million taxable bridge loan and served as senior manager for BayCare’s $1.3 billion in bonds priced in August 2024. “The transaction was significantly oversubscribed with $6.7 billion of orders from 85 institutional investors,” Stephan said.

In October 2024, Morgan Stanley provided a $835 million taxable bridge loan to fund Orlando Health’s acquisition of Tenet Healthcare’s majority interest in Brookwood Baptist, which includes five hospitals across central Alabama. That same month, Orlando Health also acquired three hospitals in Florida from Steward Health Care. Morgan Stanley also served as bookrunning senior manager on Orlando Health’s $1.25 billion long-term fixed-rate takeout financing.

For companies in the space, regional health systems that are expanding could mean fewer but stronger competitors. Investors should monitor the risks and opportunities for various types of hospital systems in a landscape where players are vying for regional market dominance. Patients could experience improvements in care in cases of effective integrations, though higher costs and fewer choices may also result from consolidation that limits competition.

Academic Medical Centers Are Growing

Academic medical centers (AMCs), hospitals that provide patient care while also educating healthcare providers, have been also growing their footprints in the last several years by acquiring community hospitals. “This trend toward community-based care allows AMCs to focus on the highest-acuity care at their main campus, while expanding their clinical networks’ ambulatory assets to serve patients closer to home,” according to Stephan.

AMCs that have struggled with higher-than-average occupancy rates have seen opportunity in building a network of community hospitals that can ease capacity constraints by serving patients with less-urgent care needs closer to their homes. “Academic medical centers have been buying community hospitals to create capacity and build higher acuity services closer to home,” Stephan said.

In January 2025, the firm served as senior manager on the financing for UMass Memorial Health’s (UMMH) acquisition of Milford Regional Medical Center, which took place in October 2024. The proceeds of UMMH’s $342 million bond issuance were used for acquisition financing and other projects.

Apart from acquisitions, AMCs are also expanding through construction projects. In December 2024, Morgan Stanley provided a $90 million loan to the University of Maryland Medical System (UMMS), as a bridge to a larger $457 million financing in the public market in January 2025.  Proceeds will be used to build a new medical center providing greater access to hospital services for residents on Maryland’s eastern shore.²

As AMCs expand, healthcare companies will be monitoring opportunities for partnerships in certain sectors and specialized services, while investors will need to watch how AMCs’ efforts to balance care, education and research funding will affect financial performance. Patients could benefit from increased access to treatments and specialists, though the potential for premium pricing could also mean higher costs of services.