Q3 2025 saw 15 new hospital transaction announcements, more than doubling H1’s total, reported Kau

Hospital and health system dealmaking continues to recover as organizations get a better handle on the new policy landscape, Kaufman Hall reports, noting an uptick in merger and acquisition activity during the third quarter.

July through September saw 15 new deal announcements, well up from the first quarter’s five and the second quarter’s eight, the advisory firm wrote in its latest report.

Among the recent deals, eight were divestitures and eight involved a financially distressed party, reflecting “an ongoing realignment in transitioning or relatively less attractive market models, as well as continued financial and operational headwinds for the industry,” the firm wrote while predicting a continuation of those trends in the quarters to come.

Two of the deals involved a seller with more than $1 billion in annual revenues, the first such deals of 2025.

For comparison, the third quarter of 2024 had 27 total deals announced. Total transacted revenue during that quarter was $13.3 billion, as opposed to this year’s third quarter’s $8.9 billion.

Taken together, Kaufman Hall wrote that the quarter’s activity shows “heightened selectivity” among larger organizations that are less open to piecemeal hospitals deals. Meanwhile, midsized regional systems remain active on “highly situation-dependent and strategic” dealmaking while major for-profits continue their efforts to realign hospital portfolios.

Concurrent with hospital transactions, however, is a slew of deals in which health systems aim to bolster their capabilities outside of acute care delivery—for instance, Kaiser Permanente’s insurance and outpatient-focused joint venture or Corewell Health’s deal with Quest Diagnostics focused on lab services.

Kaufman Hall’s M&A recap landed alongside its monthly hospital operating performance report for the month of August, which showed dips in patient volumes but an uptick in bad debt and charity.

Among the operating numbers of 1,300 nationwide hospitals (as collected by Strata Decision Technology), Kaufman Hall’s operating margin index was a median 1.9% across eight months when including health system allocations for the cost of shared services and 5.5% when excluding those. Both of these numbers represent lows for 2025.

On a month-to-month basis, the index’s median monthly operating margin was a narrow 0.1% with health system allocations and 3.7% without, again lows for the year.

From July to August, hospitals saw a 2% dip in daily net operating revenue, a 1% decline in daily inpatient revenue and a 3% decline in daily outpatient revenue.

This coincided with a 1% dip in daily discharges, a 2% drop in daily adjusted discharges and a 4% reduction in daily operating room minutes.

Daily total expense fell by 1%, with labor expenses flat month to month as supply expenses and drug expenses fell at a swifter 4% and 5%, respectively.

On a month-to-month, per-adjusted-discharge basis, net patient service revenue rose 1% and was matched by total expense.

However, the firm warned that hospitals’ bad debt and charity metrics remain elevated over the course of the year, and “with change to federal policy on the horizon, uncompensated care will likely continue to increase.” Coupled with year-over-year expense increases (total expense per calendar day is up 6% year over year), Kaufman Hall encouraged hospitals to start planning for a potential downturn in the operating environment.

“The slight declines in patient volume and the continued rise in uncompensated care indicate some uncertainty ahead, and hospitals should focus on building resilience now,” Erik Swanson, managing director and leader of the data and analytics group at Kaufman Hall, said in a statement. “The increase in expenses continues to pressure organizations. While hospitals can’t influence external forces like the rising costs of raw materials or the uncertainty in global trade, they can explore strategies to contain these costs.”