Hospitals, insurers and life sciences leaders all expect more mergers in 2025

Executives representing different segments of the healthcare industry all seem to maintain optimism for more mergers and acquisitions in 2025.

Healthcare leaders expect more mergers and acquisitions this year, but changes in the economy and federal policy could affect the pace of deals. (Image credit: ©Tippapatt - stock.adobe.com)

The majority of healthcare leaders expect more deals to take place this year, according to BRG’s 2025 US Healthcare & Life Sciences Transactions Outlook, which was released Monday.

More than four in five providers (82%) expect to see more transactions this year, while virtually all payers (96%) projected more deals this year. Life sciences leaders didn’t share quite as much merger optimism as their counterparts, but a solid majority (70%) expected to see more deals.

The report suggests more strategic opportunity could drive deal-making in the next year, with providers facing more challenges with staffing shortages. As more providers face financial pressures, they may be looking for partners to help them stay afloat, and hospitals and health systems could be looking to acquire some struggling organizations.

While most leaders project more mergers and partnerships, the report also doesn’t discount the possibility that headwinds could potentially slow some activity. Hospitals and other providers may see less federal aid coming from the federal government, and that could affect the rate of transactions, analysts say.

David Wildebrandt, a managing director at BRG, tells Chief Healthcare Executive® that hospitals facing more financial pressures may be looking for a lifeline by joining bigger systems. With the possibility of reduced support for Medicaid and tariffs leading to higher prices for supplies, some hospitals may opt against going it alone.

“That's going to impact them negatively and drive consolidation,” he says.

Wildebrandt says he projected healthcare organizations still looking at “mega-deals” will move forward.

But he also says with uncertainty about the economy and the funding picture in Washington, it’s possible that some health systems may take more time before acquiring struggling hospitals.

In many ways, Wildebrandt says he is most interested to see how deliberative some of the larger hospitals and health systems will be when it comes to scouting targets for acquisitions. He says it will be less of an “opportunistic market” and will look at acquisitions with more scrutiny.

“The people that are the purchasers are going to be more selective,” he says. “It’s going to take more working capital and take longer to get profitable. So you could see them being very picky about the deals.”

Some larger health systems may be looking at more divestitures and opt to sell facilities if the economy begins to suffer, Wildebrandt says.

If the economy sours and hospitals face higher prices on supplies, that’s going to add to cost pressures, and many hospitals have modest margins in the best of times, he says.

“Hospital margins are grocery store margins. They're so thin,” Wildebrandt says.

Plus, hospitals are dealing with staff shortages and higher costs for labor. “We have reset the hourly rate in the last few years, and that's not going away,” he says.

With artificial intelligence emerging as a growing part of healthcare, it’s probably not a surprise that many organizations are looking to boost their AI capabilities. Most survey participants (82%) said they would likely pursue deals to strengthen their AI capabilities.

As many healthcare organizations continue to face the threat of cyberattacks, the vast majority of respondents (84%) also said they’d be looking at transactions to help improve their cybersecurity.

Health systems will be looking at partners to help develop AI solutions and to address cybersecurity concerns.

“I think pretty much universally, all across the verticals in healthcare, people are investing in these areas,” Wildebrandt says. “There's all kinds of deals. I mean, not all are just hospital-to-hospital acquisition. I think there's a lot of money that’s going to be spent on strategic partnerships.”

Healthcare leaders continue to anticipate that federal regulators in President Trump’s administration are going to be more relaxed in their review of potential mergers and acquisitions, which could lead to more deals in the healthcare industry, Wildebrandt says.

“They want more activity. They want to be more of a free market, so we're going to lessen some of the restrictions,” he says.

Still, Wildebrandt says he expects an uptick in merger volume compared to last year. Healthcare M&A volume across all verticals, including providers, payers and life sciences, dipped to $256.9 billion in 2024, down from $361.5 billion in 2023.

“Most everyone agrees that it is going to bounce back from last year, which was a very low year,” Wildebrandt says.

But the extent of the rebound remains an open question, and he says it may be less dramatic for providers.

“I don't think it'll be, personally, as drastic of a shift that that maybe some think, in terms of the provider space,” he says.

BRG surveyed 150 healthcare leaders, including 50 each from providers, payers and life sciences companies. Interviews took place in December 2024.