3 Ways Hospital CEOs Are Approaching M&A in 2025

HealthLeaders’ The Winning Edge for Transforming Through M&A identified key areas that organizations should strategize for.

Mergers and acquisitions will always be a vital strategy for providers to achieve growth and sustainability, but the context shaping the dealmaking landscape continues to change.

Hospitals and health systems right now are dealing with a volatile environment consisting of inflationary pressures and business adversity risk, forcing CEOs to be thoughtful, yet willing, in pursuing integration.

In HealthLeaders’ The Winning Edge for Transforming Through M&A this week, University Health CEO Ed Banos and Aspirus Health CEO Matt Heywood discussed current trends and success factors for organizations considering consolidation.

Here are three areas leaders at the highest level are accounting for in their M&A strategy:

Balancing financial health and patient care

The reality of hospital M&A is that while it may be necessary for the viability of some organizations, it can also potentially have a negative impact on patients and communities.

A recent study published in the Journal of the American College of Surgeons found that quality of care was either lower or unchanged 77% of the time after integration, whereas 93% of cases showed increased prices.

The problem, however, is that organizations can’t provide the kind of care and access that is necessary for their community without ensuring the bottom line is strong enough to keep the doors open.

“In our organization, our motto is to be a strong, vibrant organization first and foremost Then, if that means we make tough choices, then we need to make tough choices,” Heywood said. “We need to make sure that our services are there for our community. They just may have to be there sometimes in a different location or in a different manner.”

That can make M&A a bit of a balancing act, but diversifying is a way for hospitals to alleviate some of the financial burden and serve patients in a better manner at the same time, according to Banos.

For example, University Health has implemented and grown its Hospital at Home business, which has decompressed a lot of patients that don’t need to be in hospitals but are still sick enough to require care.

Banos said: “When you’re looking at a merger and acquisition, what is the business that they can bring you that is going to help fund some of the uninsured commitments that we have as a public institution so that you make money on the good so that you can help pay for the underinsured?”

Outpatient investment

A significant trend that is influencing M&A activity currently is the push by providers towards offering more outpatient sites of care.

Organizations like Community Health Systems and Ardent Health have targeted the acquisition of urgent care centers recently to leverage their profitability and cost-friendlier models in comparison to inpatient care.

Kaufman Hall’s most recent National Hospital Flash Report showed that outpatient revenue per calendar day jumped 7% month over month in October, outpacing inpatient revenue’s increase of 1%.

“Driving the cost down is very, very important and when you can treat a patient in an ambulatory setting or even through population health and public health, you can try and manage illness and well-being before it becomes an acute issue,” Banos said. “We know that in the in the long run will prevent high-cost admissions for sure on your underinsured or uninsured.”

Focusing M&A investment on outpatient services may not make sense for every organization though. For Wausau, Wisconsin-based Aspirus Health, the rural market it serves requires a higher acuity capacity to deal with an aging population and their severity of illnesses, according to Heywood. That’s leading to a greater emphasis on hospital beds, not less.

“It was a little surprising for us as we were heavily for years pushing to the outpatient market as everybody’s talked about and now we’re finding that the aging population is starting to overwhelm people’s perspectives of how many beds are needed and we’re actually having to try to catch up on that,” Heywood said.

Advancing technology

M&A also affords organizations an opportunity to adopt or improve digital health solutions.

For both Banos and Heywood, that technology-forward mindset post-merger starts with the EHR and EMR platforms.

“We’ve really invested into ‘let’s utilize as much of our EMR as we can to the full extent,'” Banos said. “If there’s something out there that Epic rolls out, we want to be one of the first ones to do it and we try doing that all the time. That, when we go and take over a practice or dialysis center or a freestanding emergency room, really has helped us because they see that they don’t have the dollars to invest in that.”

When you’re using a platform like Epic which can have multiple versions, you want to optimize it by having any future partners on there as fast as possible and on the same maximized version, Heywood stated.

Then, organizations can replace add-ons with upgrades by Epic when it rolls them out to ensure they’re sticking to one platform as much as possible, making it easier to keep up to date.

“What we want to do is get our platforms tight and we want to get them right and we want to keep them upgraded. The minute we have an acquisition or a partner, we want to get them on those structures,” Heywood said.

Beyond the EHR and EMR platforms, Banos recognizes the value of implementing various technologies in different settings, such as AI in diagnostics and robotics for floor cleaning.

“We’re trying to use everything we can to help,” Banos said. “While it might be a little expensive now, we know in the long run it’s going to be a better solution going forward.”

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