Last year proved to be a pivotal period for the healthcare sector, marked by notable shifts in merger and acquisition (M&A) activity, as outlined in a recent report by Kaufman Hall. The findings indicate an ongoing, albeit unsteady, financial recovery for hospitals across the nation, punctuated by a surge in M&A deals — specifically, those that involve divestitures.

The report reveals that 2024 saw a total of 72 M&A transactions among hospitals and health systems, a slight uptick that underscores the sector’s evolving dynamics. However, what stands out is the startling statistic that over 60% of these deals involved divestiture — the sale of a portion of a health system’s assets. This marks the highest percentage recorded in the history of the sector, more than doubling the figures from the previous year, where approximately a third of deals included divestiture.

Anu Singh, managing director at Kaufman Hall, forecasts that this trend of high divestiture rates may persist into 2025. He notes that many organizations, particularly larger regional and national systems, are actively evaluating their strategies to identify where they can thrive. This introspection often leads to the conclusion that transferring certain assets to another owner may align more closely with their overarching objectives.

This shift in M&A strategy also signals an emergence of innovative partnership models within the healthcare landscape. Notably, Kaiser Permanente’s introduction of Risant Health and General Catalyst’s Health Assurance Transformation Corporation (HATCo) represents this new paradigm.

Launched in 2023, Risant Health is focused on acquiring and managing nonprofit health systems under value-based care models. The company made headlines with its acquisition of Geisinger in Pennsylvania last April, followed by the completion of the Cone Health deal in North Carolina later in December. Similarly, HATCo aims to redefine health system operations through digital transformation, commencing its journey by acquiring Ohio-based Summa Health in November after identifying it as a strategic target.

Such models illustrate a fundamental shift in the healthcare industry’s approach to partnerships. Historically, health systems have primarily pursued M&A routes to expand their geographical footprint; however, organizations are now pivoting toward strategic alliances that bring intellectual capital and specialized capabilities into play. This trend often includes collaborations with stakeholders such as payers, advisory groups, and private equity firms, as hospitals seek to fill specific gaps in their service offerings.