An ongoing procession of large-scale health system dealmaking continued through the third quarter and is becoming the dominant merger and acquisition trend for 2026, according to a recent report.
Per healthcare advisory firm Kaufman Hall, which is part of Vizient, the year’s third quarter hosted 16 newly announced hospital transactions, comprising $8.2 billion in total transacted revenue. Both of those are roughly in line with recent years and remain higher than pre-pandemic historical averages, the firm wrote.
The standout was two newly announced “mega mergers” in which the smaller party had annual revenue exceeding $1 billion—Erlanger Health System plus Prisma Health, and HealthPartners plus Essentia Health—as well as “several transactions that fell just shy of the $1 billion threshold,” according to the report.
Kaufman Hall noted that this is the third straight quarter in which multiple mega mergers were announced. That scale also led to an average seller size of $586 million in the quarter, well above Q3 2025’s $401 million and more closely outpacing Q3 2024’s $559 million.
"Year-to-date activity suggests 2026 is on track to become the most active year for hospital and health system transactions since the start of the pandemic," said Kris Blohm, managing director and M&A Practice co-leader at Kaufman Hall. "The continued prevalence of larger transactions demonstrates that many organizations are pursuing strategic partnerships from positions of strength as they prepare for the next phase of healthcare transformation."
Such dealmaking reflects hospitals and health systems’ interest in “proactive repositioning,” or strategic moves organizations are taking in preparation for macroeconomic pressures and other operating headwinds like reduced government payments and coverage. Kaufman Hall pointed to two deals from Intermountain—the acquisition of two Idaho hospitals it’d already had partial interests in, and a Denver joint venture with AdventHealth—as examples of a system expanding its market presence and leaning on a complementary partner to maximize value.
The mega mergers among larger players also underscore an interest among providers in a position of strength “to secure transaction commitments, bolster their competitive position, and gain access to capabilities that enhance their communities long-term,” as is the case with the Erlanger/Prisma deal.
“Often, these alignments center less on local market concentration and more on regional market collaboration,” the report reads. “The pace of new and adjacent market entry by regional health systems is increasingly being supported by strategic initiatives aimed at moving toward where the future of care delivery and network models are leading.”
The fourth quarter is already moving in a similar direction, with Rush University System for Health and Endeavor Health on Wednesday announcing a 12-hospital, nearly $11 billion merger while highlighting the organizations’ complementary strengths in the Chicagoland market.
August's hospital operating margins lowest since February
Kaufman Hall’s M&A recap accompanied the latest release of its monthly hospital flash report, which highlighted “notably weaker” hospital performance in August compared to the preceding four months.
For August year-to-date, the firm recorded an operating margin index of 2.5%, a decline from 3.8% a month earlier (both including health system allocations for shared services costs). For just August alone, the operating margin index was 1.8%, down from 3.8%, and the lowest since February.
Compared to 2025, hospitals’ operating margins are down 2% year to date, and by 3% when comparing each year’s August performance alone.
In broad strokes, the monthly report outlined a slowdown in revenues, volumes and expenses alike from July to August, though each area remains elevated compared to the same period in 2025 and year to date. The pain points, per Kaufman Hall, are non-labor expenses that, year to date, have risen 6% per adjusted discharge and a tougher path to payment.
"Hospitals are facing increasingly difficult decisions around resource allocation, expense management and long-term sustainability," Erik Swanson, managing director and Data and Analytics group leader at Kaufman Hall, said in a statement. "Growing uncompensated care, rising expenses and ongoing payer mix challenges are creating significant strain, particularly for organizations operating on already thin margins. As these pressures persist, leaders will continue evaluating opportunities to strengthen their organizations for the future."
One standout statistic from the report is that about 43% of hospitals are currently operating at a loss, as opposed to about 33% ahead of the pandemic.
“As hospitals seek greater long-term financial sustainability, continued financial pressures may accelerate strategic repositioning and portfolio optimization efforts through partnerships,” the report reads.
Kaufman Hall’s reports pull data from more than 1,300 nationwide hospitals as collected by Strata Decision Technology.