Repositioning, not scale: How health systems are leveraging partnerships differently to reshape their footprint

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Health systems are entering a new phase of mergers and acquisitions (M&A) that is laser-focused on achieving enterprise goals such as improved access, increased affordability, and ongoing sustainability in a more challenging operating environment. Health systems are using M&A as a tool to strategically reposition portfolios, expand ambulatory capabilities, and prepare for the financial pressures expected in 2027 and beyond.

According to Irving Levin’s The Health Care M&A Report, 2nd Quarter 2026, hospital M&A activity increased 33% year over year, rising to 16 transactions in Q2 2026 from 12 in Q2 2025. The proposed Sutter-Allina combination was the quarter’s headline health system transaction.

Academic and large nonprofit health systems are buying and partnering across the full spectrum of rural, community, and suburban hospitals:

Novant Health is slated to acquire rural Northern Regional Hospital in Mount Airy, North Carolina.
Billings Clinic is affiliating with 88-bed Sheridan Memorial.
Altru absorbed CommonSpirit’s 25-bed Devils Lake critical access hospital.
Vanderbilt acquired suburban Tennova Clarksville in February for $623 million.

National health systems pruned their portfolios, while regional systems selectively bought:

Ascension reduced its consolidated portfolio from roughly 139 hospitals to 90.
Community Health Systems (CHS) sold four Arkansas hospitals to Freeman Health System for $110 million. CHS also sold Crestwood Medical Center in Alabama to Huntsville Hospital System for $450 million.

Cross-market nonprofit combinations continue to surface:

AdventHealth and Intermountain Health signed a letter of intent to form a Denver-area joint venture combining eight hospitals, related physician practices, and other ambulatory assets. AdventHealth would manage and lead daily operations.
In April, Orlando Health announced it would buy RMC Health System, in Anniston, Alabama, adding to its 2024 acquisition of five Birmingham-area hospitals (70% majority stake) from Tenet Healthcare.
A proposed Sutter–Allina combination would span California, Minnesota, and Wisconsin, enabled by more than $2 billion of investment in Minnesota and western Wisconsin.

Health systems repositioned toward outpatient capabilities:

Ascension closed its $3.9 billion AmSurg deal in early June, reaching 300 surgery centers.
Long Island-based Catholic Health formed a 10-year $500 million imaging deal with GE Healthcare.
Saint Alphonsus Health System in Boise, Idaho, acquired Intermountain Medical Imaging through a joint venture with RadNet.
The Hospital for Special Surgery formed a strategic joint venture with Lumexa Imaging in the New York City metro area.

The range of partners continues to expand beyond other health systems to include pharmaceutical companies, private equity-backed platforms, and other diversified healthcare organizations:

Cencora, a global pharmaceutical services and drug distribution company (formerly AmerisourceBergen), announced plans to acquire EyeSouth Partners’ retina division in a $1 billion transaction.
Ascension agreed to acquire Nashville’s Williamson Health for nearly $1 billion.
The 50/50 joint venture between Providence and Compassus, owned by PE firm TowerBrook Capital Partners and Ascension, added a fifth state (Oregon) for hospice, palliative care, home health, and private duty nursing services.

Why It Matters

Irving Levin’s Q2 2026 report reinforces that health systems continue to use M&A as a strategic lever. Amid persistent margin pressure and a more challenging financial outlook for 2027, health systems are using transactions to reposition their portfolios, strengthen priority markets, expand ambulatory and adjacent capabilities, and improve long-term sustainability.

The objective is less about adding scale for its own sake and more about making deliberate choices to improve access, increase affordability, and ensure sustainability through partnerships and transactions.

Medicaid work requirements, labor and supply costs, continued reimbursement pressure, and expiration of enhanced marketplace subsidies are already impacting financial planning, and additional pressure is expected to ramp up in 2027. Health systems are not waiting for the headwinds to fully materialize. They are assessing which markets can support sustainable operations; which assets warrant additional investment; and where an acquisition, partnership, or divestiture could create greater value.

That assessment is placing active portfolio management at the center of M&A strategy. Organizations are evaluating their businesses to determine which assets should be accelerated, which require a different operating model or capital structure, and which may be more valuable under another owner.

Divestitures, once viewed primarily as evidence of financial distress, are increasingly a strategic lever. Health systems are using them to improve margins, strengthen balance sheets, and redirect capital toward higher-priority opportunities. Ascension, for example, has demonstrated how disciplined portfolio management can support debt reduction and reinvestment. Similarly, regional buyers have used acquired assets to accelerate growth in markets where they can generate greater strategic and operational value.

Cross-market and non-contiguous expansion also remain important parts of the transaction landscape. For health systems operating in regions with contracting populations, limited organic growth, or unfavorable demographic trends, entering new markets can diversify risk and create access to stronger growth opportunities. These combinations are not simply geographic expansion plays. Their success depends on whether the acquiring organization can extend its operating model, clinical capabilities, and capital resources across markets that may have different competitive dynamics and community needs.

Academic and large nonprofit health systems remain important partners for rural and community hospitals. These transactions can give smaller hospitals access to capital, clinical protocols, specialty services, digital investment, and recruitment support that may be difficult to sustain independently. For the acquiring health system, these transactions expand referral networks, add lower-acuity capacity, and relieve pressure on flagship campuses.

Ambulatory and adjacent capabilities are reshaping competitive positioning. Site-of-care management by commercial payers, movement toward site-neutral payment, and the continued migration of procedures from inpatient settings are pushing health systems to build stronger positions in surgery, imaging, infusion, physician services, home-based care, and digital access. Innovation is not limited to acquiring assets outright as joint ventures and partnerships can provide specialized operating expertise, physician alignment, and capital while allowing a health system to move faster or share risk.

Competition for healthcare assets is extending beyond traditional providers. Pharmaceutical companies, payers, private equity-backed organizations, and other healthcare services companies are pursuing acquisitions, partnerships, and management agreements that position them more directly in care delivery. As the competitive landscape broadens, health systems must evaluate transactions within a more complex ecosystem of potential partners and competitors.

As transaction structures and participants become more varied, operational preparation will be critical to realizing value. Integration planning cannot begin only after an agreement is signed or a transaction closes. Organizations should define the future operating model, governance structure, leadership responsibilities, technology requirements, clinical integration priorities, and financial targets at the outset.

Early planning is particularly important when a transaction introduces a new business model or capability that the organization has not previously operated. Without that preparation, health systems risk closing strategically compelling deals but failing to capture their intended benefits.

The next phase of healthcare M&A will be defined less by transaction volume or scale alone and more by disciplined decisions about where and how to compete. Organizations will be better prepared for a more constrained and competitive environment if they actively tie their transaction strategy to margin improvement, market positioning, and care delivery innovation—connecting each transaction to a clear operational value-creation plan.