Special Report: Healthcare M&A Predictions for 2023

Read what forces our team believes will shape the healthcare M&A industry next year.

They share thoughts on challenges, investing, partnerships, trust, the media – and what gets them up in the morning when they think about healthcare.

Several clear themes emerged. Welcome to 2023.


1. What forces will be driving hospital M&A in the coming year?

Chris Benson

The forces likely to drive hospitals to seek stronger partnerships and affiliations are the usual suspects.  While it is clear expense side factors are universal, it is also important to recognize the transition all providers must make to be able to practice the medicine of tomorrow for their patients and stakeholders. Disruptive clinical forces are changing the way care is delivered and the business model of healthcare providers.  Scale, especially when implemented with a strong operating company approach, allows organizations to spread costs and be more responsive to changing market demands.  Independent hospitals will find it difficult to invest in new and disruptive care models given all the other headwinds they face.


Adam Davis

Hospital mergers and acquisitions will be driven by the need for operators to achieve increased scale to mitigate operating pressures that began in 2022 and will likely continue in 2023. Ongoing disruptions in the industry, driven by a host of economic factors, particularly higher labor costs, will prompt hospital executives and boards to consider strategic partnerships. While wage pressures have somewhat subsided recently, they remain elevated, and will likely persist in 2023, putting pressure on hospitals’ profitability. Inflation has also generally waned recently, but supply chain issues and geopolitical uncertainty are ongoing concerns in the eyes of US policymakers. As a result, the Federal Reserve continues to signal its willingness to raise interest rates to stymie cost increases across the US economy. However, higher rates would not only make the cost of capital greater for hospitals to finance the development, renovation, or expansion of service lines, but they would also cause investment portfolio volatility and thus cash flow erosion, contributing to breaches of bond and/or loan covenants. In addition, small-to-mid-sized hospitals, especially in areas with low or stagnant population growth, will likely feel these pressures more acutely than bigger ones in more densely populated regions.


2. Are there industry sectors you anticipate to be particularly active?

Rex Burgdorfer

We sampled ~15 health systems that our team is working with around the country in evaluating M&A opportunities.  Two-thirds are hospitals seeking a larger partner.  One-third are larger systems pursuing growth. 20% are local government-sponsored, 20% faith-based, and 60% secular. Local Governments are the category most likely to undergo change in the coming years.



Casey Webb

The acute care hospital industry will likely see an acceleration of consolidations, particularly of independent hospitals sponsored by local governments, as they seek relief from the unique operational challenges brought on by the pandemic. Regional health systems that have failed to grow over the last decade will likely feel pressure to seek additional scale, either through restructuring non-core regions, partnering with smaller independent hospitals or merging with like-size peers. Beyond acute care, many systems are considering how to expand their behavioral health offerings by either partnering to build de novo facilities or acquiring existing facilities. The skilled nursing industry continues to show distress and will keep workout groups busy next year.


3. Will geography continue to play a role in hospital consolidation?

Brent McDonald

Geographic issues will always play a significant role.  Certainly, how organizations are faring in the current industry-wide headwinds caused by rampant staffing cost inflation, volatile investment returns and higher cost / tighter debt markets depends on geographic associated issues including regional payor mix, fairness of health plan reimbursement, and demographics (employment, population growth, etc.).   We are seeing hospitals less than 45 miles apart but separated by an arbitrary state line facing vastly different futures based upon lower reimbursement, monopolistic BCBS concentration, and government failure to address Medicaid expansion.  These geographic distinctions certainly may be a catalyst for those organizations that may want to join a larger-scale health system and, conversely, may lead to forbearance for the governing bodies of larger organizations that may be considering appropriate consolidation.


Jordan Shields

Multi-region transactions will be a hot topic in 2023. For example, as Advocate and Atrium stated in their merger communications, the Midwest and the MidAtlantic are now adjacent healthcare markets. While the scale benefits of hospital transactions can include in-market clinical and referral synergies, those tend to be secondary to the market-independent structural synergies of best practices, corporate finance, population health infrastructure, purchasing and other gains. However, to fully realize those benefits, organizations typically need to undergo structural and ownership change, indicating that loose affiliations and other “dip-the-toe-in” partnerships are likely to cool off in 2023.


For more information about Juniper’s work in healthcare, please contact us at 312-516-3000 or info@juniperadvisory.com.