For the past few decades, health systems have struggled to find ways to boost revenue amid growing financial stress. The pressure on hospitals has steadily built up over the years, especially in wake of the pandemic. The answer for many is to merge.
The new trend to merge two or more systems either in the same region or in different markets opens up many more opportunities for consolidation.
But as cross-market mergers become more common, so does the debate about their benefits to organizations and patients. There is no lack of academic studies and opinions on this topic — so let's explore the issue.
How trendy are these mergers?
Cross-market mergers began drawing greater attention in the aftermath of the COVID-19 pandemic. By early 2023, industry analysts noted the trend of large, regional health systems increasingly moving beyond traditional geographic constraints to find partners. It was a trend they expected to continue and even intensify.
Regional and cross-market mergers are more prevalent for health systems that want to expand but face few opportunities in their already crowded markets, according to a recent study by KFF.
Pre-pandemic, hundreds of health systems owned hospitals in multiple commuting zones. According to one study, about 1,500 hospitals were targeted as part of a completed merger or acquisition from 2010 through 2019 and most of these deals (55%) involved hospitals or health systems in different commuting zones.
More recent examples of cross-market mergers include:
- The $27 billion Atrium–Advocate Aurora merger, which was completed in December 2022 and created the third-largest nonprofit health system in the United States.
- Risant Health, a nonprofit subsidiary of Oakland, Calif.-based Kaiser Permanente but headquartered in Washington, D.C., acquired Geisinger in April 2024. In June, Risant announced plans to acquire Greensboro, N.C.-based Cone Health.
- Albuquerque, N.M.-based Presbyterian Healthcare Services and West Des Moines, Iowa-based UnityPoint Health announced plans to combine in March 2023 before walking away from the deal in October that year. The deal would have resulted in an $11 billion enterprise with sites across New Mexico, Iowa, Illinois and Wisconsin.
- St. Louis-based BJC HealthCare and Kansas City, Mo.-based Saint Luke's Health System formed a combined $10 billion organization with 28 hospitals at the start of 2024 that anchors each side of the state with additional sites in Illinois and Kansas.
What are the benefits of cross-regional M&A?
The advantage of such mergers in healthcare is the opportunity for health systems to reduce duplication and improve revenue.
The American Hospital Association issued a statement in May to the House Budget Committee arguing that mergers can help some hospitals ease financial burdens and improve patient care. Among other benefits, mergers can expand access to care for patients and allow hospitals to achieve the scale and increase the efficiency in purchasing medical services, supplies and prescription drugs.
As explained by KFF Health News, merged hospitals can share knowledge and best practices with each other even if they aren't in the same geographic area. Operating at a larger scale can help smaller systems and hospitals be involved in value-based payment programs.
Finally, it's important to note that cross-market mergers have faced less resistance from government antitrust agencies compared to mergers between healthcare providers operating within the same market — a benefit for hospitals.
What are the red flags?
Although cross-market mergers may lead to geographic dispersion of affiliated hospitals and health systems, studies have highlighted concerning impacts of this type of M&A on patients and consumers.
According to a study published in 2024 by Health Services Research, cross-market mergers lead to higher healthcare costs and no impact on mortality and readmission rates for heart failure, heart attacks and pneumonia.
The researchers found that cross-market mergers increased healthcare prices by almost 13% within six years of the acquisition. Price increases were even higher when the acquired hospital had a larger market share than the acquiring hospital, growing by 21.8%, according to the study. "More antitrust scrutiny of cross-market mergers — particularly those of serial acquirers — appears prudent given the current state of highly concentrated hospital markets in the United States," the study authors concluded.
The new research shows that mergers between two hospitals at least 50 miles apart have led to significant price increases for patients — findings that could impact regulatory scrutiny of future healthcare transactions.
Hospital industry leaders insist that acquisitions and mergers help reduce healthcare costs and make it possible for hospitals to sustain operations. Mergers keep hospitals open, they say. The AHA agrees. Its position is that mergers reduce annual operating expenses and patient revenue per adjusted admission — and help drive quality.
Will the FTC increase scrutiny of cross-market M&A?
The FTC has yet to interfere with any cross-market mergers, although some movement from the federal agency could suggest that is open to change.
From 2000 to 2020, the FTC challenged only 13 hospital transactions — an enforcement rate of about 1%. This information, presented in research by Yale economist Zack Cooper and researchers at Harvard, the University of Chicago, and the University of Wisconsin-Madison, concluded that there was an "underenforcement of antitrust laws in the hospital sector."
In 2022, the FTC renewed its focus on challenging mergers within the same market, with many deals contested or abandoned under increased scrutiny from the Biden administration. Additionally, the agency expanded its interpretation of a 1914 statute, broadening the scope for intervention against corporate practices it considers anticompetitive. This reinterpretation could lower the legal threshold for challenging business conduct that might not violate other federal laws.
The AHA expects that academic research on cross-market mergers among health systems will continue to grow. While the FTC has not yet used a cross-market effects model to challenge a hospital merger in court, it has raised questions about such models in its investigations, a line of inquiry the AHA believes will persist.