After a period of macro uncertainty and uneven deal flow, healthcare M&A is entering 2026 with renewed momentum, but also sharper discipline. The past year revealed a market less focused on sheer volume and more attuned to strategy, balance sheet strength, and long-term operational resilience.

For healthcare real estate investors and occupiers, these shifts are reshaping where capital flows, which assets trade, and how real estate fits into broader transaction strategies.

A Market Reset, Not a Retreat

Healthcare M&A activity through 2025 told a nuanced story. While overall deal volume remained relatively steady, deal values surged, signaling a clear shift toward fewer, larger, and more strategic transactions. In the first half of 2025 alone, total healthcare deal value climbed more than 50% compared to the prior period, even as transaction counts dipped. Per KPMG, strategic buyers continued to dominate, accounting for roughly 60% of deal activity, while private equity remained active despite higher interest rates and tighter credit conditions.

Rather than signaling a pullback, this pattern reflects a market-wide recalibration. Dealmakers adjusted to higher capital costs, regulatory uncertainty, and ongoing margin pressure — particularly among Providers — by becoming more selective. Capital increasingly flowed toward assets offering scale, outpatient exposure, technology enablement, and durable demand fundamentals.

Hospital M&A: Where the Recalibration Was Most Visible

That selectivity was most pronounced in the hospital and health system sector. Hospital M&A slowed meaningfully in 2025, with announced transactions falling to 46 deals, down from 72 the year prior, according to Kaufman Hall. Financial stress, however, became a defining driver of the deals that did occur. More than 43% of hospital transactions involved a financially distressed party — a record high.

Policy uncertainty, Medicaid reimbursement pressure, and rising labor and supply costs weighed heavily on providers, particularly in the first half of the year, sidelining many potential transactions. However, deal activity accelerated in the second half of the year as systems gained greater clarity around Federal policy and sought partnerships or exit strategies to stabilize operations.

Transactions like Hartford HealthCare’s $86 million acquisition of two Connecticut hospitals from bankrupt Prospect Medical Holdings illustrate this dynamic. Well-capitalized systems are stepping in where others cannot, acquiring distressed assets while committing new capital to modernize facilities, expand outpatient and ambulatory services, and invest in behavioral health and virtual care.

Outpatient, Services, and Digital Health Take Center Stage

If hospitals faced headwinds, healthcare services and digital health forged ahead. Healthcare services was the most active subsector by volume in 2025, driven by consolidation in fragmented outpatient, home health, behavioral health, and specialty care markets. Deal value in the sector jumped as buyers pursued scalable platforms with strong regional density and real estate footprints, which optimized outpatient delivery.

Digital health and healthcare IT also gained momentum, with deal volume increasing more than 20% year-over-year. While deal sizes skewed toward the mid-market, investor interest remained strong in AI-enabled platforms, revenue cycle automation, and hybrid care models. These trends are increasingly influencing real estate decisions, as technology enables care to move closer to the patient and into more flexible physical footprints.

Medtech and Life Sciences Signal Confidence

Outside of Provider M&A, medtech transactions surged in the back half of 2025, with total deal value reaching approximately $80 billion, surpassing the prior three years combined. Large transactions, including multi-billion-dollar acquisitions and go-private deals, reflect confidence in long-term innovation pipelines and demand fundamentals.

While medtech M&A doesn’t always translate directly to traditional healthcare real estate, it often drives growth in R&D facilities, advanced manufacturing, and specialized office and lab space, particularly in established life sciences clusters.

Real Estate Capital Remains Selective — but Active

Healthcare real estate investment remains active, particularly in sectors with strong demographic tailwinds. Skilled nursing, senior housing, and outpatient assets continue to attract capital, even amid reimbursement uncertainty.

Transactions like CareTrust REIT’s $142 million acquisition of a Mid-Atlantic skilled nursing portfolio illustrate investors’ willingness to deploy capital where coverage metrics, operator quality, and yield profiles align.

That said, overall healthcare real estate transaction volume remains below historical averages, reflecting a bid-ask gap and cautious underwriting. Interest rate relief could unlock additional activity later in 2026, however, investors remain disciplined, favoring off-market deals, long-term leases, and operators with proven performance.

What This Means for 2026

Looking ahead, healthcare M&A in 2026 is likely to remain active, but targeted. Expect continued consolidation in outpatient and services-driven sectors, selective hospital transactions tied to distress or strategic repositioning, and sustained interest in technology-enabled care models.

For healthcare real estate stakeholders, success will hinge on understanding how real estate supports broader M&A objectives, from balance sheet optimization to care delivery transformation.