Hospital M&A, Outpatient Growth, & Health System Finance Trends with Alan Condon

There's a small circle of people who truly understand what it takes to lead a health system right now. The decisions are enormous, the variables are constantly shifting, and the stakes of getting a call wrong don't stay contained. That's not a complaint, it's a structural reality. And it's why the most effective C-suite leaders are deliberate about where they go to pressure test their thinking. Becker's 14th annual CEO and CFO Roundtable brings together more than 1,500 executive level attendees, and nearly 400 speakers for four days built around growth, financial sustainability, workforce strategy, and the leadership questions that don't have easy answers. Join us November 2nd through the 5th in Chicago. For the agenda and event details, visit BeckersHospitalReview.com and click on the events tab in the upper right. This is Scott Becker with the Becker's Healthcare Podcast. I'm thrilled today to be joining me, Alan Condon. Alan is one of the leaders. He's the editor-in-chief of the editorial team at Becker's Healthcare. Tremendous leader, covers a lot around finances of health systems and what's going on in that world. Alan, take it away. What are a couple of the stories that you're watching currently in healthcare and health system finance? Yeah, absolutely. So I think we usually kind of cover a ton of really big, big transactions, mergers, acquisitions. It seems like this year, it's not a week that goes by where there's not another big health system transaction in this space. So just to quickly surface one of these that we just covered yesterday, and then moving on to maybe a broader, wider look at how health system, hospital finances are stacking up currently. But I think first and foremost, I think a really interesting deal that we just covered on Becker's this morning, and that's UW Health in Madison, Wisconsin. Academic Health System, I believe they operate seven hospitals across Wisconsin and Northern Illinois. Just planning to acquire a Marshfield Clinic hospital. Marshfield Clinic of course acquired under the Sanford Health umbrella in a big big merger last year This is the first hospital sale that Sanford Health has done in quite some time Now, of course, a huge, huge nonprofit integrated 56 hospital system operating in multiple, multiple states, offloading one particular hospital as part of Marshall Clinic to UW Health. Not over the line yet, still, of course, some regular hurdles and clearances to come. But an exciting deal for UW Health to expand and grow its presence in Wisconsin and an interesting deal for Sanford Health to upload one of those hospitals that did come under the Sanford Health system umbrella through that Marshall Clinic integration last year. I think just to kind of pull another note or two out on Sanford Health, one hospital sale coming in the works there, but it also just two months ago signed a definitive agreement to acquire North Memorial Health System. Now, that's a two hospital system in Minnesota. So Sanford Health, no doubt, has some big, big plans to grow within the Midwest. Minnesota, a key market that it really wants to expand and grow into there. And then on the other side of that deal, just to kind of focus on UW Health and the trend that we're seeing across academic systems over the last two years or so, we're seeing, I believe this year alone, we've reported on 32 or 33 academic health systems that have either acquired or plan to acquire hospitals. Mostly these are community hospitals, rural or safety hospitals that are somewhat struggling, looking for a larger health system partner. And academic health systems are really stepping up to the fold here. Just over the last couple of months or so, we've seen UC San Diego Health Acquire Hospital, Hackensack Meridian Health in New Jersey looking to do the same, UNC Health in North Carolina, Allegheny Health Network in Pennsylvania, part of Pymark Health. They just acquired two hospitals as well last month. So really indicative of a wider trend that we seeing a lot of financial challenges by some small standalone hospitals and health systems academic systems with broad balance sheets operating operating footprints really stepping up and acquiring some of these financially struggling facilities which is quite interesting Fascinating. The Marshfield Clinic thing is a fascinating thing because Marshfield Clinic, for a very long time, was one of the most respected names in healthcare. And it just seems over the last few years, trying to find their footing in rural America between Stanford and now back to University of Wisconsin, a fascinating challenge in evolution, but a great, great system. And it'll be fascinating to watch. how that plays out over time. Let me turn it back to you. Anything else you're watching closely? Yeah, yeah, absolutely. And I guess just to kind of belabor that point one more bit deeper, to your point there, Scott, I think it's really interesting, just drawing a line between Sanford Health's acquisition of Marshfield Clinic. Essentially, they called it the Marshfield Clinic region of Sanford Health. Very, very similar to what Sutter Health is looking to do with Alina Health, essentially acquired as 12 hospital system of Minnesota, move across the country, and essentially have that operate as the Illina Health region of Sutter Health. That's a really exciting deal that a lot of folks are watching, and somewhat similar in terms of how those two deals will be structured. But just to jump to the other story, Scott, I guess just kind of a wider lay of the land, just kind of covering the most recent Kaufman Hall National Hospital flash report, kind of gives us a wider picture of what we're looking at here as of May 2026, the most recent data which we have available. And essentially, we see nonprofit hospital margins on average dip to 2.9% as we saw expenses, costs grow again month over month as health systems really strategically planning for care, shifting and accelerating, it seems like, towards that outpatient setting. So So Kauffman Hall noted that outpatient revenue has grown year over year for the last several months. Many health systems really looking to accelerate proactively adapting their portfolios and operations to support that future of US healthcare delivery. No doubt it's something that we've seen happen for quite some time. It not a new trend by any stretch of the imagination but certainly seems to be more of an onus in 2026 for health systems and hospitals to really accelerate towards implementing those outpatient footprints moving care towards there We're seeing a big, big shift on the ASC side, more complex procedures being able to be done safely, effectively. and the ASC, the CMS elimination of the inpatient onlyness, all of these trends really kind of coupling into each other to really accelerate the need for systems to make sure they've got a robust outpatient footprint and really making sure that care is meeting folks where they are there. So just a couple of quick notes in terms of key takeaways from the Kawhi report there. Certainly interesting to see. Dipping margins, no doubt to be expected given the financial challenges we've seen. I think that's something that we expect to continue, unfortunately, through Q3 and Q4. But really interesting to see, Kauffman, again, noting the real need for systems to really accelerate towards that outpatient revenue growth. Thank you very, very much. Fascinating, as always. Anything else you wanted to share today that's top of mind? I think one other, just kind of quick, we love to kind of take a lay of the land in terms of what we're looking at in Q2, just to kind of give readers and audience members what's coming down the pipeline. We have the big, big for-profit health systems all reporting their Q2 finances. I believe beginning next week, we'll have HCA Healthcare, Community Health Systems, Tenant Healthcare, Universal Health Services as well. So no doubt our finance team will be all over those. I think the nonprofit sector will really be having a keen eye on what the executives and leaders of those big for-profit systems have to say. on those Q2 earnings calls, particularly as it relates to the ACA, enrollment numbers, Medicaid, and whatnot. So just a quick little teaser, I guess, for what's coming down the pipeline, and we'll be sure to make sure, keep our readers up to date there, Scott. Thank you so much. As always, great to visit with you, Alan. You're the best in the business. Thank you so much for joining us. Thank you. Cheers, Scott. Thanks so much.