As larger healthcare systems engage in M&A activity, unaffiliated and independent community hospitals are expected to decrease over time, with 67% of community hospitals already part of larger systems, according to the report. This is because community hospitals are looking to offer more capabilities and specialized services to enhance care, something they can do by partnering with larger healthcare systems that offer these resources. As a result, the model of care delivery is expected to become more viable and sustainable among these organizations, with coordination of care across multiple sites enhanced and more specializations added to these places.

"Improving telehealth capabilities has been a particularly critical driver for recent transactions," said Singh. "In addition, many hospitals and health systems are pursuing creative arrangements to bolster their post-acute care capabilities and better coordinate the care patients receive after leaving the hospital. Many organizations are also looking to partner with like-minded counterparts to gain the complementary intellectual capital and expertise needed to develop these capabilities."


Partnerships outside of hospitals and health system transactions are also still consistent, with more being seen between payers and providers and with a greater focus on care delivery and transitioning from fee-for-service to value-based care payment models.

Prior to the pandemic, M&A activity was strong in both profits and numbers, with 92 transactions announced in 2019. The average size of sellers by annual revenue then was $278 million, which was high but not as much as the $409 million earned from the 90 deals announced in 2018.

The first quarter of 2021 included 13 transactions, fewer than those in the first quarter of 2020. The average size of the deals, however, was significantly larger, with the average seller size by revenue at $676 million.

The trend of high average seller size is expected to be seen in the fourth quarter, as large healthcare systems continue to see ways to overcome the negative implications of the pandemic and expand their reach, according to the report.

Moody's Quarterly report, back in May, also predicted the trend to continue in the face of the pandemic. "Larger health systems will pursue M&A to increase market share through geographic and service line diversification. As COVID-19 takes a toll on financial performance, smaller providers will look to partner to gain access to clinical, strategic and financial resources and reduce labor, supply and information technology (IT) expenses. Flush with liquidity, for-profit hospitals will focus M&A efforts on building capabilities in non-hospital settings to meet consumer demand,” wrote the authors of that report.

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