Law firms predict more growth in healthcare M&A, digital health

Earlier this year, law firms said they expected healthcare consolidation to accelerate in the months ahead, driven by Trump administration policies and last year's heightened appetite for deals, especially in physician practice and hospital/health system acquisitions.

A Modern Healthcare survey of law firms nationwide, conducted from late January to late February, found growing momentum not only in industry mergers and acquisitions but also in digital health. While respondents at the time said they saw no signs of a slowdown in the near future, they also noted reasons for uncertainty.

Related: How hospital merger oversight is shifting deal-making

Here are some key takeaways based on responses from nearly 60 law firms regarding industry trends in 2024 and the outlook for this year:

1. Physician practices dominate M&A transactions

Approximately 75% of responding firms identified physician practices and services as the most common M&A transaction type in 2024. Additionally, 60% of firms cited hospitals and health systems, while 50% said behavioral health was their top sector.

2. Mental health sector leads M&A interest

About 45% of respondents said the mental health sector received the most interest from potential M&A partners in the past year, while telehealth and long-term care both received 41% of respondent support as the sectors with the second largest interest from potential M&A partners.

Another 45% of responding firms replied “other” regarding which sector drove the most interest among potential M&A partners in the past year. The most common write-ins were urgent care centers, ambulatory surgery centers, digital health, artificial intelligence and medtech/medical devices.

View the full survey results

3. Uncertainty clouds M&A outlook

Upcoming changes in government regulations and enforcement, as well as potential lawsuits arising from those changes, will weigh on potential mergers in the coming year, said Frank Carsonie, chair of the healthcare practice group at law firm Benesch, in his survey response. 

Curt Chase, leader of the healthcare, life sciences and education business unit at law firm Husch Blackwell, also cited some uncertainty.

“It remains to be seen if the new administration will take a more "free market" approach, increasing market activity, or if the uncertainty, new (Hart–Scott–Rodino Antitrust Improvements Act) requirements, and increased state scrutiny will lower the appetite for mergers and acquisitions,” he said in the survey response.

Other responding firms expressed a more positive outlook on M&A oversight. 

In its survey response, law firm Manatt, Phelps & Phillips said it expects the healthcare market to become more dealer-friendly — and possibly even bullish — subject to expected federal regulatory changes under the Trump administration.
 
Erin Whaley, partner at law firm Troutman Pepper Locke, also expressed a favorable outlook.

“The healthcare market will make a gradual rebound over the next year, with a significant uptick in deals,” she said in her survey response.

4. Bullish outlook for growth in digital health

Survey respondents also see increased momentum in the telehealth and digital health sectors, particularly in areas such as personalized care, diagnostics and clinical documentation. 

“We expect a surge in digital health innovations, such as AI-driven diagnostics and personalized treatment plans,” said Krist Werling, global head of McDermott’s health and life sciences practice.

Brent Hill, healthcare section leader at Holland & Knight, expects many changes in the industry will be driven by the continued adoption of telehealth, remote patient monitoring capabilities, personalized care and increased utilization of AI for clinical diagnostics documentation. 

Benesch’s Carsonie also sees strength in those sectors.

“Telehealth and virtual care should continue expanding, making healthcare more accessible, while AI will play a larger role in clinical documentation, patient communication, and personalized care,” he said.