On August 31, 2024, two Massachusetts hospitals closed their doors for the last time. Carney Hospital in Boston and Nashoba Valley Medical Center in Ayer — one founded in 1863, the other the only hospital for miles around — stopped taking patients on the same Saturday, because their owner had run out of money and the bankruptcy court had run out of patience. The ambulances were rerouted. The staff were sent home. The buildings went dark. It was the sharpest image of a year in which the American hospital business, for the first time in a generation, began to shrink in public.
The owner was Steward Health Care, and its collapse was the largest hospital bankruptcy in decades. Steward had been built the way private-equity hospital systems are built: Cerberus Capital Management bought the six-hospital Caritas Christi system in 2010 for nearly $900 million, grew it to 36 hospitals in ten states, then sold the hospital real estate to Medical Properties Trust in a $1.3 billion deal in 2016 and leased it back. When Steward filed for Chapter 11 on May 6, 2024, it listed about $1 billion in funded debt, roughly $6.6 billion in long-term lease obligations, and 31 hospitals. Six of its Massachusetts hospitals were sold to new operators — Boston Medical Center took St. Elizabeth's and Good Samaritan, Brown University Health took Saint Anne's and Morton, Merrimack Health took the two Holy Family hospitals — and two closed outright.
Steward was the headline, but the numbers behind it are the story. In 2025, only 46 hospital transactions were announced in the entire United States, down from 72 in 2024 — the lowest annual count since Kaufman Hall began tracking hospital deals in 2011. Total transacted revenue fell to $18.5 billion, down from $39.7 billion the year before and the lowest since the firm began tracking the figure in 2018. And 43.5% of those deals involved at least one financially distressed party, a record high. The share had been 15% in 2022, then 27.7% in 2023, then 30.6% in 2024. In four years, distress went from an exception to the defining condition of the market. Kaufman Hall's managing director Anu Singh said the firm expects the trend to continue into 2026 — and the average distressed seller was no longer a small rural hospital. At $345 million in annual revenue, the average distressed party in 2025 was a mid-sized system.
The pressure underneath is visible in the operating numbers. Kaufman Hall's National Hospital Flash Report, built on data from more than 1,300 hospitals, put the national median operating margin at 1.8% in August 2026, down from 3.8% in July and 5.6% in June — the weakest month since February. The calendar-year-to-date median was 2.5%. Roughly 43% of American hospitals were operating at a loss, up from about 33% before the pandemic, and bad debt and charity care had risen to 13% of costs. A hospital earning a 1.8% margin has no room for a bad quarter, a broken roof, or a payer that decides to pay late. It has no room, in other words, for the ordinary accidents of running a hospital.
Policy made it worse. The One Big Beautiful Bill Act, enacted on July 4, 2025, cut federal healthcare spending in ways that fall hardest on Medicaid and on the insurance coverage markets — the exact revenue lines that keep safety-net hospitals alive. Kaufman Hall cited the law, along with tariff changes and the fight over expiring enhanced Affordable Care Act subsidies, as the uncertainty that froze dealmaking in the first half of 2025. Nearly 70% of the year's deals were announced in the second half, after the picture cleared enough for boards to act. The deals that did happen were often the ones that could not wait.
Prospect Medical Holdings is the second case study, and in some ways the bleaker one. Leonard Green & Partners bought a controlling stake in the 17-hospital chain in 2010 for $363 million. A Georgetown University case study put the dividends and fees Leonard Green collected during its ownership at $658 million, including a $1.55 billion sale-leaseback of 14 hospitals to Medical Properties Trust in 2019 that left the hospitals paying about $100 million a year in rent. Prospect filed for Chapter 11 on January 12, 2025, listing assets and liabilities between $1 billion and $10 billion. Its Crozer Health system in Delaware County, Pennsylvania — four hospitals serving half a million people — closed its last two hospitals in April 2025. ChristianaCare bought five of Crozer's outpatient locations that May for $50.3 million. The Crozer-Chester campus itself sold at auction in October 2025 for $10 million.
Closures are the quiet part of the wave. A Harvard study tracking acute-care hospitals found that 432 hospitals closed between 2010 and 2025 while only 216 opened — a net loss of 216 hospitals and 24,399 beds. The closure rate rose about 4% a year while the opening rate fell about 3%. Most of those closures were small and rural, and most never made the news outside their county. Their absence is felt in ambulance drive times and in emergency rooms an hour further away, not in deal announcements.
The counterargument deserves its weight. Distress is also a market, and it has buyers. The Steward hospitals that found new owners — Boston Medical Center, Brown University Health, Merrimack Health — are run by systems with the balance sheets to invest in them, and the Massachusetts Hospital Association said it was encouraged by the transfers. A distressed sale at a low price can be the best outcome for a community that would otherwise lose its hospital entirely: the alternative to a sale is not independence, it is closure. And 2026 shows the market turning. The first quarter produced 22 deals and $14.5 billion in transacted revenue, the strongest first quarter since 2020, and only 4 of those 22 deals involved a distressed seller. Divestitures — systems shedding non-core hospitals by choice — made up 15 of the 22. The wave is still there. It is no longer the only story.
That shift is what makes valuation the hinge of the whole market. A distressed hospital is the hardest asset in healthcare to price: its earnings are negative or close to it, so multiples fail; its real estate may be leased back to a landlord; its value sits in a Certificate of Need, a payer contract, or a physician group that may not survive the sale. The buyer who pays too much inherits the distress. The seller who accepts too little answers to a community, a bond trustee, and a bankruptcy judge. Every distressed deal in the Kaufman Hall count — and every closure that never became a deal — passed through that judgment. The firms that make it, and the advisors who run the sales, are the ones this market cannot do without.
Sources: Kaufman Hall 2025 year-end M&A report via Healthcare Dive, January 20, 2026: 46 deals, $18.5 billion transacted revenue, 43.5% distressed (15% in 2022, 27.7% in 2023, 30.6% in 2024), distressed-deal average seller $345 million, https://www.healthcaredive.com/news/hospital-health-system-mergers-acquisitions-decline-2025-policy-uncertainty-kaufman-hall/809916/. Fierce Healthcare, January 16, 2026: $39.7 billion transacted revenue in 2024; Anu Singh on the distress trend, https://www.fiercehealthcare.com/providers/uncertainty-financial-distress-dominated-hospital-ma-2025. Steward Health Care: Cerberus $900 million Caritas purchase (2010), Medical Properties Trust $1.3 billion deal (2016), Chapter 11 filing May 6, 2024 with $1 billion funded debt and $6.6 billion lease obligations, 31 hospitals; Massachusetts transitions to Boston Medical Center, Brown University Health, Merrimack Health; Carney and Nashoba Valley closed August 31, 2024, https://www.mass.gov/info-details/steward-health-care-transitions and https://en.wikipedia.org/wiki/Steward_Health_Care. Prospect Medical Holdings: Leonard Green $363 million (2010), $658 million dividends and fees (Georgetown/PESP case study), $1.55 billion sale-leaseback (2019), Chapter 11 January 12, 2025; Crozer closure April 2025; ChristianaCare $50.3 million outpatient purchase; Crozer-Chester campus $10 million auction, https://www.beckershospitalreview.com/finance/private-equity-firm-drained-658m-from-safety-net-hospitals-in-3-states-report/ and https://en.wikipedia.org/wiki/Prospect_Medical_Holdings. Kaufman Hall National Hospital Flash Report, August 2026, via Becker's Hospital Review, October 22, 2026: median operating margin 1.8%, year-to-date 2.5%, roughly 43% of hospitals losing money, https://www.beckershospitalreview.com/finance/why-43-of-hospitals-are-losing-money/. Harvard hospital-closure study via Advisory Board, October 13, 2026: 432 closures, 216 openings, net −216 hospitals, −24,399 beds, https://www.advisory.com/daily-briefing/2026/10/13/hospital-closures-oi-ec. Q1 2026 rebound via Health Capital Topics, April 2026: 22 deals, $14.5 billion, 15 divestitures, 4 distressed, https://www.healthcapital.com/hcc/newsletter/04_26/HTML/HOSPITAL/hospital_ma_q1_2026.php.