Why some systems say ‘yes’ to distant M&As — and others say ‘never’
As financial pressures mount and adjacent markets become saturated and/or highly regulated, a growing number of health systems are rethinking the geographic boundaries of traditional mergers and acquisitions — sparking renewed debate over the strategic value of noncontiguous transactions.
While some leaders argue that expansion beyond a system’s immediate footprint dilutes cultural cohesion and operational synergies, others see opportunity: greater scale, diversified risk, and expanded access to capital and talent.
For systems like Kaiser Permanente and Prime Healthcare, strategic moves into new regions and non-adjacent markets reflect a deliberate shift toward value-based care and scalable operating models. But many executives remain cautious, insisting that deeper integration and community connection remain best achieved within contiguous regions.
So what would it take to compel a health system to pursue a merger or acquisition with a geographically distant partner? Will noncontiguous M&As become more common — or remain the exception? Seven health system leaders shared their perspectives with Becker’s.
Editor’s note: Responses have been lightly edited for clarity and length.
Question: What are the primary factors that would compel your health system to pursue a merger or acquisition with a geographically distant partner?
Brett Tande. Corporate Executive Vice President and CFO, Scripps Health (San Diego): Quality and resources. For a merger or acquisition to be worthwhile over the long term, it must offer a clear pathway to elevate the quality of care across both organizations while expanding the combined entity’s access to resources (e.g., cash). Health systems have a duty to their communities to continually enhance clinical outcomes and achieving that often requires ready access to financial resources.
If a partnership allows Scripps to improve care delivery at both our facilities and the partner’s without diluting the resources Scripps has, that could represent a compelling opportunity. That said, pursuing M&A purely for top-line growth feels tone-deaf in today’s environment. Given that federal and state legislation will reduce profitability over the next decade, many health systems will be contemplating some very tough strategic and operational decisions. A transaction lacking clear benefits in quality or resource access risks weakening both organizations. For organizations that will struggle under the deteriorating reimbursement environment we are entering, my advice would be for them to consider strategic alternatives before resources dwindle… give your organization the benefit of striking a deal from a position of strength.
Jeff Costello. CFO, Beacon Health System (South Bend, Ind.): Our strategic focus as a regional health system remains on strengthening our presence within our core geographic markets. We would not be compelled to pursue geographically distant partnerships, as our growth strategy centers on deepening our footprint in northern Indiana and southwest Michigan, where we can leverage operational synergies, maintain care continuity for patients and build upon our established community relationships. Our recent acquisition of Ascension Southwest Michigan exemplifies this approach and enhances our ability to serve patients across the region.
John Orsini. Executive Vice President, CFO of Northwestern Medicine (Chicago): I find geographically distant mergers challenging as synergies from IT and managed care contracting are difficult to obtain. The potential partner would need to be a significant provider in its market and also have either scalable capabilities that would add value to us or capabilities we could bring to bear that would help them advance their strategic goals.
Joseph Cacchione, MD. CEO, Jefferson Health (Philadelphia): We actually believe that having a strong regional presence is a benefit to our patients, students and health plan members. We pursued our combination with Lehigh Valley Health Network last year because joining together strengthens access and care for patients. By creating an integrated regional system, we offer broader networks of specialists, expanded services and advanced treatments closer to home.
Strategically, acquiring or merging with partners in contiguous or adjacent markets also allows us to better serve the communities between our current service areas where access to care may be limited. By expanding our footprint in this way, we can create a more seamless regional system of care, improving access for broader communities and reaching populations we could not as effectively serve independently.
It also enhances our research, education and health plan offerings — helping us attract top talent, improve affordability and better serve vulnerable populations. Ultimately, our combination with LVHN allows us to enhance delivery on our mission to provide accessible, high-quality, patient-centered care to all the communities we serve.
Nick Barcellona. CFO, WVU Medicine (Morgantown, W.Va.): We’ve nearly tripled in size in the last four years from a revenue perspective, north of $7 billion now and 25 hospitals. We’ve experienced quite a bit of M&A, which has been contiguous from a geographic market perspective. I think because of all the external pressures out there, you’re going to see an acceleration in M&A. I think that’s the reality of what’s happening. You’re probably hearing and reading a lot about this related to the Big, Beautiful Bill and the potential implications to Medicaid funding and the number of hospitals that will close or systems that will come under significant financial stress.
I think that’s accurate, but specifically related to non-contiguous M&A … I think when you get into those times of great stress, more organizations are sort of raising their hands and asking for help or seeking out partners. That’s certainly been true for folks talking to us as well. You have to have your strategy defined, and your methods and metrics that you evaluate when answering or responding to those types of questions, you have to be aligned on that.
Sam Glick. Executive Vice President of Enterprise Strategy and Business Development, Kaiser Permanente (Oakland, Calif.): Kaiser Permanente has operated successfully for 80 years with a noncontiguous footprint, so we understand well the opportunities and challenges that serving geographically distant communities presents. We believe that value-based care — as Kaiser Permanente defines it — is the future of healthcare. Kaiser Permanente currently touches more than 13.1 million lives across 10 states and [the District of Columbia]. We know there is a great desire from our members and customers to have our unique value-based care in more places across the country. We are working to meet that need, and that includes a focus on communities where the country is growing and people are moving, regardless of whether a community is contiguous with our current states. And our mission compels us to share our expertise in delivering this care with even more people.
Steve Aleman. CFO, Prime Healthcare (Ontario, Calif.): The main factors that would compel our health system to pursue an M&A with a geographically distant partner:
1) A facility with strong volume that would benefit from implementation of Prime’s proven operating model.
2) The ability to expand market presence or a system in a new market that already has an established market concentration.
3) A transaction that can be executed at appropriate market value.
Prime has stated for some time now that future acquisitions would either be a tuck-in/add-on into an existing market or a cluster acquisition into a new market. This is important because it is a very challenging environment currently for hospital providers and you need to have the strength and flexibility of scale to adapt. Prime is unique from other providers in that our strength has always been the ability in our operating discipline to be able to pivot accordingly to the everchanging macro environment. It is the clear understanding of our operating metrics, performance drivers, service lines, market headwinds and tailwinds and fiscal conservatism that allows us the opportunity to manage and pivot as needed depending on changes that come our way.
Q: Do you expect more health systems to pursue noncontiguous transactions in the future? Why / why not?
Brett Tande. Corporate Executive Vice President and CFO, Scripps Health (San Diego): Yes. For the past two decades, health systems have largely pursued M&A within adjacent geographies, but many of those opportunities have now been exhausted. At the same time, both the FTC and various state regulators have stepped up scrutiny of mergers within the same or nearby markets, making those deals harder to complete. Despite these hurdles, the economic reality for many health systems is a need for significant cost reduction, and overhead costs play meaningfully into this problem. If two noncontiguous health systems are truly committed to operational integration (sharing a single EHR, using a single ERP platform, standardization across supply chain and corporate infrastructure, etc.), and demanding exceptional performance out of areas such as revenue cycle, then the rationale for partnership remains strong.
Jeff Costello. CFO, Beacon Health System (South Bend, Ind.): While some health systems may explore noncontiguous transactions, we believe the trend will likely still favor regional consolidation. Health systems are increasingly recognizing that geographic proximity enables better operational integration, more efficient resource sharing and stronger community connections.
Joseph Cacchione, MD. CEO, Jefferson Health (Philadelphia): I think health systems will increasingly look at the local and regional approach as the more effective strategy. True economies of scale aren’t just about size on paper — they’re about operational alignment, shared infrastructure, a unified culture, and clinical integration that improves access to care and reduces costs. By focusing on a closely connected geographic region, you can develop better care coordination, stronger local partnerships, improved recruitment and retention, and supply chain efficiencies.
John Orsini. Executive Vice President, CFO of Northwestern Medicine (Chicago): I think the multi-state health systems will continue to grow. They will continue to round out in their geographies and likely expand from there.
Nick Barcellona. CFO, WVU Medicine (Morgantown, W.Va.): We are of the opinion, and I don’t want to speak for everyone, but I think Albert [Wright, WVU Medicine CEO] would agree that we don’t see the value in these noncontiguous M&A deals that you’re seeing, certainly for nonprofit healthcare and mission oriented organizations like ours. Yes, there’s scale. Yes, there are other potential benefits you bring to the table.
For us, we have a lot of pride and passion in our brand. We have a lot of appreciation and depth of support from our region, from a geographic perspective, and certainly in an environment of uncertainty related to Medicaid. Medicaid, whether we like it or not, is a very local business. You have to work very closely with your state or surrounding states that you are in and establish those relationships and work together, because these are very challenging problems to solve, and they’re not going to be solved overnight. For us, the pros do not outweigh the cons; we see a lot of value in contiguous geographic growth and expansion.
Sam Glick. Executive Vice President of Enterprise Strategy and Business Development, Kaiser Permanente (Oakland, Calif.): When we decided to form Risant Health to expand and accelerate the adoption of value-based care in diverse, multi-payer, multi-provider environments, geography was not a limitation. Through such initiatives, we can unite like-minded nonprofit, community-based health systems to expand value-based care, improve outcomes, make health care more accessible and affordable, and enhance the care experience.
Risant Health and its current and future health systems — including Geisinger and Cone Health — together with Kaiser Permanente, will continue to build the value-based platform, working with clinicians, to provide solutions that enable health systems to improve care and experience for patients, members, and clinicians. There are clear criteria for health systems that become a part of Risant Health, including recognized quality outcomes, sustainable standalone financials, a leading reputation in their geography, and a demonstrated commitment to value-based care. The interest continues to be robust. It is our intention to grow to five or six systems in our first five years.
Steve Aleman. CFO, Prime Healthcare (Ontario, Calif.): I anticipate in an environment of reimbursement cuts and rising cost pressures, systems will look for diversification to mitigate those risks. That diversification drive will lead health systems to pursue acquisitions that diversify their business segment portfolio and or expand to new markets that can help diversify the risk related to state specific concentration risks.