Healthcare M&A: How to Know When to Sell — and What to Look for in a Buyer

Market conditions in healthcare remain mixed as organizations respond to ongoing margin pressure, workforce challenges, and shifting care models. Some systems are divesting, creating opportunities — but competition for quality assets is high. Sellers should identify performance issues early; buyers should hold firm on fundamentals and compatibility.

Why M&A Matters Now

When you’re considering selling a healthcare organization, timing is key. Sell too soon and you may miss opportunities to address key factors that could undermine the organization’s valuation. Wait too long and your current struggles can weigh down performance, making it harder to attract buyers at a competitive price.

A challenging economic environment has prompted several health systems to divest, creating M&A opportunities for systems looking to grow. However, potential buyers should assess a range of factors to find the right targets for acquisition.

Signs It’s Time to Consider Selling (KPIs & Signals)

Your decision to sell must be rooted in data. Consider using real-time data to make the right business decision. Here’s what to look for when you’re considering a sale.

Track Financial Performance

Performance metrics, including how each metric is trending over time, should play a pivotal role in your decision-making.

Key metrics include:

• EBITDA
• Revenue trends, including gross revenue, and revenue growth rate
• Payer mix
• Reimbursement rate
• Average cost per discharge
• Expenditures, including labor costs, supply costs, and capital expenditures
• Operating margin
• Days cash on hand
• Days sales outstanding

Track financial performance across service lines to identify those that may be underperforming and make sense to sell.

Assess Alignment Between Leadership and Staff

Talent metrics should shape your decision to sell. A productive, engaged workforce may help organizations overcome negative financial trends, while lagging talent metrics may indicate that it’s time to divest.

Key metrics include:

• Turnover rate (among both staff and leadership)
• Vacancy rate
• Recruitment costs
• Time-to-fill for key roles
• Employee engagement/satisfaction ratings
• Agency and contract talent usage rates
• Absenteeism rates

Identify Operational Challenges

Leverage data to measure your performance and determine if selling may be the best option.

Key metrics include:

• Bed occupancy rates
• Average length of stay
• Patient throughput
• Readmission rate
• Patient satisfaction
• Supply chain efficiency ratings
• Age of core IT infrastructure
• IT downtime
• Percentage of revenue spent on IT

After reviewing the key metrics you selected, create forecasts to determine how current trends could shape the future of the organization.

What Buyers Look For

Successful M&A begins with clear internal alignment on current pain points and strategic goals.

Solid Financial Fundamentals

Financial performance is critical in your decision. Consider tracking a range of metrics to measure current financial performance — and predict profitability going forward.

Key metrics include:

• Debt-to-equity ratio
• Gross revenue
• Profit
• Cash flow and liquidity
• Access to capital
• Reinvestment

Alignment Between Leadership and Staff

Talent plays a pivotal role in the success of any transaction, and friction between leadership and staff may signal trouble ahead. Examine employee metrics to assess the strength of an organization’s talent management strategy, including:

• Employee retention (clinical and nonclinical staff)
• Recruitment costs
• Employee Net Promoter Score (eNPS)

Tip: Look for subtle signs of talent management struggles, too, including:

• Job stress and reported burnout rates
• Job satisfaction
• Time spend

Organizational Compatibility

While no two organizations are identical, the ideal M&A opportunity should make the most of both entities’ strengths.

Missions and core values:

• Do you share business goals?
• Do you have a complementary approach to care?

Workplace culture:

• Does the target’s talent management strategy align with yours?
• Does the target offer expertise that aligns with yours, without creating redundancies?

Processes, technologies, and workflows:

• Does the target use technologies compatible with your current tech stack? If not, how much will it cost to integrate?
• What’s their maturity level for automation compared to your organization?

Additional Market Opportunities

The ideal M&A target should allow you to gain market share without raising additional regulatory hurdles. Merging with an out-of-state hospital, for instance, may provide a path to growth when additional in-state growth is no longer possible.

Preparing for a Successful Transition

The decision to sell is a collaborative effort — one that should involve stakeholders within the organization as well as external support. Discussions with leaders across the organization can help identify current strengths and weaknesses in the market and position it to attract the right buyer.

These conversations can also help identify sources of risk, factors that could undermine your valuation, make it more difficult to attract buyers, or even block a transaction. Taking steps to manage risk — for example, diversifying revenue streams in the years leading up to a sale or upgrading IT infrastructure to reduce the risk of a data breach — can help you maximize your success in the market.

A robust financial audit helps define the performance you realistically expect post-acquisition and helps predict how a transaction impacts your system’s overall financial well-being.

Get the Support You Need to Feel Confident in Your Next Transition

The decision to sell is rarely an easy one, and we’re here to support you every step of the way. We can help you address weaknesses across the health system, whether your goal is to improve outcomes under the current ownership structure or prepare for a transaction.

Whether you’re just starting to consider a transaction or you already have a target in mind, Eide Bailly is here to support you each step of the way. We’ll help you weigh your options to find the right fit for your health system’s mission — so you can focus on delivering care.