Darwin's Our Take 7.27.26: A look at four IDN M&A strategies

Last week, we conducted a survey for our Health Care Rounds podcast, and we extend our thanks to all who responded. One of the most important purposes of the survey was to elicit questions I would answer in future “mailbag” episodes of the podcast. I’ve already started working on those, but several questions jumped out as being better suited for Our Take. One was a question about recent higher-profile IDN mergers. Since it’s a slow news week — it seems that the news is on vacation like everyone else right now — I thought we’d take a stab at it here. We’ll take a look at four health systems I most often get asked about by clients, describe the strategy behind their separate mergers, and explain how each situation is different. - JM

Feature: A look at four IDN M&A strategies

1. Kaiser Permanente

Kaiser Permanente’s core business is a closed-panel, single-payer, single-provider integrated model: Kaiser Foundation Health Plan, Kaiser Permanente Medical Groups, and the health system’s hospitals operating as one entity in a limited number of markets. The first closed-loop, integrated model was introduced in 1945 and came to be known as the quintessential “staff model” HMO — a hallmark of the heyday of managed care that still exists today.

Now, that model works for Kaiser and the employers that contract with the health system, but it doesn't travel well. Kaiser can't simply plant its flag in Pennsylvania or North Carolina and recreate the HMO staff-model machine from scratch.

Risant is Kaiser's answer to that limitation. Formed in 2023 as a separate nonprofit headquartered in Washington, D.C., Risant’s explicit purpose is to scale Kaiser's value-based care practices to what CEO Jaewon Ryu calls “pluralistic environments,” meaning multipayer, multiprovider, multi-payment-model settings rather than Kaiser’s closed system. Geisinger (which closed in March 2024) and Cone Health (closed in December 2024) are the first two systems in Risant’s portfolio, and Ryu has said the plan is to add three to four more by 2028, with Kaiser having seeded the venture with a $5 billion investment.

Two things distinguish this from a normal hospital merger. First, it’s a platform, not an acquisition or roll-up. The member systems keep their names, boards, CEOs, and local leadership. What they get in return is access to a “value-based platform” — a set of clinical protocols, referral guidelines, and technology tools built from Kaiser’s own playbook.

The clearest evidence of this is more than branding. According to a January 2026 article in NEJM Catalyst, co-authored by Ryu, Geisinger has already seen a 5.2% decline in specialist referrals, and Geisinger Community Medical Center in Scranton posted a modest but real drop in average length of stay, from 5.29 to 5.15 days between February and September 2025, both attributed to the rollout of Kaiser-style care guides embedded directly in the EHR.

Second, while the most commonly cited reason for mergers is to establish scale — achieving greater economies of scale, having better purchasing power and improving contracting leverage — Ryu is explicitly not claiming scale is mandatory. In a recent interview in Managed Healthcare Executive, Ryu noted that scale has advantages for building consistent systems and technology but isn’t the only path to value-based care success, pointing to physician groups and multispecialty practices as proof that value-based strategies can work without size.

That’s a notable position for the CEO of an acquisition vehicle to take. It probably reflects Risant trying to sell itself to prospective member systems as a capability-transfer partner rather than a roll-up.

Kaiser’s stated goal is five to six health system acquisitions over the next several years. Soon after the Geisinger deal, we predicted a number of possible acquisition targets and got lucky by picking Cone Health as a possibility. Moving forward, we’ll stay out of the prediction business on this one. Lightning rarely strikes twice in the same place.

2. Sutter Health–Allina Health

This is a more conventional acquisition, but the cross-market structure is what makes it interesting. Sutter Health (27 hospitals, $19.8 billion revenue, based in Sacramento) and Allina Health (12 hospitals, $6 billion revenue, based in Minneapolis) don’t share a border and certainly don’t share a market. Signed as a letter of intent in March 2026 and now a definitive agreement, the deal would create a 39-hospital, $26 billion system spanning Northern and Central California, Minnesota, and Western Wisconsin, and having about 88,000 employees.

Each side sees a different benefit from a combined entity. For Sutter, this is about breaking out of California. Sutter has spent years operating in one of the most competitive, tightly regulated hospital markets in the country — and it’s surrounded by, among other health systems, Kaiser and Providence.

For Allina, it’s about access to capital and long-term stability. Allina posted a $95.4 million operating loss last year and hasn’t had a positive operating margin in several years. Sutter is committing $2 billion in investment in Allina’s Minnesota and Western Wisconsin properties, covering new ambulatory and specialty sites, physician recruitment, and AI/digital health capability.

Becker’s frames the deal as part of a broader industry shift toward cross-market transactions, pursued as health systems look to scale operations, diversify risk, and strengthen negotiating leverage with payers and vendors. As examples, Becker’s points to Prime Healthcare’s expansion into Illinois and Maine and Sanford Health’s acquisition of Marshfield Clinic.

That shift is also a function of geography: As local markets grow more saturated and organic growth opportunities dry up, cross-market deals let systems keep growing without ever competing for the same patients. It’s a genuinely different value proposition from the traditional “combine overlapping service areas and rationalize duplicate facilities” merger logic, since Sutter and Allina will never share a patient population and the case for combining rests entirely on scale, capability-sharing, and corporate leverage rather than local market consolidation.

The deal is expected to close by the end of 2026, pending regulatory approval.

3. Advocate Health

In 2018, Illinois-based Advocate Health Care combined with Wisconsin-based Aurora Health Care to form Advocate Aurora Health, the 10th-largest nonprofit system at the time, spanning 27 hospitals and roughly $11 billion in annual revenue. Advocate Aurora Health operated under that structure for four years, growing to 27 hospitals and more than 500 sites of care, before it became the acquiring partner in the 2022 combination with Atrium Health that created what we know today as Advocate Health.

The thesis behind that 2022 combination was straightforward, which was to combine two large regional systems and build the scale, capital base, and academic anchor needed to compete on innovation and health equity investment, with Wake Forest University School of Medicine serving as an anchor. Three years in, the more interesting story is what Advocate is now doing with that scale: acting as an acquisition platform in its own right.

In May 2026, Atrium Health proposed a combination with WakeMed in Raleigh, N.C., the dominant community health system in Wake County. Advocate’s pitch to WakeMed (and to Wake County officials) rests on three legs: 1) a $2 billion investment commitment in Wake County and 3,000 new jobs, 2) access to Advocate’s national infrastructure, specifically the Advocate Health National Center for Clinical Trials, plus a combined virtual care and behavioral health network, and 3) better purchasing power and economies of scale.

Advocate has become a genuine acquisition-and-integration platform. The Atrium-WakeMed deal shows it’s using the same playbook (clinical trials network access, virtual care scale, mental health network breadth) as a pitch to absorb strong regional systems, not just distressed ones.‍

4. CommonSpirit

When Catholic Health Initiatives (CHI) and Dignity Health combined in February 2019 to form CommonSpirit, there was virtually no overlap in the market presence of each organization. CHI’s strength was concentrated in the Midwest and Southeast, whereas Dignity’s was in California, Arizona, and Nevada.

The financial picture underneath that geographic fit was less balanced. In fact, when the proposed combination was announced a little more than a year earlier, many of us in the IDN intelligence space wondered why, when Dignity’s balance sheet looked so healthy (the result of a turnaround story under then-CEO Lloyd Dean’s leadership earlier in the century), Dignity would want to take on CHI’s debt and management problems. With the exception of a profitable 2021 — bolstered by one-time gains such as pandemic funding — CommonSpirit has continued to lose money. The picture, however, is improving: The system posted an operating loss of $225 million in fiscal 2025, a meaningful improvement from an $875 million loss the year before.

Today, CommonSpirit’s strategy is a mirror image of Advocate’s or Sutter’s. It’s not chasing scale; it’s shedding assets. The recently proposed sale of Trinity Health System to UPMC is the clearest example. UPMC and CommonSpirit have signed a definitive agreement, and the deal is expected to close in the third quarter.

CommonSpirit remains one of the largest nonprofit systems in the country, with more than 140 hospitals across 21 states, and that scale has become part of the problem. A system spread that thin across markets with wildly different competitive strengths and payer mixes is bound to have a hard time running every market well. CommonSpirit’s leadership has been explicit that this is a multiyear financial turnaround plan built around shedding assets in markets that don’t fit strategically.

As part of that plan, CommonSpirit has been selling assets in North Dakota to Altru Health System and earlier this year sold its minority stake in Conifer Health Solutions, a revenue cycle management joint venture, back to Tenet Healthcare. The common thread across all of these transactions is that CommonSpirit is consolidating its footprint around fewer, stronger markets and converting non-core assets into cash and reduced management complexity.

HCR #213: Are We Measuring Health Care Quality All Wrong? w/ Dr. Rachel Werner, University of Pennsylvania

Decades of quality measurement programs were designed to make U.S. health care better. The evidence suggests they have, just not nearly as much as anyone hoped, and sometimes in ways that hurt the patients who needed help most. Dr. Rachel Werner, Professor of Medicine, Perelman School of Medicine at the University of Pennsylvania, joins John to examine why well-designed quality incentives so often produce unintended consequences, and why the long-term care system, despite years of reform attempts, remains structurally broken. Listen on Spotify, Apple, or wherever you get your podcasts.

What we’re reading

We’ve Spent Decades Testing Medicare-Medicaid Integration. Why Don’t We Know If It Works? Health Affairs, 7.7.26

Integrated Care for Serious Mental Illness, Physical Health Needs, and Social Services. NEJM Catalyst, 7.15.26 (abstract available, subscription required for full access)

Accountable care organization leaders detail wins and unfinished business in Medicare reform. Medical Economics, 7.22.26