The market volatility and general chaos unleashed across the first few months of the Trump administration may take years to fully assess, but health system M&A activity in Q1 2025 provides us an early indication of the chilling effect this instability can have on strategic planning. According to Kaufman Hall, after three straight years of increasing activity, only five hospital M&A deals were announced in Q1 2025, undercutting the seven transactions announced in Q3 2021 to become the least active quarter in at least ten years. Although there’s reason to believe that the pace of deals will pick up in the back half of 2025 if the market settles, we’re currently on pace for just 17 M&A transactions in 2025, a 75 percent reduction from last year. This sharp drop comes as a surprise, relative to expectations that the Trump administration would take a friendlier antitrust stance than Biden, but a variety of forces, both temporary and lasting, have contributed to the slowdown. Some systems may be waiting for the Federal Reserve to cut interest rates, which would reduce the cost of debt needed to finance transactions, but the Fed has indicated that planned rate cuts are now delayed amid market volatility. The Trump administration has also opted to continue implementing Biden-era reforms to M&A review, which have made mergers more burdensome and costly, and state governments have likewise increased their healthcare M&A scrutiny. However, even if we were in a different policy environment, the business logic behind hospital mergers has been evolving in a new direction. After years of heightened M&A activity, the hospital market has become highly concentrated, leaving fewer independent hospitals and small systems ripe for acquisition. The lack of desirable targets and the integration struggles of some recent mergers have left more boards unconvinced by the argument of scale for scale’s sake. Instead, more systems are exploring flexible or targeted partnerships, like joint ventures and clinical affiliations, as ways to expand capabilities without confronting the cultural and operational challenges of a full merger.