Navigating Healthcare M&A in 2025: Opportunities and Challenges in an Evolving Landscape

The healthcare sector continues to experience significant M&A activity, fueled by rising bankruptcies and increased private equity involvement. These trends are reshaping the market, creating both challenges and opportunities across various segments. Increased competition, shifting regulatory pressures, evolving risk profiles, and fluctuating capacity are driving changes in pricing and underwriting strategies. While some areas face ongoing rate pressures due to claims severity and economic factors, new market entrants and excess capacity in certain lines foster competition. As the marketplace changes, navigating these dynamics will require strategic partnerships, proactive risk management, and adaptability to emerging trends.

Long-Term Care/Senior Living: Consolidation and Capacity Constraints

The Long-Term Care (LTC) and Senior Living insurance marketplace will continue to face significant challenges in 2025, driven by economic pressures, evolving demographics, and increasing claims severity.

Ongoing mergers and acquisitions are reshaping the landscape, with larger operators acquiring regional senior living homes. Private equity remains heavily involved in assisted living and memory care, driving a perceived “profits over people” dynamic, which puts pressure on rates. This has sometimes led to adverse underwriting experiences due to the inconsistent performance of entities as they are bought and sold.

High interest rates, inflation, and elevated costs of staffing and supplies are pressuring smaller providers. Many are seeking partnerships with larger systems to benefit from economies of scale. Additionally, the lending environment remains challenging for new developments. However, an increase in new builds is anticipated based on macroeconomic conditions likely to drive more funding into the private equity markets. The regulatory climate is still changing, and there will be an intense focus on the effectiveness of regulations. From a rate standpoint, everything is still demographic-driven, but there is substantial competition from newer markets trying to buy up business. This is creating inconsistencies in the marketplace.

Claims frequency and severity, particularly in memory care, have returned to or exceeded pre-pandemic levels. The industry is experiencing more nuclear verdicts and high plaintiff awards, placing pressure on carriers to adjust rates accordingly. Some business is flowing back into the direct marketplace as the E&S carriers hold firm on necessary rates based on the claim activity in this sector.

Capacity on the excess side remains unpredictable, with no carrier consistently offering significant limits. Established carriers are cautious and often unwilling to provide excess coverage above their primary limits. Newer market entrants are increasing competition, but their staying power is uncertain, raising concerns about long-term claim payment reliability. Renewal retention will require balancing cost considerations against carrier stability.

The rapidly expanding senior population drives increased demand for housing and care solutions, including a shift toward home-based care and wellness-focused living. Technology plays a pivotal role, with the increased adoption of telehealth, smart sensors, wearable devices, and updated emergency care systems. Consumers also demand more personalized care options and tech integrations in senior living facilities. There is a growing emphasis on community-based living with a wellness-centric approach and social engagement opportunities. The active adult segment is evolving to appeal to a new generation of seniors seeking a personalized and vibrant lifestyle.

As the senior living industry garners more attention from lawmakers, the press, and the public, the regulatory environment becomes more complex. The focus is on improving oversight and effectiveness. Recruiting and retaining qualified staff remains critical, with elevated costs and ongoing shortages adding to operational challenges.

Human Services: Capacity Challenges and Coverage Adjustments

Challenges in placing these risks will persist in the year ahead, and capacity and affordability will likely worsen. These accounts are entering their fourth year of change from the standard market, which began gradually and intensified in 2023 and again in 2024.

Risks that have not seen changes from the standard market should expect disruption in the year ahead, mainly as package offerings (including property & auto) and occurrence-form PL become increasingly rare. The focus on abuse coverage is justified as carrier claims rose in 2024, and “revivor statutes” have opened the door in certain states to file claims beyond the regular statute of limitations, causing intense scrutiny for underwriters and reinsurers. From a class perspective, inpatient care organizations are bracing for premium increases and higher retention.

Overall capacity, abuse coverage, and auto in the umbrella continue to be difficult, and significant cost increases are expected. More interest from legacy allied medical carriers in writing excess/umbrella coverage does provide more competition. Yet, deployed capacity on any one account remains low, generally in the $2M – $5M range per account. As a result, it takes more carriers to build capacity to reach levels of $5M – $15M. A thorough review of contractual requirements is helpful to assess how much limit is truly required of the insured or on balance with their peers.

Physicians: Evolving Market and Pricing Variability

The Physicians’ insurance market is experiencing significant shifts as solo practitioners and smaller physician groups increasingly turn to the E&S market. Rate adjustments by standard markets may be driving this movement, but it remains to be seen if those adjustments will be enough to continue pushing more business to E&S even as losses creep up.

The E&S market has seen no new entrants, but some sidelined carriers are becoming more aggressive with new business. This has resulted in greater pricing variability, with some accounts experiencing massive outlier pricing. Renewals are inconsistent, with many accounts coming in flat or seeing slight reductions while others face rate increases or unexpected changes in terms. Carriers are balancing aggressive underwriting for new business, focusing on obtaining rate and step increases on renewals.

Long-tail and severity-driven classes like obstetrics, pediatrics, and major surgical specialties like neurosurgery are seeing less aggressive competition. Traditionally challenging venues like Cook County (Chicago, IL), West Virginia, and New Mexico remain difficult. Georgia is emerging as a problematic venue as well. The surplus lines market for physicians continues to create sound solutions for multi-state and telemedicine risks.

Conclusion: Navigating M&A with DOXA

In this evolving healthcare landscape, DOXA stands as a trusted partner for companies and free agents looking to consolidate. Our deep expertise in mergers and acquisitions, combined with our strategic approach to underwriting, ensures that businesses can navigate market fluctuations with confidence. Whether you are looking to expand your footprint, optimize risk management, or secure competitive pricing in a changing market, DOXA provides the insights and support needed to make informed decisions.

As the healthcare M&A environment continues to evolve, success will depend on partnerships that provide agility, expertise, and stability. Contact DOXA today to explore how we can help you navigate these market dynamics and position your business for long-term success.