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Join Glenn Hunzinger, PwC’s US Health Industries Leader, and Dan Farrell, PwC’s Health Services Deals Leader, as they discuss the mid-year outlook for health services dealmaking in 2026. They explore how investors are navigating rising medical costs, reimbursement uncertainty, and increased scrutiny around value creation while remaining active in the market. The conversation examines the growing importance of portfolio optimization, operational resilience, and AI-driven transformation, and highlights what organizations should prioritize to unlock growth and create value in an increasingly selective investment environment.
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We’ve summarized the full discussion in a short Q&A format so you can get the highlights in minutes.
What is driving deal activity despite market pressures?
Q. Glenn Hunzinger
Deal activity has slowed, but capital is still being deployed. What's driving investor confidence in today's market?
A. Dan Farrell
The market is selective rather than stalled. While overall deal volume has declined, larger, high-conviction transactions continue to move forward at attractive valuations. Investors remain willing to deploy capital, but they are focusing on assets with strong fundamentals, reimbursement visibility, and clear pathways to value creation.
What types of assets are attracting the most interest?
Q. Glenn Hunzinger
Where are buyers placing their bets today?
A. Dan Farrell
Investors are prioritizing assets that offer operational resilience and durable earnings. Physician medical groups and behavioral health organizations continue to attract significant interest because they provide strong fundamentals and opportunities for future growth.
We are also seeing increased activity around carve-outs and portfolio optimization as organizations focus on core capabilities and sharpen their strategic priorities.
What are investors looking for during diligence?
Q. Glenn Hunzinger
What factors are most important when evaluating potential investments?
A. Dan Farrell
Buyers are focused first on downside protection. They want reimbursement visibility, earnings durability, and confidence in an asset's ability to navigate market pressures.
Once those fundamentals are established, investors evaluate factors such as payer mix, labor model resilience, and the credibility of the value creation plan. The goal is to identify assets that can perform well today while also delivering sustainable growth over time.
How is AI influencing investment and value creation strategies?
Q. Glenn Hunzinger
AI continues to be a major topic across healthcare. How is it influencing both investment decisions and value creation plans?
A. Dan Farrell
AI has moved from a future concept to an operational requirement. Investors increasingly expect management teams to demonstrate measurable operational impact and a clear return on investment.
The most compelling use cases today are in revenue cycle management, workforce productivity, and patient engagement, where organizations can show meaningful performance improvements. Companies are using AI to improve collections, automate administrative work, streamline claims processing, and enhance patient access and communication.
When organizations can demonstrate measurable results in these areas, it strengthens buyer confidence and supports long-term value creation.
What gives you confidence in the market outlook?
Q. Glenn Hunzinger
Despite ongoing uncertainty, what makes you optimistic about the second half of the year?
A. Dan Farrell
Investors continue to have capital to deploy, and high-quality assets remain in demand. Organizations are becoming more disciplined in how they evaluate opportunities, which is helping support deal value even in a challenging environment.
Buyers are still willing to invest when they see strong fundamentals, operational resilience, and a clear path to creating value.
What should dealmakers focus on over the next six to twelve months?
Q. Glenn Hunzinger
As organizations evaluate growth opportunities, where should leaders focus their attention?
A. Dan Farrell
The strongest performers will remain disciplined about portfolio management and capital allocation. Before pursuing growth, organizations should ensure they have clarity around their core assets and strategic priorities.
Management teams that are outperforming are making deliberate choices around portfolio optimization, pursuing targeted acquisitions, and ensuring every transaction is supported by an executable value creation plan.
In today's environment, disciplined underwriting combined with operational execution will be the key differentiator.
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Episode transcript
Find episode transcript below.
00:00:03:02 Welcome to PwC’s Next in Health. I'm Glenn Hunzinger, PwC’s US Health Industries leader. Today, we're taking a look at a mid-year deals outlook for health services and what we've been seeing across the market as we head into the second half of 2026. It's been an interesting year so far. Deal volumes have softened a little bit, deal value remain resilient.
00:00:23:05 But obviously as we know, we've seen in the health environment, organizations are facing a tremendous amount of pressure — medical rising costs, reimbursement uncertainty and obviously this continuous need for productivity improvements. But what does that mean for where everyone's placing investments and their bets,
00:00:40:07 what separates assets from being attractive, and those that sort of will struggle to create value? More importantly, in the world of technology and AI and the continuous need for portfolio re-evaluation, what are people doing to create value and continuously change your organization from within? Joining me today is Dan Farrell. He is the health Services Deals Leader at PwC. Dan, thanks for joining us and welcome.
DAN FARRELL:
00:01:05:10 Thank you, Glenn. It's great to be here. As you said, there is a ton going on in the market, so I am looking forward to the conversation.
GLENN HUNZINGER:
00:01:11:02 Yeah, so let's jump right in. Talk a little bit about, because of the market, the performance, what you saw in the first half, and a little bit of the fundamentals here.
DAN FARRELL:
00:01:20:10 I think what we are seeing is a selective market, not necessarily a stalled one. As you mentioned, deal volume definitely softened, but deal value is still resilient because larger, higher conviction transactions, they're still getting done and they're getting done at relatively lucrative valuations. So, investors are still putting money to work.
00:01:42:10 They are just doing it with tighter standards and more discipline. Good example is physician medical groups, right? They captured a record 46% share of first quarter ‘26 deal volume with deal count pretty much up year over year. That tells me buyers still have conviction. They're just concentrating on assets with 1) stronger fundamentals, 2) reimbursement visibility, and 3) maybe most importantly, clear value creation pathways.
GLENN HUNZINGER:
00:02:12:04 It's always interesting to look under the hood to see what's driving this, and I think you set the groundwork and fundamentals there, which is obviously on the dollar side, investments continuing. And Dan, when you think about what's attracting capital today, you mentioned a little bit about selectivity, but when you're on investment committees and when you're advising your clients, what are you guys looking about from an asset standpoint?
00:02:33:06 What concerns are people worried about and where are they looking at on opportunistic views?
DAN FARRELL:
00:02:38:03 Yeah, so in our interactions with investment committees, it looks like to us the first lens they're looking through is one that scans for downside protection. The second lens, and we'll talk about it in a second, is looking for the usual growth levers, but related to that downside protection, I think buyers, investment committees, what they want is reimbursement visibility.
00:03:00:10 They want earnings, durability upfront. Those are two things that's dice, that investors are just, they're no longer willing to roll. Once comfortable with the downside risk, then they go deeper. They're looking at shifting elements like payer mix dynamics, labor-model resilience, and of course, the execution risk related to whatever the integration plan might be.
00:03:21:00 So if I had to summarize like what gets people excited for assets in today's market, it's operational resilience today, but then also a credible 12-to-24-month value creation path. Anecdotally, that is precisely why I think physician groups and behavioral health companies, for example, they continue to attract interest,
00:03:41:05 is also why we're seeing more momentum in carve outs, in portfolio-optimization opportunities. The market participants, they're basically just recalibrating around core competencies and whatever their risk profile might be.
GLENN HUNZINGER:
00:03:55:05 Yeah, I saw that in the report. I think that was a good point to call out, which is now more than ever you've got to transform businesses. Yeah, everybody always believed in operational improvements, but you're right, with some of these fundamentals combined with technology, that value-creation opportunity is there.
00:04:10:20 So maybe that as a lead in for the next topic, which is really talking about AI and how that's leading to that value creation. You spoke about it last time, we're on here where you say that is the number-one focus area that people are looking to say, how do I transform these businesses with the current technology out there?
00:04:27:09 And also looking at the lens for the future that's going to come out. So maybe talk a little bit about how your clients are thinking about that, how they sort of stage that, how they sort of underrate some of this.
DAN FARRELL:
00:04:37:02 Yeah, that's a great point. So AI, and you're right, we talked about this the last time. It has clearly moved from just narrative to an operational requirement and the lion's share the deals that we're supporting today, especially with our PE clients, buyers are looking for measurable AI operating impact and demonstrable ROI in their value capture plan.
00:05:00:30 It's not just some compelling marketing tagline anymore. In fact, the use cases that continue to resonate the most with our clients, they're coming from three specific areas. First, revenue cycle, where can teams show faster collections, cleaner claims, or lower denial rates? Two, workforce productivity. Where can automation help teams do more without scaling labor costs at the same pace?
00:05:26:40 Then lastly, patient engagement. That's a big area. This is where can they help basically empower better scheduling, communication and patient navigation to improve access and retention. When management teams can show real KPI and movement in those areas that supports valuation and it increases buyer confidence, which is critical given the environment we're in today.
00:05:50:06 So put simply, AI is now shaping both portfolio strategy and growth strategy in a much more practical way.
GLENN HUNZINGER:
00:05:59:05 Dan, that's a great point on just an operational requirement, and as you look at the second half of 2026, what are the things you look for and what's going to separate the winners for those that can really create value and grow?
DAN FARRELL:
00:06:13:04 Yeah, it's a great question. So, I think a common mistake we're seeing right now is companies rushing to accelerate growth before getting clear on their portfolio focus. The shotgun approach that we saw in yesteryears, it's tempting, but it's just too risky now.
00:06:30:09 Capital is more expensive, medical cost pressure remains elevated and reimbursement uncertainty is still a real factor. So, every dollar needs to be deployed with care when non-core assets absorb management time and capital organizations lose flexibility right when speed and focus matter the most. The management teams that we see outperforming, they're making deliberate choices,
00:06:58:20 they're cleaning up their portfolio, they're pursuing targeted acquisitions, and they're tying every deal to an execution-ready value creation plan. That combination of disciplined underwriting and operational follow through is what's going to separate the winners in the second half.
GLENN HUNZINGER:
00:07:14:07 What I've always marveled at is if you're investing, investing into health is such a challenging place to invest in with stroke-of-the-pen risk, just a constant change that's happening, and at the end of the day, as you help your clients and help them think through it, like this idea of getting to yes and getting to investing with all those background sort of risks around there,
00:07:38:20 I mean, it's always quite impressive to see putting capital work in such a challenging environment, but yet at the same point, still having those returns. So listen, Dan, thanks so much for the insight here. It's been tremendous to sort of hear firsthand exactly what are health companies doing, how are they investing, how are they maximizing their portfolio and optimizing it, leveraging technology?
00:08:00:07 So it's going to be exciting to see the back half of the year and hopefully we'll continue to see dollars rise as well as the volume move up. So, thanks for your perspective.
DAN FARRELL:
00:08:11:07 Absolutely. Thank you, Glenn. This has been great. Really appreciate the conversation.
GLENN HUNZINGER:
00:08:15:03 To learn more, check out our health services deals mid-year 2026 Outlook report now available and linked in our show notes below, and thank you all for tuning into PwC’s Next in Health. For more on these topics and other insights across health industries, please subscribe to our podcast at pwc.com/us/next in Health podcast. Until next time, this has been Next in health.
FEMALE VOICEOVER:
00:08:45:06 This podcast is brought to you by PwC. All Rights Reserved. PwC refers to the US member firm, or one of its subsidiaries or affiliates, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details. This podcast is for general information purposes only and should not be used as a substitute for consultation with professional advisors.
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