US Health Services Deals Midyear Outlook 2026: Why investors are focusing on resilience and value creation

Welcome to PWC's Next in Health. I'm Glenn Hunzinger, PWC's U.S. 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.

But obviously, as we know, we've seen in the health environment, organizations are facing a tremendous amount of pressure. Medical rising costs, reimbursing uncertainty, and obviously this continuous need for productivity improvements. But what does that mean for where everyone's placing investments and their bets? 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 reevaluation, what are people doing to create value and continuously change your organization from within? Joining me today is Dan Forrell. He's the health services deals leader of PwC. Dan, thanks for joining us and welcome.

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.

Yeah, so let's jump right in. You know, talk a little bit about the market, the performance, what you saw in the first half, and a little bit of the fundamentals here. 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. 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 one, stronger fundamentals, two, reimbursement visibility, and three, maybe most importantly, clear value creation pathways. 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? What concerns are people worried about? And where are they looking at on opportunistic views? 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 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. They want earnings durability up front.

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 mixed dynamics, labor model resilience, and of course the execution risk related to whatever the integration plan might be. 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 pass.

Anecdotally, that is precisely why I think physician groups and behavioral health companies, for example, they continue to attract interest. It's also why we're seeing more momentum in carve-outs and portfolio optimization opportunities. The market participants, they're basically just recalibrating around core competencies and whatever their risk profile might be. 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. Everybody always believed in operational improvements, but you're right, with some of these fundamentals combined with technology, that value creation opportunity is there. 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 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 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. 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 of 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. 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? And 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. So put simply, AI is now shaping both portfolio strategy and growth strategy in a much more practical way.

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? 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. 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. 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. 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. 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.

So it's gonna 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. Absolutely. Thank you, Glenn.

This has been great. Really appreciate the conversation. 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 in to PWC's Next in Health.

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