Healthcare bankruptcies on the decline
Healthcare bankruptcies are currently on track to see 58 cases by the end of this year, a 27% decline from the 79 cases filed in 2023.
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Healthcare bankruptcies are on a gradual decline, showing signs of slowing down over the past three fiscal quarters, according to data published by healthcare advisory firm Gibbons Advisors.
The report analyzed healthcare sector Chapter 11 bankruptcy cases filed from January 1, 2019 through June 30, 2024 for companies with more than $10 million in liabilities.
After accelerating to a spike in Q3 2023, healthcare bankruptcies are currently on track to see 58 cases by the end of this year, a 27% decline from the 79 cases filed in 2023. That projection is based on the current run rate, calculated by annualizing six months of cases filed through June 30.
WHAT'S THE IMPACT?
A closer examination of filings by case size shows that the decline in case volumes is largely driven by middle-market companies, which the study defined as those with liabilities ranging from $10 million to $100 million.
By contrast, bankruptcy filings of very large healthcare companies, those with liabilities exceeding $500 million, remain at the elevated levels seen in 2023.
The data also highlights trends within various healthcare subsectors. Senior care and pharmaceuticals remain predominant, together comprising nearly half of all healthcare bankruptcy filings.
However, certain subsectors are seeing higher rates of bankruptcies, such as clinics and medical equipment. Filings from clinics and physician practices have surged, trending 60% higher in 2024 based on cases filed through June 30. Medical equipment bankruptcies have shown a steady upward trajectory since 2021.
Notably, only one hospital company, Steward Health Care, filed for bankruptcy in the first half of 2024, with 31 hospitals under the company's umbrella.
Research by ownership type showed that over the past five years, 45% of healthcare bankruptcy filings were privately held debtors (excluding private equity-backed), followed by publicly traded (24%), nonprofit (17%) and PE-backed (14%). Nonprofit cases focused on senior care and hospitals, while publicly traded cases were prominent in pharmaceuticals.
PE-backed bankruptcies featured across the spectrum of healthcare subsectors, with the highest subsector concentration in medical equipment and supplies. There were no nonprofit debtors with more than $500 million in liabilities as the very large cases were typically PE-Backed or publicly traded companies.
THE LARGER TREND
Authors noted that, while a decline in bankruptcies is a positive sign, it doesn't mean that financial challenges in the industry have abated. Since the research tracks bankruptcy filings, it does not include restructuring efforts taking place outside of a bankruptcy forum.
The healthcare sector continues to face financial headwinds, with some subsectors under increasing pressure, and some organizations better equipped to confront those challenges than others.
Some of those headwinds include high interest rates, which are impacting access to capital; cost increases and labor shortages; pressure from payers; and unwinding Medicaid continuous enrollment.
Jeff Lagasse is editor of Healthcare Finance News.
Email: jlagasse@himss.org
Healthcare Finance News is a HIMSS Media publication.
