Healthcare bankruptcies reached five-year peak in 2023, report finds
Dive Brief:
Healthcare bankruptcies spiked in 2023 to the highest level in the past five years, according to a report released Thursday by healthcare restructuring advisory firm Gibbins Advisors.
The analysis included Chapter 11 bankruptcies for companies with liabilities of at least $10 million. Gibbins Advisors found 79 such bankruptcies last year — more than three times the level seen in 2021.
The number of filings dropped from the third to the fourth quarter, but total case volume could remain high in 2024 as the market continues to be “very challenging” for providers, said Tyler Brasher, a director at Gibbins Advisors, in a statement.
Dive Insight:
Last year included some high-profile healthcare bankruptcies, including staffing company Envision Healthcare’s filing in the spring.
The company, taken private by private equity firm KKR in a deal valued at $9.9 billion including debt, said its large debt obligations, slowing patient volumes, battles with insurers and the “flawed” implementation of the No Surprises Act led to its financial struggles. It emerged from restructuring in November.
Another physician staffing firm, American Physician Partners, also filed for bankruptcy last year, alongside retail pharmacy Rite Aid and digital therapeutics company Pear Therapeutics.
High interest rates are one contributor to the soaring number of bankruptcies in the healthcare sector, challenging refinancing options and slashing access to capital and valuations, Gibbins Advisors said in the report.
Increasing labor and supply costs and heightened pressure from payers also squeezed margins, the firm wrote. Payer rate increases may not have been enough to cover inflation, while the No Surprises Act, which aimed to protect patients from unexpected costs, may have hit providers who previously relied on out-of-network bills.
States could also begin checking Medicaid eligibility again this year after a long period of continuous enrollment during the COVID-19 pandemic. States have removed more than 15 million enrollees from the safety-net program so far, according to health policy and research firm KFF.
That process, called redeterminations, could boost the number of uninsured patients who may struggle to pay for care, the report noted.
Large healthcare bankruptcies, or filings with liabilities over $100 million, in particular surged in 2023. The report tallied 28 large filings last year, compared with just seven in 2022 and eight in 2021.
The senior care and pharmaceutical sectors made up nearly half the total healthcare bankruptcies last year. Yet hospital filings spiked too, hitting their highest level since 2019. The report logged 12 hospital bankruptcies in 2023, compared with only two in 2022 and three in 2021.
“As we anticipated, restructuring activity in the hospital sector increased markedly in 2023 and we expect to see a continuation of that level of distress this year as hospitals, particularly rural and standalone hospitals, work through challenging profitability, liquidity and leverage dynamics,” Clare Moylan, a principal at Gibbins Advisors, said in a statement.
Bankruptcies likely don’t paint a full picture of hospitals’ financial stress either, the healthcare consultancy added. Hospitals could be owned by a larger health system, so facilities could be closed without declaring bankruptcy.
And if hospitals aren’t financially viable and won’t attract interested buyers, bankruptcy likely wouldn’t be effective, the report said.
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