Healthcare Bankruptcies Slow After Reaching Five-Year High In 2023: Report

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Dive Brief:

• Bankruptcy filings in the healthcare sector have slowed so far in 2024 after spiking last year, according to a report by healthcare restructuring advisory firm Gibbins Advisors.
• This year is on track to see 58 filings by healthcare companies with at least $10 million in liabilities, compared with 79 cases in 2023.
• But the decline doesn’t necessarily mean the financial headwinds driving bankruptcies have lessened, according to the advisory firm. Restructuring could be taking place outside of courts, and case volumes might increase later this year, Clare Moylan, principal at Gibbins Advisors, said in a statement.

Dive Insight:

The slowing pace of healthcare bankruptcies comes on the heels of a flood of filings last year. In 2023, the advisory firm noted bankruptcies had reached a five-year high, with the number of filings more than three times higher than levels seen in 2021. 

Several high-profile companies filed for bankruptcy last year, including physician staffing firms Envision Healthcare and American Physician Partners, as well as retail pharmacy Rite Aid. 

Gibbins has tallied just 29 bankruptcies so far this year through June 30. In the last three quarters, filings declined to a quarterly average of 13 from an average of 22 in the preceding four quarters. 

That decline is largely linked to fewer filings among middle-market companies, or those with liabilities ranging from $10 million to $100 million. Those cases are 33% lower so far this year compared with 2023.

But bankruptcies at large healthcare firms are still elevated.

“The very large bankruptcy cases with liabilities over $500 million include sizeable healthcare enterprises, so when you see six such cases filed year to date, that represents a much bigger number of healthcare facilities,” Ronald Winters, principal at Gibbins Advisors, said in a statement.

Bankruptcies in senior care and pharmaceutical companies are responsible for the majority of filings so far this year. But filings among clinics and physician practices are climbing, trending 60% higher this year compared with 2023.

The healthcare sector continues to face several financial challenges, according to the advisory firm. Interest rates are still high, and federal and state regulators have increased antitrust scrutiny, limiting options for deals. 

Providers are also still facing pressure from elevated labor and supply costs, and payers are pushing back with more coverage denials — especially in Medicare Advantage, where insurers have reported increased medical spending among seniors for much of the past year. 

Medicaid redeterminations could hit providers too. During the COVID-19 pandemic, states didn’t check eligibility for the safety-net insurance program in exchange for more generous federal funds — but that period of continuous enrollment ended more than a year ago.

Since then, nearly 25 million beneficiaries have been disenrolled from Medicaid, according to a tracker by health policy research firm KFF. Removing enrollees from the program could lead to them becoming uninsured, possibly increasing uncompensated care costs for providers, according to the Gibbins report.