Healthcare sector bankruptcy filings hit new record globally last year

A new report by Gibbins Advisors reveals 79 healthcare bankruptcy filings in 2023, a record high for the past five years. The healthcare restructuring advisory firm released its report, analyzing healthcare sector Chapter 11 bankruptcy cases for companies with more than $10 million in liabilities, on Jan. 25. High interest rates, new requirements from the Federal Trade Commission (FTC) as well as anti-trust regulations are named as key factors.

According to the report, “Large Healthcare Bankruptcy Filings with liabilities over $100 million surged in 2023, reaching 28 filings compared to only 7 in 2022 and 8 in 2021….Of particular note, hospital bankruptcy filings spiked in 2023 with 12 filings compared to a total of 11 filings from the prior three years combined.” Almost half of the bankruptcy filings in 2023 were from the senior care and pharmaceutical subsectors.

Aside from high interest rates impacting access to capital, new requirements from the FTC and state anti-trust regulations potentially limiting mergers and acquisitions, labor and supply expenses are named as contributing factors. “Payment rates from payers are generally not aligned with inflation,” Victoria Bailey writes on Feb. 7 for Revcycle Intelligence.

Gibbins Advisors warns that smaller healthcare systems may face more challenges than larger health organizations in 2024 as financial hurdles persist. The firm advises health systems to review their portfolio of services, budgets, processes, and staffing models, as well as evaluate workflows and incorporate Artificial Intelligence (AI). Healthcare Innovation