Healthcare saw an alarming spike in Chapter 11 filings last year, lengthening a trajectory that started taking shape in mid-2022.
The trend was in evidence across the sector, meaning care providers as well as industry players, and hospitals were anything but immune.
The observation is from the advisory firm Gibbins Advisors, which lays out the contours of the development in a report released Jan. 25.
The report shows hospital bankruptcies in 2023 hit their highest rate of occurrence—12 filings in 12 months—since 2019.
In fact, those 12 topped the hospital bankruptcy count of the previous three years combined, as only 11 filed between 2020 and 2022.
Here’s a rundown of the 2023 bankruptcy counts by key subsectors:
- Pharmaceutical companies: 20
- Senior care facilities: 15
- Hospitals: 12
- Medical equipment and supplies companies: 7
- Clinics/physician practices: 6
Another 19 entities that filed in 2023 are classified by Gibbins as “Other.”
The report only looks at companies and organizations with large enough of a footprint in healthcare to have more than $10 million in liabilities.
Meeting that criteria were a total of 79 filing entities in 2023. This smashed the previous recent high, 51 cases in 2019.
Among large organizations, those with liabilities topping $100 million, some 28 filed in 2023. This compared with just seven in 2022 and eight in 2021.
Gibbins notes that the fourth quarter of 2023 saw a decline in healthcare bankruptcies compared with the third quarter, adding that this may or may not suggest an emerging trend heading into 2024.
Clare Moylan, principal at Gibbins Advisors, is bearish on this possibility—at least for hospitals.
“As we anticipated, restructuring activity in the hospital sector increased markedly in 2023,” Moylan says in a news release. “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.”
Tyler Brasher, Gibbins Advisors director, seconds that forecast.
“We are seeing a lot of distress in healthcare as the market remains very challenging for providers,” Brasher says, “so we expect to see continued levels of healthcare bankruptcies in 2024 that we saw last year.”
Dave P. has worked in journalism, marketing and public relations for more than 30 years, frequently concentrating on hospitals, healthcare technology and Catholic communications. He has also specialized in fundraising communications, ghostwriting for CEOs of local, national and global charities, nonprofits and foundations.