Healthcare bankruptcies to drop 27% by year-end

TENNESSEE, UNITED STATES — The healthcare sector is expected to see a notable decrease in bankruptcy filings in 2024, following a peak in 2023.
According to a report by Gibbins Advisors, a healthcare restructuring advisory firm, the number of bankruptcy cases is projected to reach 58 by the end of this year, representing a 27% decrease from the 79 cases recorded in 2023.
This reduction is largely due to fewer filings among middle-market companies, which are defined as having liabilities between $10 million and $100 million.
Large healthcare firms face continued financial distress
Despite the decline in bankruptcy filings, financial challenges within the healthcare sector remain significant.
Gibbins Advisors warns that restructuring efforts may be occurring outside of the court system, and case volumes could potentially increase later this year.
Clare Moylan, a principal at Gibbins Advisors, stated that the decline doesn’t necessarily mean the financial headwinds driving bankruptcies have lessened.
While middle-market companies have seen a decrease in bankruptcy filings, large healthcare firms with liabilities exceeding $500 million continue to face financial distress.
The report highlights that six such cases have been filed this year, underscoring ongoing challenges for sizeable healthcare enterprises.
Ronald Winters, another principal at Gibbins Advisors, noted, “The very large bankruptcy cases with liabilities over $500 million include sizeable healthcare enterprises.”
Persistent financial pressures in the healthcare sector
The report also identifies trends within various healthcare subsectors. Senior care and pharmaceutical companies account for the majority of bankruptcy filings this year.
Notably, filings among clinics and physician practices have increased by 60% compared to 2023.
The healthcare sector continues to grapple with high interest rates, increased regulatory scrutiny, rising labor and supply costs, and payer pressures, particularly in the Medicare Advantage space.
Impact of Medicaid redeterminations on healthcare providers
The end of continuous Medicaid enrollment, which was maintained during the COVID-19 pandemic, presents additional challenges for healthcare providers.
Nearly 25 million beneficiaries have been disenrolled from Medicaid, potentially leading to higher uncompensated care costs for providers.
As the sector navigates these ongoing financial headwinds, the decline in bankruptcy filings offers a temporary respite but does not signal an end to the underlying economic pressures.