Though not quite reaching 2023’s highs, healthcare bankruptcies remained elevated across 2024 with a six-year high among physician practices as well as “the largest hospital sector bankruptcy by far in the last 30 years,” according to new research from Gibbins Advisors.
The restructuring advisory firm’s Thursday report outlined 57 Chapter 11 bankruptcy filings among healthcare companies with more than $10 million in liabilities. This was down from the high of 79 filings during the prior year but remains above the average of 42 filings seen from 2019 to 2022, per the report.
Bankruptcies among larger entities, or those with more than $500 million in liabilities, remained elevated—nine in 2024 as compared to 12 in 2023 but an average of three per year from 2019 to 2022.
Bankruptcies among senior care companies (11) and pharmaceuticals (14) were major drivers of the total, similar to previous years. However, filings among clinics and physician practices have been steadily increasing since 2021 and jumped from six in 2023 to 10 in 2024. Headwinds on government and commercial reimbursement as well as inflationary supply costs are likely to continue the trend, the firm wrote.
“We’ve already observed a rise in bankruptcy filings among physician practices, and the 2.83% reduction in Medicare’s physician fee schedule for FY2025 will further strain this sector, impacting both physician groups and the hospitals that own them,” Clare Moylan, principal at Gibbins Advisors, said in a release. “Given these trends and our ongoing experience, we anticipate an increase in physician practices needing restructuring support in 2025.”
As opposed to 2023’s 12, the hospital sector saw just five bankruptcy filings in 2024: CarePoint Health Systems, Washington Regional Medical Center, Emergency Hospital Systems, OneCore Health and Steward Health Care. The Steward filing is noteworthy for its scale, Gibbins wrote, as a 31-hospital health system represents the sector’s largest bankruptcy in the past three decades.
Gibbins noted in the report that not all distressed hospitals pursue bankruptcy. To paint a better picture of the sector’s health, the firm pulled MedPAC data showing 117 acute care hospital closures and 68 openings from 2019 through 2023—a net closure of 49 hospitals. Closures among rural facilities in particular were increasing since 2021 but slowed to four closures in 2024.
Though hospitals’ inpatient Medicare rate is set to increase in 2025, the sector shares many of the financial constraints facing physician practices.
“While the new presidential administration introduces some uncertainty to the healthcare system, the core factors driving healthcare distress remain unchanged,” Ronald Winters, principal at Gibbins Advisors, said in a release. “Standalone and rural providers will continue to face significant financial challenges, and collaborating with communities on effective restructuring solutions is vital to preserving essential healthcare services in those regions.”
Gibbins’ report also pointed to lower interest rates, more lenient antitrust enforcement, a shift to care outside of the hospital and a “widening gap between ‘haves’ and ‘have nots’” that could fuel an uptick in M&A or other changes to the healthcare provider landscape in 2025.
The new year already boasts a notable Chapter 11. The 16-hospital Prospect Medical Holdings filed on Jan. 11, saying at the time that it intends to continue operating but will use the proceedings to streamline sell-offs outside of its home state of California.