Hospitals bankruptcy filings dropped to five in 2024 from 12 in 2023, though Dallas-based Steward Health Care System's 31-hospital bankruptcy was the largest in three decades, according to Gibbins Advisors, a healthcare restructuring advisory firm.
Average hospital operating margins gradually improved in 2024 and hit a 12-month high of 7.6% in December, according to Kaufman Hall. However, hospitals continue to face financial headwinds, with some organizations better equipped to meet challenges than others.
Examples of industry drivers include capital constraints, rising costs and staffing shortages, pressure from payers, business model challenges as care migrates outpatient and a widening gap between higher- and lower-performing facilities.
So far this year, Becker's has reported on two hospitals and one health system that have filed for bankruptcy:
1. Prospect Medical Holdings, a for-profit health system headquartered in Los Angeles, filed for Chapter 11 protection in January and is working to offload 10 of its 16 hospitals.
The private equity-backed system said it initiated voluntary bankruptcy proceedings to facilitate the timely completion of its planned hospital sales. Prospect operates seven hospitals in California, three in Connecticut, two in Rhode Island and four in Pennsylvania.
Prospect plans to restructure and exit the hospital markets in Connecticut, Rhode Island and Pennsylvania, focusing solely on California.
Prospect's PHP Holdings, including Prospect Health Plan, Prospect Medical Systems and Foothill Regional Medical Center, are not included in the Chapter 11 proceedings and are expected to be sold to Alhambra, Calif.-based Astrana Health by mid-2025.
2. Montgomery, Ala.-based Jackson Hospital and Clinic filed for Chapter 11 bankruptcy after "significant financial pressures" in recent years, including a challenging payer mix, COVID-19, stagnant reimbursement rates and increased labor costs, according to a Feb. 4 news release shared with Becker's.
The 344-bed hospital also faces substantial financial losses due to the absence of Medicaid expansion in Alabama as well as its obligation to provide care for uninsured patients. It reported more than $45 million in gross charges in 2023 for treating uninsured patients.
3. The Bellevue Hospital in Toledo, Ohio, filed for Chapter 11 protection in early February and plans to be acquired by Sandusky, Ohio-based Firelands Health.
The 50-bed facility faces many pressures common to rural and independent hospitals, including rising operational costs, access to capital, regulatory complexity and funding constraints. The restructuring and acquisition will allow Bellevue to meet its financial obligations while continuing to provide care.
Pending the Chapter 11 process and regulatory approvals, Firelands Health will become the sole owner of Bellevue. This would include capital investments aimed to maintain hospital-based services as well as sustain and expand services at other care sites.
The proposed acquisition is projected to be completed in the second quarter.