Healthcare bankruptcies accelerate in 2022, but hospitals an exception for now

Large bankruptcy filings in the healthcare sector increased 84 percent in 2022 over the previous year, but the hospital sector managed to escape relatively unharmed, according to a Jan. 12 report from restructuring firm Gibbins Advisors.

While such bankruptcy cases were dominated by the senior care sector in the first half of 2022, it was the pharmaceutical sector that took over in the second half of the year. In total, there were 46 bankruptcy filings of entities with over $10 million in liabilities, with almost three times as many examples in the fourth quarter versus the first quarter of 2022.

In the hospital sector, however, there were only two such filings compared with 10 cases in 2019, a period when overall bankruptcy filings in healthcare were at a similar level, the report said. Those two filings were El Segundo, Calif.-based Pipeline Health and San Jorge Children's Hospital in San Juan, Puerto Rico.

Factors driving such bankruptcies were related mainly to a "COVID hangover," Gibbins Advisors said. Symptoms included skyrocketing labor costs and supply chain issues, the ending of government support funding, an inability to pass on higher costs, lower investment returns and interest rate increases.

"All these factors place a strain on cash flow and access to capital, and without a strong balance sheet such constraints are typically the reason behind companies filing Chapter 11 bankruptcy," said Ronald Winters, Gibbins Advisors principal.

While hospitals largely escaped last year, there is likely to be future pressure on the sector in 2023, particularly regarding rural and community hospitals, the report warned.

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