While healthcare bankruptcy filings declined 28% from a six-year peak in 2023, 2024 saw the second-highest level of bankruptcies since 2019, according to a Jan. 22 report published by Gibbins Advisors, a healthcare restructuring advisory firm.
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. Senior care and pharmaceuticals comprised nearly half of 2024 filings. Clinics/physician practices hit a six-year high with 10 filings, compared to an average of four annually from 2019-2023.
"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. "Given these trends and our ongoing experience, we anticipate an increase in physician practices needing restructuring support in 2025."
Healthcare continues 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.
The new presidential administration may also bring changes in the healthcare regulatory environment in areas including antitrust policy and Medicaid funding, which could have a significant effect on providers and investors.
"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. "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."