Steward, Cano and more: 5 recent healthcare bankruptcies

Healthcare bankruptcies spiked in 2023 amid high debt levels and rising interest rates as 73 healthcare companies — including 12 hospitals and health systems — filed for bankruptcy. Private equity firms, which owned 21% of the healthcare companies that filed for bankruptcy last year, have come under greater scrutiny by lawmakers and other healthcare stakeholders. 

Here are five healthcare bankruptcies Becker's has reported on so far this year:

1. Atlanta-based LaVie Care Centers, a skilled nursing facility operator, filed for Chapter 11 bankruptcy in June because of high labor costs, lower occupancy and uneven reimbursement rates. The company operates 43 nursing homes and assisted living facilities across five states and has about 3,600 employees. Since the pandemic, LaVie has divested more than 90 facilities. When selling off facilities, it was left with lease liabilities and litigation claims. It was unable to negotiate repayment plans with all creditors and fell behind on settlement agreements.

2. Dallas-based Steward Health Care in May filed for Chapter 11 bankruptcy and will receive millions in financing from Medical Properties Trust to maintain operations at existing hospitals and clinics. The for-profit health system received the green light to auction off its 31 hospitals in June and July. Steward has faced various financial challenges and liquidity issues, blaming low reimbursement from government payers and increasing costs for labor, materials and operations due to inflation. Lawmakers have been investigating Steward's financial situation in recent months amid hospital closures and vendor complaints of unpaid bills. One of Steward's hospitals in San Antonio closed last year amid unpaid bills, and the system shut down New England Sinai Hospital in Stoughton, Mass., in April.

3. Healthcare tech company Cue Health filed for Chapter 7 bankruptcy in May and is winding down operations. The board made the decision after the company failed to improve operational efficiency and its capital structure. 

4. Primary care provider Cano Health filed for Chapter 11 bankruptcy in February. Under a restructuring agreement, Cano will get $150 million in new financing from some of its current leaders. Additionally, the company will convert $1 billion in secured debt for a mix of new debt and complete ownership of the reorganized company through equity. Cano expects to achieve about $290 million of annualized cost reductions by the end of 2024 and to emerge from the restructuring process in the second quarter of thai year.

5. Careismatic, a medical scrubs maker and distributor, filed for bankruptcy in January as it logged $833 million in debt. The private equity-owned company reported record sales in 2021 with $687 million in revenue, but demand for medical supplies has since declined amid a decrease in COVID-19 cases. Inflation, constant supply chain disruptions and a challenging labor market also hurt the business, which, as of January, employed about 800 employees in the U.S.. Careismatic listed its assets and liabilities exceeding $1 billion.

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