Healthcare Bankruptcies Ease, But Providers Still Feel the Squeeze

Even as filings in the industry fell for a second consecutive year in 2025, hospital bankruptcies increased to signal further strain ahead of policy shifts.

Healthcare bankruptcies cooled in 2025, marking the second straight year of falling Chapter 11 filings across the sector, according to a report by Gibbins Advisors.

While the drop appears to be a sign of relief after several years of financial turbulence, the data suggests that underlying pressures on providers remain significant and are, in some cases, worsening.

The restructuring advisory firm tracked 45 healthcare bankruptcy filings in 2025 among organizations with at least $10 million in liabilities, down 21% from 2024 and well below the 79 filings recorded in 2023. Gibbins cautioned that the decline should not be interpreted as an easing of financial strain across the industry.

“The lower filing volumes seen in 2025 may indicate that distressed healthcare organizations are taking earlier action, which would be a positive development, rather than reflecting a reduction in underlying market stress,” Clare Moylan, principal at Gibbins Advisors, said in a statement.

Around two-thirds of the bankruptcies involved middle-market organizations ($10 million to $100 million in liabilities), a jump from 60% in the previous year. That trend is illustrative of the continued vulnerability of providers with fewer financial buffers and more limited access to capital.

Though filings fell across much of the sector, the report highlighted notable increases in hospital and senior care bankruptcies, which rose 60% (from five filings to eight) and 18% (from 11 filings to 13), respectively.

Gibbins Advisors attributed the stress in these areas to a combination of conditions, such as high labor costs and payer mix issues, that have proven difficult to unwind even as financial indicators stabilize.

Looking ahead, the firm warned that policy-driven funding changes are likely to intensify financial challenges for providers beginning in 2026. Medicaid reductions enacted in 2025 are expected to ripple through hospital and health system finances over the coming years, particularly for organizations with heavy Medicaid exposure. The expiration of enhanced Affordable Care Act subsidies at the end of last year could further strain revenues by increasing uncompensated care.

“From where we sit today, the impact of impending funding cuts is not theoretical,” Ronald Winters, principal at Gibbins Advisors, said in a statement. “With effects beginning in 2026 and likely escalating over the next five years, providers that do not model these scenarios, plan ahead, and make disciplined decisions about strategy, priorities, and resource allocation risk being forced into reactive decisions.”

Gibbins emphasized that fewer filings are more indicative of temporary stabilization rather than a turning point. Without proactive planning and disciplined financial strategy, many providers could still face restructuring or insolvency as policy shifts and market headwinds converge.