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More Bankruptcies Stemming From Private Equity Ownership

Analysis  |  By Jay Asser  
   April 29, 2024

A new report examines the financial impact of private equity involvement in healthcare companies.

Private equity ownership in healthcare is increasing leading to organizations filing for bankruptcy, according to a new report from the Private Equity Stakeholder Project (PESP).

As private equity’s presence in the industry continues to expand, more bankruptcies are expected this year due to many companies dealing with significant leverage and credit rating downgrades, the nonprofit investigator said.

In 2023, there were 17 instances of private equity-owned organizations filing for bankruptcy, which accounted for 21% of all healthcare bankruptcies. That figure also more than doubled the number of private equity-owned bankruptcies from 2019 (eight) and cleared the amount from the past three years combined (13).

“Private equity’s excessive use of debt and aggressive financial strategies put healthcare companies at risk, and in turn threaten the stability of critical healthcare resources across the country,” the report stated.

PESP highlighted that bankruptcies in healthcare threaten more than just a company’s financial viability—they can also result in closures, disruption of services, layoffs, and more.

Some private equity firms are “repeat offenders,” such as KKR which owned two companies that filed for bankruptcy last year: physician staffing firm Envision Healthcare and oncology provider GenesisCare. KKR also owns Covenant Physician Partners, Global Medical Response, and One Call Corporation, which are all distressed and carry heightened risk for default.

The report projects more defaults ahead this year, pointing to Moody’s Investors Service ratings. Of the 45 companies with a probability of default rating of B3 negative and lower as of November 2023, all but three were owned by private equity firms.

One well-known organization that has already experienced bankruptcy this year is Miami-based primary care provider Cano Health, which filed in February following months of financial turmoil.

Meanwhile, the hospital closures amidst the Steward Health fiasco have further led to lawmakers putting the spotlight private equity involvement in healthcare.

As the industry hits a point of reckoning with private equity, one hospital CEO believes bigger questions must be asked.

Matt Heywood, president and CEO of Aspirus Health, recently told HealthLeaders: “We have to decide, do we want free market? Do we not want free market? And then if we want free market, do we want to put some guardrails in place to ensure that you don't have some of these adverse outcomes? That's something our country hasn't really had to grapple with historically but we're going to need to as more for-profits, more hedge funds, and private equity get involved in healthcare in general and this environment is getting tougher. We're going to have to address how much are we willing to allow to not go well before America decides it wants to put some guardrails.”

Jay Asser is the contributing editor for strategy at HealthLeaders. 


Research by the Private Equity Stakeholder Project reveals that 21% of all healthcare bankruptcies in 2023 involved private equity-owned companies.

More bankruptcies and defaults are expected this year as many organizations backed by private equity deal with excessive debt.

Lawmakers have been critical of private equity’s impact on healthcare, with bankrupticies often leading to hospital closures and a shutdown of services.

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