Healthcare Industry Sees Alarming Spike In Bankruptcy Filings

Large healthcare bankruptcy filings in the fourth quarter of 2022 were almost three times the number of filings in the first quarter 2022.

The healthcare industry has been under enormous financial pressure stemming from the pandemic, labor shortages, rising expenses, and inflation. As a result of these economic challenges, there was an increase in the number of large healthcare organization bankruptcy filings through 2022.   

Large healthcare bankruptcy filings in the fourth quarter of 2022 were almost three times the number of filings in the first quarter of 2022, according to research from Gibbins Advisors, a healthcare restructuring advisory firm. Bankruptcies in the first half of 2022 were dominated by the senior care sector, while the latter half of the year saw a greater number of bankruptcies from the pharmaceutical sector. Over the course of 2022, 19 hospitals filed for bankruptcy, closed, or announced plans to close, according to other reports. One key contributing factor to these issues has been the end of government financial relief for healthcare organizations.

"The hospital sector was particularly insulated from financial distress during the pandemic however those protections have ended, and we are now seeing a lot of struggling hospitals, particularly rural and community hospitals," Ronald Winters, a principal at Gibbins Advisors said in the report. "Financial distress will persist if not worsen in 2023 as financial buffers wear thin. COVID-related support deferred this process, but margin squeeze and macroeconomic forces are driving the healthcare market toward consolidation given the enormous scale and depth of expertise you need to compete effectively."

Looking forward, Gibbins advises hospitals and health systems to examine their operations and services through a critical lens. Shifting from inpatient to outpatient and community-based methods of delivering healthcare can help organizations remain "relevant and efficient," the advisory firm says.  

"Healthcare organizations need to be future-focused," Clare Moylan, a principal at Gibbins Advisors, said in the report. "If the board pays attention and acts early there’s a lot more that can be done, but by the time you’re tight on cash the options for the organization become much more limited."