Healthcare company bankruptcies surged in 2023

Healthcare company bankruptcies spiked in 2023 amid high interest rates, rising labor and supply costs, and an uptick in denials from payers, according to a January report from healthcare restructuring firm Gibbins Advisors.

Seventy-nine healthcare companies filed for bankruptcy in 2023—the highest number since 2019, which saw 51 bankruptcies, according to the report. The volume of bankruptcies last year was nearly 2x as high as 2022 and over 3x the level seen in 2021.

“We saw a dramatic increase in healthcare bankruptcy filings in 2023, continuing the trend which began in mid-2022,” Clare Moylan, co-founder and principal at Gibbins Advisors, said in a statement. “Key observations from 2023 are the return of large bankruptcy cases with over $100 million in liabilities, and a spike in hospital filings, both of which appear to primarily be a result of Covid-19 pandemic-related protections ending.”

Twenty-eight large healthcare companies with liabilities surpassing $100 million filed for bankruptcy in 2023, compared to seven in 2022 and eight in 2021, according to Gibbins Advisors.

Nearly half of the bankruptcies in 2023 were among senior care and pharmaceutical companies, the report found. Plus, 12 hospitals filed for bankruptcy, compared to 11 in the three prior years combined.

A few key trends drove the increase in bankruptcies last year, per the report, including high interest rates that raised the costs of capital, large increases in labor and supply costs over the past two years, and an increase in denials from payers.

Additionally, Medicaid unwinding means there may be a big increase in the number of uninsured patients, and the trend of moving care out of the hospital and into the home creates “both opportunities and headwinds,” the report stated.

There were a couple “surprising” findings in the report, according to Tyler Brasher, director at Gibbins Advisors: There weren’t any bankruptcies among senior care companies in Q4 of 2023, when there are usually five per quarter, and the number of bankruptcies increased across six consecutive quarters, but declined between Q3 and Q4 of 2023.

“Despite the absence of senior care bankruptcy filings in Q4 2023, based on our knowledge of the market we expect to see senior care bankruptcies return in 2024,” Brasher said in a statement. “As for total case volume, we are seeing a lot of distress in healthcare as the market remains very challenging for providers, so we expect to see continued levels of healthcare bankruptcies in 2024 that we saw last year.”

Moylan agreed that 2024 will have a similar level of bankruptcies as 2023, particularly among hospitals.

“As we anticipated, restructuring activity in the hospital sector increased markedly in 2023 and we expect to see a continuation of that level of distress this year as hospitals, particularly rural and standalone hospitals, work through challenging profitability, liquidity, and leverage dynamics,” Moylan said in a statement.