Healthcare Bankruptcies Decline in 2024, but Industry Challenges Persist

Bankruptcy Filings Remain Elevated Despite Slight Decrease

The healthcare industry saw a slight dip in bankruptcy filings during 2024, with 57 Chapter 11 filings among companies with over $10 million in liabilities, according to a recent report from Gibbins Advisors. While this number represents a decrease from the 79 filings recorded in 2023, it remains above the 2019-2022 average of 42 filings per year.

Larger entities, defined as those with more than $500 million in liabilities, continued to face significant financial pressures. Nine such companies filed for bankruptcy in 2024, down from 12 in 2023 but still triple the average of three per year observed from 2019 to 2022.

Physician Practices and Hospitals Face Mounting Pressures

The report highlighted a concerning trend in the physician practice sector, with bankruptcies steadily increasing since 2021. In 2024, 10 clinics and physician practices filed for bankruptcy, up from six in 2023. Clare Moylan, principal at Gibbins Advisors, warned that this trend is likely to continue, citing headwinds such as reductions in Medicare's physician fee schedule and inflationary supply costs.

While hospital bankruptcies decreased from 12 in 2023 to five in 2024, the sector witnessed what Gibbins described as "the largest hospital sector bankruptcy by far in the last 30 years." The filing of Steward Health Care, a 31-hospital health system, underscored the significant challenges facing even larger healthcare providers.

Industry Outlook and Future Trends

Despite the overall decline in bankruptcies, the healthcare industry continues to face substantial financial challenges. Ronald Winters, principal at Gibbins Advisors, noted that "the core factors driving healthcare distress remain unchanged," with standalone and rural providers particularly vulnerable.

The report also pointed to potential shifts in the healthcare landscape for 2025, including the possibility of increased mergers and acquisitions activity. Factors such as lower interest rates, more lenient antitrust enforcement, and a widening gap between financially stable and struggling providers could drive consolidation in the industry.

As the sector navigates these challenges, collaboration between healthcare providers and their communities will be crucial in preserving essential services, particularly in rural areas. The industry will also need to adapt to ongoing shifts in care delivery models and potential policy changes under the new presidential administration.