Healthcare providers have gotten some balance sheet relief, thanks to a greater number of paying patients over the past couple of years. But bankruptcy filings suggest the industry has recovered more slowly than the improving economy would indicate.
It's not only Medicare pay cuts pushing providers into bankruptcy, but also a combination of forces that include litigation, payment delays and even bad merger agreements.
“In the general U.S. economy, distress has dropped off 60% to 65%,” said Bobby Guy, a Nashville-based healthcare attorney at law firm Polsinelli. “In healthcare, it has gone up.”
Polsinelli conducted an analysis of providers in distress based on Chapter 11 filings for healthcare services firms with more than $1 million in assets. The analysis included 83 organizations.
“We did not see the Affordable Care Act mentioned very much,” Guy said. “It was often issues that snuck up on companies or a convergence of factors.”
The vast majority of filings—or 77.8%—cited more than one cause for organizational distress, with more than a quarter of filings citing four reasons. For instance, three-quarters of filings that cite tort litigation also noted the high cost of liability or malpractice insurance. And most of the healthcare services companies that blamed reimbursement changes for their stress also cited competition and the rapidly changing healthcare environment as contributing factors.
About a third of Chapter 11 filings were from the South, from Virginia to Texas, while another 26.5% were from Arizona, California, Colorado, Nevada, New Mexico and Utah.