Healthcare company bankruptcies soared in 2023 to their highest level in the last five years, according to a report released Thursday by Gibbins Advisors.
The advisory firm's report, which looked at Chapter 11 bankruptcy case filings from 2019 to 2023, found 79 healthcare companies with more than $10 million in liabilities filed for bankruptcy protection last year. Pharmaceutical and senior care companies made up nearly half of the list. The next-highest year for bankruptcies was 2019, when 51 companies filed for protection.
Twenty-eight healthcare companies with liabilities exceeding $100 million filed for bankruptcy protection in 2023, compared with 15 in 2021 and 2022 combined, the report found.
Twelve hospital companies filed for bankruptcy protection in 2023, compared with two in 2022 and three in 2021, according to the report. Some of that can be attributed to the end of government funding and waivers to support cash flow during the COVID-19 pandemic, said Clare Moylan, principal at Gibbins Advisors.
Financial pressures in healthcare are expected to continue this year, as companies grapple with high labor and supply costs, increased payer denials, low reimbursement rates, additional federal scrutiny on mergers and acquisitions and ongoing Medicaid disenrollments.
"If you're breaking even, you're doing quite well in this environment," Moylan said. "It's not surprising to us. We expected it, and we'd expect that same level [of bankruptcies] to continue into 2024."
The end of 2023 offered some possible encouragement. After six consecutive quarters of increases, bankruptcies decreased in the fourth quarter to 11, compared with 28 in the third quarter, according to the report.
Tyler Brasher, director at Gibbins Advisors, noted in a statement no senior care bankruptcies occurred in the fourth quarter, although he typically expects to see about five each quarter.
The question is whether the fourth quarter is an anomaly, Moylan said, adding that another two quarters of data would be ideal before determining if there is a trend.