Gibbins Advisors, a lhealthcare restructuring advisory firm, has issued its latest report analyzing healthcare sector Chapter 11 bankruptcy cases filed from 2019 to 2023 for companies with more than $10 million in liabilities.
According to the report, there were 79 Healthcare Bankruptcy Filings in 2023 which made it the highest of the last five years, with the next closest being 2019 which saw 51 cases. Case volumes in 2023 were over 3 times the level seen in 2021 and over 1.7 times the level in 2022.
Large Healthcare Bankruptcy Filings with liabilities over $100 million surged in 2023, reaching 28 filings compared to only 7 in 2022 and 8 in 2021.
While the number of Healthcare Bankruptcy Filings increased across six consecutive quarters through Q3 2023, there was a decline from Q3 to Q4 2023. While the number of cases in the second half of 2023 approximate those in the first half of 2023, it is yet unclear if lower volumes in Q4 2023 indicate an emerging trend.
Senior care and pharmaceutical subsectors comprised almost half the total healthcare bankruptcy filings in 2023, consistent with previous trends.
Of particular note, hospital bankruptcy filings spiked in 2023 with 12 filings compared to a total of 11 filings from the prior 3 years combined.
“We saw a dramatic increase in healthcare bankruptcy filings in 2023, continuing the trend which began in mid-2022″ said Clare Moylan, Principal at Gibbins Advisors. “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 COVID-19 pandemic-related protections ending.”
“Some of the recent data was surprising” said Tyler Brasher, Director at Gibbins Advisors. “Total healthcare filings spiked in Q3 and then receded in Q4 2023, and there were no senior care bankruptcies filed in Q4 2023 when we expect to see about 5 per quarter. We will closely monitor in 2024 to see if the market is changing”.
“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” said Brasher. “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.”
“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,” said Moylan.