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The mission of the Private Equity Stakeholder Project is to identify, engage, and connect stakeholders affected by private equity with the goal of engaging investors and empowering communities, working families, and others impacted by private equity investments. It’s vision is to bring transparency and accountability to the private equity industry and empower impacted communities.

According to a recent report by the Project 2023 was a record year for large healthcare bankruptcies, and healthcare companies owned by private equity firms accounted for some of the largest bankruptcies: KKR’s Envision Healthcare, American Securities’ Air Methods, and American Physician Partners, owned by Brown Brothers Harriman Capital Partners, all made major headlines.

The healthcare default and bankruptcy wave is projected to continue in 2024 as companies are increasingly facing credit rating downgrades and potential defaults – and most of the companies at the highest risk are owned by private equity firms.

Bankruptcies in healthcare are more than just legal or financial events – they can lead to closures, disruption or cessation of critical healthcare services, and layoffs. Such outcomes have ripple effects on the broader healthcare infrastructure, such as overburdening healthcare providers that need to fill the gaps left by closures. In addition, Medicare, Medicaid, and other government health programs make up a significant component of revenue for many healthcare companies, which means private equity-driven bankruptcies are not just threatening healthcare infrastructure, but in many cases publicly-funded healthcare infrastructure.

There were an estimated 80 healthcare bankruptcies in 2023, and PESP found that at least 17 of those companies were backed by private equity firms. That amounts to approximately 21% of all healthcare bankruptcies last year. There were also at least 12 bankruptcies by companies with venture capital backing, accounting for another 15% of the year’s total healthcare bankruptcies.

The number of private equity healthcare bankruptcies has increased substantially in recent years. In 2019, there were 8 private equity healthcare bankruptcies, marking a 112.5% increase over the last 5 years.

Some private equity firms are repeat offenders when it comes to healthcare bankruptcies and unmanageable debt. For example, private equity firm KKR owned two major healthcare companies that filed for bankruptcy in 2023: physician staffing giant Envision Healthcare and oncology provider GenesisCare. In addition, KKR owns three other companies that are distressed and carry heightened risk for default: Covenant Physician Partners, Global Medical Response, and One Call Corporation.

In another example, H.I.G. Capital’s weight management company Jenny Craig filed for bankruptcy in 2023, its mental health company Community Intervention Services filed for bankruptcy in 2021 after one of its subsidiaries paid a four-million-dollar settlement for alleged Medicaid fraud, and its correctional healthcare company Wellpath Holdings currently has “very high credit risk.”

Moody’s Investors Service rates companies based on their probability of default. Out of 45 healthcare companies with a probability of default rating of B3 negative and lower, which is considered speculative, as of November 2023, all but three were owned by private equity firms – 93% of the most distressed healthcare companies in North America.