While the number of Chapter 11 healthcare bankruptcies has declined in the past three quarters, pharmaceutical and senior housing companies still make up nearly half of all bankruptcy filings at this point in 2024.
That’s according to the latest Gibbins Advisors report, which analyzed Chapter 11 bankruptcy cases among companies with more than $10 million in liabilities ranging from 2019 through June 30, 2024.
Healthcare bankruptcies have been on a decline over the past year, and are currently around 27% lower than in 2023, according to the report. Senior housing made up 12 of the 58 filings in 2024, while pharmaceutical companies accounted for 14 filings.
Over the past five years, senior care made up 65 of the 275 bankruptcy cases in the report. The majority of filings ranged between $10 million and $50 million in liabilities at 39 cases, with another 17 being between $100 million and $500 million. Only one case was valued at over $500 million.
Excluding private equity-backed deals, almost half of those filings, 45%, were from privately held debtors. Publicly traded companies were behind 24% of the filings, while nonprofits had 17% and private equity-backed filings had 14%.
Although declining health care bankruptcy filings are a good sign overall, “ it doesn’t necessarily mean that financial challenges in the healthcare sector have abated,” the report’s author wrote. Specifically, the industry is still grappling with financial headwinds including high interest rates, labor cost increases leading to margin squeezes and increased pressure from payors.
Overall trends for middle-market company bankruptcy filings ranging from $10 million to $100 million have been on the decrease and are 33% lower than they were in 2023. However, very large healthcare companies with over $500 million in liabilities remain elevated like they were last year.
“The trend of lower bankruptcy volumes is not resonating with the amount of financial distress we are seeing in our practice” said Clare Moylan, Principal at Gibbins Advisors, in a press release about the new report. “A possible reason could be financial restructuring taking place out of court rather than in bankruptcy. We wouldn’t be surprised if the case volumes increased from current levels as the year progresses.”
Additionally, a recent Polsinelli-TrBK Distress Indices Report indicates distress in the healthcare sector has reached another record high at 1,241.7, up 328 points over the last quarter.
The report uses Chapter 11 filing data to measure financial distress in the U.S., and indicates the southeast makes up the majority of the distress in the country at 73.4%. Delaware makes up the second largest amount at 16.4%, followed by the southwest at 4.4%.
Over the past year, the total percentage of healthcare filings increased from 12.2% to 15.3%.
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