Hospital bankruptcies hit 5-year high

According to the report, there were 79 bankruptcy filings in the healthcare sector in 2023, the highest since 2019, which saw 51 filings. The report found that case volumes in 2023 were more than triple the level in 2021 and more than 1.7 times the level in 2022.

The report also found that bankruptcy filings of healthcare entities with liabilities over $100 million increased to 28 in 2023 compared to just seven in 2022 and eight in 2021.

Nearly half of the total healthcare bankruptcy filings in 2023 were in the senior care and pharmaceutical subsectors, however, the report found that hospital bankruptcy filings increased to 12 in 2023, compared to a total of 11 filings in the past three years combined.

Specifically, the report found that hospital bankruptcy filings steadily rose through the first three quarters of 2023 but dropped in the fourth quarter of the year.

Between 2018 and 2023, a total of 117 acute care hospitals closed and 69 hospitals opened, resulting in a net closure of 48 hospitals.

Rural hospitals have seen an increased rate of closures after experiencing no closures in 2021. However, in 2023, there were seven rural hospital closures, lower than the average of eight per year between 2014 and 2020.

Discussion

Tyler Brasher, director at Gibbins Advisors, said some of the data was "surprising."

"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," he said.

Clare Moylan, principal at Gibbins Advisors, said some of the increase in hospital closures can be attributed to the end of government funding and waivers supporting cash flow that occurred during the COVID-19 pandemic.

"If you're breaking even, you're doing quite well in this environment," Moylan said. "It's not surprising us. We expected it, and we'd expect that same level [of bankruptcies] to continue into 2024." (Gibbins Advisors release, 1/25; Hudson, Modern Healthcare, 1/25)

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