Healthcare bankruptcies hit a five-year high in 2023, when 12 hospitals and health systems filed for bankruptcy, but the trend has slowed in 2024 as average operating margins improved across the hospital sector.
However, while hospital margins are steadily increasing, there is a growing divide between higher- and lower-performing facilities, with smaller and rural providers most at risk.
Gardner, Mass.-based Heywood Healthcare emerged from bankruptcy on Sept. 30, about one year after it filed for Chapter 11. The two-hospital system also exited bankruptcy as a standalone entity with its original leadership team intact — a rare feat among health systems.
"Emerging from bankruptcy lifted a weight off our shoulders, allowing us to maintain local control and advocate for our community, but challenges remain. Every healthcare organization faces financial constraints, particularly rural hospitals," Rozanna Penney, CRNA, President and CEO of Heywood, told Becker's. "We're working with tighter budgets and unique cost pressures. Large suppliers often favor bigger hospitals with discounts, while smaller hospitals like ours must find ways to deliver the same quality care without those advantages."
This year, Becker's has reported on two hospitals and two health systems that have filed for bankruptcy:
1. Dallas-based Steward Health Care, which operated 31 hospitals in eight states at the start of the year, filed for bankruptcy in May. The health system closed or sold its hospitals as part of its restructuring efforts.
Several health systems stepped in to acquire Steward's hospitals amid bankruptcy proceedings, including Scottsdale, Ariz.-based HonorHealth, Orlando (Fla.) Health, Lawrence (Mass.) General Hospital, Glendale, Calif.-based American Healthcare Systems, Irving, Texas-based Christus Health, Providence, R.I.-based Lifespan, Boston Medical Center, Brentwood, Tenn.-based Quorum Health and Flint, Mich.-based Insight Health Systems.
Steward Chair and CEO Ralph de la Torre, MD, "amicably separated" from the health system, effective Oct. 1. Dr. de la Torre's exit came shortly after a unanimous Senate vote on Sept. 25 to hold him in contempt for skipping a hearing he was subpoenaed to attend earlier that month.
2. Jersey City, N.J.-based CarePoint Health filed for Chapter 11 protection on Nov. 3.
The three-hospital, safety-net system secured $67 million in new funding to avoid interruptions to patient care and ensure its hospitals remain open. Its three hospitals provide care to more than 60% of Hudson County's population, with up to 65% of its patients uninsured or underinsured, CarePoint Chair and CEO Achintya Moulick, MD, told Becker's.
CarePoint is also moving forward with plans to affiliate with Secaucus, N.J.-based Hudson Regional Hospital under Hudson Health System, a new management services organization.
CarePoint said it has taken steps to ensure employee salary and benefits will continue amid the financial restructuring. The Chapter 11 filing was driven by insufficient state funding, reimbursement challenges and an increase in hospital operating costs after the COVID-19 pandemic, according to the health system.
3. Washington Regional Medical Center in Plymouth, N.C., on Oct. 29 filed for bankruptcy.
The 25-bed critical access hospital said it will remain open with no interruptions to daily operations.
Financial and restructuring experts have been brought in to help stabilize the hospital's finances, improve operational efficiency and allow it to continue to invest in technology and infrastructure as well as its workforce.
4. Pontiac (Mich.) General Hospital on Nov. 23 filed for Chapter 11 bankruptcy protection. The hospital lost Medicare funding Nov. 24 after CMS found it was not in compliance with several conditions of participation. Pontiac General is laying off 248 employees and believes the Medicare fund exclusion is temporary and should last less than six months.
The hospital did not respond to Becker's request for comment.
Click here for details on the hospitals and health systems that filed for bankruptcy in 2023.