Healthcare bankruptcies have spiked this year as staffing shortages and climbing interest rates continue to challenge hospitals, health systems, physician staffing groups and other healthcare companies, according to Bloomberg.
Five things to know:
1. In the first quarter, 17 healthcare companies with more than $10 million in liabilities, including a hospital, senior living centers and a pharmaceutical developer, filed for Chapter 11 bankruptcy, according to Gibbins Advisors, a healthcare restructuring consulting firm. Seven companies filed for Chapter 11 in the same period in 2020.
2. Economic challenges have led to a general rise in Chapter 11s bankruptcy filings, according to the report. The healthcare industry has been hit particularly hard as it grapples with a nationwide staffing shortage and rising labor costs.
3. Two private equity-backed companies, Envision and GenesisCare, and two hospitals — Madera (Calif.) Community Hospital and Beverly Hospital in Montebello, Calif. — are among the Chapter 11 bankruptcy filings in healthcare so far this year.
4. Healthcare bankruptcies spiked in late 2022, and cooled slightly in the first quarter of 2023. However, first-quarter numbers are up year over year, and the rate of new bankruptcy filings are expected to spill over into coming quarters, according to the report. .
5. Inflation and rising interest rates are also contributing to challenges in the healthcare sector. Medicare and Medicaid reimbursement generally comprise a large portion of a healthcare providers' revenue, but federal payments typically lag behind inflation, Clare Moylan, co-founder of Gibbins Advisors, told Bloomberg.