US healthcare bankruptcies soar as costs mount

Ella Castle

Unlock the Editor’s Digest for free Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter. A record number of large healthcare companies filed for bankruptcy in the US last year, underlining the industry’s struggles with problems ranging from rising costs to falling patient numbers and […]

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A record number of large healthcare companies filed for bankruptcy in the US last year, underlining the industry’s struggles with problems ranging from rising costs to falling patient numbers and tougher regulation. 

Eighteen companies with liabilities of more than $100mn, including radiotherapy and medical staffing services and a community hospital, filed for Chapter 11 bankruptcy protection, seeking court approval to reduce their debts. 

The list includes Envision, which was formerly owned by KKR, Brown Brothers Harriman’s American Physician Partners (APP) and Akumin, according to an analysis of data by, part of analytics group New Generation Research.

The number of bankruptcies is an almost fivefold rise on 2022 and an increase of five from the previous high during the pandemic in 2020. A Chapter 11 bankruptcy is a common way for businesses in financial distress to cut their debts and restructure in the US.

“Healthcare has historically been perceived as always in demand, perhaps inflation resilient. But in the pandemic you had low interest rates, lender concessions, government funding for healthcare providers, all those factors deferred some of the fundamental issues hitting the most fragile businesses,” said Steven B Smith, a partner at US law firm Herrick, Feinstein. 

In total, the 18 healthcare companies had assets of $7bn against liabilities of $8.3bn. Healthcare was not the only sector with a high number of bankruptcies in 2023 — others included computer software, chemicals and agriculture — but it had by far the largest aggregate shortfall in assets.

US bankruptcy volumes in 2023 overall were lower, at 133, than in 2020, when there were 179. The latter was a record year for bankruptcies in the US. But in terms of scale — that is the amount by which liabilities exceeded assets — 2009 was worse, driven by the financial crisis.

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The numbers include “lead” bankruptcy filings only and exclude the filings of any corporate subsidiaries. 

The rising bankruptcies also highlight the problems that some indebted private equity owned healthcare businesses are having because of the combination of higher interest rates and costs and a reduction in patient numbers.

In the past five years, private equity groups have backed about $140bn of US healthcare deals, making it the third most active sector behind technology and financials according to figures from Refinitiv. 

The “No Surprises Act”, which regulates patient billing and seeks to cut excessive charges, came into place at the start of 2022 and has been problematic for some providers.

“Surprise” healthcare bills arise when a procedure is not fully covered by an insurance scheme. They have been cited as a major problem in the fragmented and costly US healthcare system.

The act has resulted in tougher reimbursement talks between medical groups and the insurance companies that pay the bills, and meant cash flows have become harder to predict, or even dried up in some cases.

This combination of factors has meant that some healthcare companies have struggled to make interest payments and sought to reduce their debts.

The outlook remains challenging. During the pandemic, the US government required Medicaid programmes — federal and state-supported medical insurance for people on low incomes — to keep people enrolled in the system. That protection is now being withdrawn.

US health policy research organisation KFF, estimates that between 8mn and 25mn people could lose Medicaid coverage by May 2024. Of the $4.3tn of US healthcare spending in 2022, Medicaid represented $1 in every $6, according to KFF. 

“Margin squeeze, economic contraction, staffing shortages and regulatory scrutiny are mounting systemic challenges,” Smith said. “All these factors have made healthcare a tough environment generally to succeed in.”

Stonepeak, which reached an agreement with Akumin in October to take the company private, declined to comment.

Envision said it had successfully emerged from bankruptcy in November “with a markedly strengthened capital structure” adding that its clinicians were “an essential part of the US healthcare system” and it was committed to supporting them.

Brown Brothers Harriman and APP could not be reached for comment.

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