Physician practice and clinic bankruptcy filings have surged 60% year-over-year in 2024

Bankruptcy filings for clinics and physician practices have “surged” this year, up 60% through June 30 compared to last year’s levels.

That’s according to new research from Nashville, Tennessee-based consulting firm Gibbins Advisors, published earlier this month. Overall healthcare Chapter 11 filings have cooled compared to a spike in 2023. There were roughly 79 bankruptcy cases filed last year, with 2024 on pace for 58, a decline of 27%.

The drop in overall bankruptcy case volume is largely driven by middle-market companies with liabilities ranging from $10 million to $100 million. Conversely, filings of larger healthcare companies remain at the same elevated levels seen in 2023, with half a dozen so far this year.  

“The very large bankruptcy cases with liabilities over $500 million include sizable healthcare enterprises. So, when you see six such cases filed year to date, that represents a much bigger number of healthcare facilities,” Ronald Winters, MBA, principal at Gibbins Advisors, which specializes in restructuring-related advice, said in a statement. “We are seeing elevated financial distress in nursing homes, senior living, pharmacy, physician practices and rural and standalone hospitals…strained by legacy debts, cash shortages and profitability challenges.”

Steward Health Care is the only hospital system to file for bankruptcy this year. The Dallas-based organization had 31 hospitals at the time of the filing, carrying $9 billion in liabilities. Senior care and pharmaceutical subsectors have comprised almost half of the total bankruptcy filings in 2024.

About 45% of healthcare bankruptcies over the past five years were for privately held debtors, excluding those backed by private equity. So far this year, about 62% of the clinics/physician practices filing for Chapter 11 are privately held—a category that includes for-profits owned by investors, physicians, holding companies and others. Publicly traded healthcare firms were next on the five-year list at 24%, including radiology provider Akumin Inc. The Plantation, Florida, firm filed for Chapter 11 in October seeking to cancel $470 million in debt, and it completed the process in February.

Another 17% of bankruptcies were from healthcare nonprofits, and 14% were tied to private equity. The latter included multispecialty radiology provider Envision Healthcare, formerly backed by KKR, which filed in May 2023 hoping to cancel $5.6 billion in debt and emerged from the process in November.

Gibbins Advisors noted that the healthcare sector continues to face “financial headwinds,” with several “distress drivers” pushing physician groups and other sectors toward bankruptcy. Among them are capital market constraints, cost increases, labor shortages and pressure from payers. The analysis covers all Chapter 11 bankruptcy filings logged from Jan. 1, 2019, through June 30 of this year in the “healthcare and medical” sector where such cases reported liabilities of at least $10 million.

Their research only tracks bankruptcy filings and does not include debt restructuring taking place outside of court. As one example, earlier this year, S&P Global Ratings placed imaging industry giant Radiology Partners on CreditWatch, citing “rising risk” of a payment default. However, the country’s largest radiology practice was able to raise $720 million in new equity in February, reducing liabilities by about 20% or $600 million, and restructure its debt agreements. This left Rad Partners with obligations of about $2.4 billion as of February, with debt maturities extended by several years.

“The trend of lower bankruptcy volumes is not resonating with the amount of financial distress we are seeing in our practice,” Clare Moylan, principal at Gibbins Advisors, said in the same announcement. “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.”

Some of the 26 physician groups/clinics that have filed for bankruptcy so far this year include Atlantic Neurosurgical Specialists, Prime Plastic Surgery Associates, Advanced Care Hospitalists and Cano Health. Gibbins Advisors also highlighted one Chapter 9 healthcare bankruptcy filing this year and four Chapter 15 cases, but it did not include these in the analysis.