Private equity-backed bankruptcies hit record high, with radiology firm topping healthcare list

Bankruptcies of private equity- or venture capital-backed companies hit a record high in 2023, with one radiology firm topping the list in the healthcare industry, according to S&P Global.

A total of 104 such portfolio companies went belly-up last year, representing a 174% increase over the 38 that filed in 2022. Meanwhile, overall bankruptcies leapt 73% year-over-year, up to 642 in 2023.

Radiology and oncology provider Akumin Inc. ranked as one of the largest private equity portfolio company bankruptcies in healthcare last year, alongside medical transport firm Air Methods Corp. The Plantation, Florida-based firm filed for Chapter 11 bankruptcy protection in October, seeking to wipe out $470 million in debt.

Under terms of the deal the nearly half-billion-dollar loan balance will be converted to shares in the company, held by Stonepeak Partners LP. The alternative investment firm also is investing $130 million more into Akumin, with a bankruptcy judge approving its plans to go private in November.

S&P experts said the uptick in bankruptcies is being fueled by inflation, high interest rates and the fading impact of pandemic stimulus spending.

“It's no secret that there's been economic headwinds after the COVID bump,” Kris Herrmann, a partner for law firm Proskauer, said in the Jan. 11 report. “I wouldn’t be surprised if, even when the economy kicks up again, you’re still going to see some of those residual bankruptcies happening for those businesses whose time maybe should have run out three years ago,” he added.

Private equity- and VC-backed companies accounted for over 16% of all U.S. bankruptcy filings in 2023, which is their largest share going back to at least 2010, S&P said. More than one-third of the 104 firms on the list were in healthcare, hinting at the “specific economic pressures squeezing” the sector.

Some private equity-backed companies are grappling with restrictions around their ability to raise prices to counter soaring costs, Hermann added. This includes the No Surprises Act, which has cut into profit margins for some in the industry. S&P Global Ratings placed industry giant Radiology Partners on CreditWatch in December while highlighting the NSA’s impact on its cash flow.

Private equity-backed radiology provider Envision Healthcare also filed for bankruptcy in 2023, exiting the process in October.

Marty Stempniak

Marty Stempniak has covered healthcare since 2012, with his byline appearing in the American Hospital Association's member magazine, Modern Healthcare and McKnight's. Prior to that, he wrote about village government and local business for his hometown newspaper in Oak Park, Illinois. He won a Peter Lisagor and Gold EXCEL awards in 2017 for his coverage of the opioid epidemic. 

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