News: Q3 Healthcare bankruptcy filings spiked 3 times higher than Q1 in 2022, research shows

CDI Strategies - Volume 17, Issue 3

Labor shortages, rising expenses, inflation, and the COVID-19 pandemic are all economic challenges that have contributed to an increase of large healthcare organization bankruptcy filings. In 2022, the number of fourth quarter large healthcare bankruptcy filings were nearly three times the number of filings in the first quarter, according to research published by Gibbons Advisors. From 2021 to 2022, large healthcare bankruptcy filings increased by 84%. Additionally, their research found the majority of bankruptcies in the first half of 2022 were from the senior care sector, while the latter half of the year say more bankruptcies from the pharmaceutical sector, HealthLeaders reported.

One key contributing factor to this that the researchers cited is the end of government financial relief for healthcare organizations. “The hospital sector was particularly insulated from financial distress during the pandemic,” said Ronald Winters, a principal at Gibbins Advisors, in the report. “However, those protections have ended, and we are now seeing a lot of struggling hospitals, particularly rural and community hospitals.".

Winters stated that financial distress will continue and possibly worsen in 2023 as other financial buffers wear out. Gibbons Advisors recommended hospitals examine their operations and services critically moving forward.

“COVID-related support deferred this process, but margin squeeze and macroeconomic forces are driving the healthcare market toward consolidation given the enormous scale and depth of expertise you need to compete effectively,” he said.

To prepare for the future, the advisory firm said shifting from inpatient to outpatient and community-based methods of delivering healthcare can help organizations maintain relevance and efficiency.

Editor’s note: To read HealthLeaders’ coverage of this story, click here. To access the full report, click here.

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