Trends in U.S. health care bankruptcy: a 10-year retrospective

Background: In recent years, the United States (U.S.) healthcare system has faced financial challenges resulting from changing reimbursement models, fluctuations in sources of investment, and a global pandemic. These factors have resulted in an influx of bankruptcy filings among healthcare organizations. This study explores the number of healthcare organizations filing for bankruptcy as means to reorganize (Chapter 11) or liquidate assets (Chapter 7), and examines whether organizational size, defined by assets and liabilities, influences the success of reorganization. The research on bankruptcy among healthcare organizations has been limited to larger businesses including hospitals and nursing homes. This study investigates all healthcare organizations filing for bankruptcy, regardless of type or size. Methods: Using 2013–2023 bankruptcy filing data from the Federal Judicial Center’s (FJC’s) Integrated Data Base (IDB), we conducted bivariate analyses to identify any statistically significant differences between the final dispositions of the healthcare bankruptcy, as well as a multinomial regression model to examine the relationships between the independent variables and bankruptcy disposition. Results: Findings show that bankruptcies with an unknown status have a higher proportion in the high asset and liability category, compared to successful bankruptcies; whereas unsuccessful bankruptcies have a higher proportion in the low asset and liabilities categories. Healthcare organizations with a medium level of assets were more likely to have a successful bankruptcy compared to those with low or high levels of assets. The length of time from filing to closure influences the likelihood of success, with those organizations spending more time in bankruptcy being more likely to have a successful filing. Conclusions: Overall, the findings suggest that most filing organizations are smaller healthcare entities, compared to larger enterprises, that do not find much success in filing bankruptcy as a means to reorganize. Policymakers might give concerted attention to other solvency approaches within bankruptcy guidelines that may better contend with the resource constraints of smaller healthcare entities.