This last year has been tough on healthcare financial stability. Becker’s Healthcare noted 15 bankruptcies in 2024 in early December, with hospitals, health systems, and healthcare organizations either seeking protection or exiting bankruptcy.
Driving factors included personnel shortages, rising expenses, and declining reimbursement rates. Of the 15, 14 involved Chapter 11 — reorganization under bankruptcy laws for protection from creditors while restructuring for an eventual return to normal business. One case used Chapter 7 to wind down operations. The locations were Pontiac, Michigan; two in Miami and one in Miami Beach, Florida; Bradenton, Florida; Jersey City, New Jersey; Plymouth, North Carolina; Gainesville, Florida; Gardner, Massachusetts; Philadelphia, Pennsylvania; Brockway, Pennsylvania; Atlanta, Georgia; San Diego, California; Dallas, Texas; and Pearl River, New York. Florida was by far the hotbed of healthcare. Further actions later in December included multiple closure notices.
Numerous states — California, Massachusetts, Pennsylvania, Connecticut, Oregon, Washington and Minnesota — have attempted some degree of at least oversight, if not outright prohibition, of private equity healthcare deals, blaming the PE firms for failures.
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However, none of the attempts have panned out, according to a Bloomberg report. California Governor Gavin Newsom vetoed legislation that would have allowed the state to prevent PE deals for healthcare facilities. In Massachusetts, a bill to lock REITs out of hospital ownership failed to clear legislative hurdles. Similarly, according to law firm Holland & Knight, attempts in other states also fell flat.
“I don’t think eliminating private equity altogether is either practical or doable,” Massachusetts Governor Maura Healey told Bloomberg in an interview. “I think there is a role for private equity in health care — but the question becomes, what is the role? How do you define that role? I think the legislature is right to be looking at what are the guardrails that we need here.”
In September, private equity lobbyist American Investment Council wrote a letter to Senators Bernie Sanders and Bill Cassidy, the ranking Democratic and Republican senators on the Senate Committee on Health, Education, Labor and Pensions. “America’s health care system has tremendous challenges — but the private equity industry is not the cause,” they wrote.
Although the American Investment Council stressed that “private equity owns less than 4% of providers by revenue,” the Private Equity Stakeholder Project reported that out of 80 healthcare companies that filed for bankruptcy in 2023, private equity firms owned at least 21%.
For-profit hospitals represent only 36.1% of Medicare-enrolled hospitals, according to the Department of Health and Human Services.
Fitch Ratings revised its outlook for U.S. nonprofit hospitals from “deteriorating” to “neutral,” according to Becker’s Hospital Review. "Balance sheets remain healthy, and in fact are near all-time highs for many systems, which will continue to support ratings as operating results rebound," the report said. Balance sheets are “healthy,” but headwinds for 2025 include growing drug expenses, pay mix shifts, strong competition, decline of insurance coverage, policy shifts with the incoming administration, and a growing aging population.
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