Healthcare Companies File for Bankruptcy Amid High Debt Obligations and Litigation

Healthcare sector bankruptcy filings have increased in the last two years, with 79 cases in 2023 and 57 in 2024. In the third quarter, several large healthcare companies have filed for bankruptcy, including ModivCare, LifeScan Global, Genesis Healthcare, and Landmark Recovery of Colorado. These filings are attributed to high debt obligations and litigation.

Healthcare sector bankruptcy filings have seen a significant increase in the last two years, with 79 cases in 2023 and 57 in 2024. This trend has continued into the third quarter of 2025, with several large healthcare companies filing for bankruptcy. These filings are primarily attributed to high debt obligations and litigation.

In July 2025, ModivCare Inc. and its 70 affiliates filed for a prearranged Chapter 11 bankruptcy, seeking to reduce its $1.4 billion in debt and hand its assets to its lenders. Medical device company LifeScan Global also filed for Chapter 11 protection on July 15, 2025, aiming to reduce $1.27 billion in debt. Genesis Healthcare Inc., a leading provider of post-acute and long-term care services, filed for bankruptcy on July 9, 2025, to address legacy liabilities associated with previously divested operations. Landmark Recovery of Colorado LLC, which operates addiction treatment facilities in Colorado Springs and the Denver area, also filed for Chapter 11 bankruptcy to reorganize its business.

These bankruptcies are part of a broader trend in the healthcare sector, where companies are struggling to meet their financial obligations. According to Gibbins Advisors, the annual average of health care bankruptcies from 2019 through 2022 was 42, but this number has increased significantly in recent years. Senior care and hospital bankruptcies surged past typical levels in the first quarter of 2025, but overall health care bankruptcies dropped markedly in the three months through July.

The rising bankruptcies are attributed to various factors, including the growing delta between revenue and expenses, rising labor costs, and the impact of private equity ownership. Lawton Robert Burns, professor of health care management at the University of Pennsylvania's Wharton School, noted that bankruptcies in the sector have been steadily rising since 2010. He attributed the revenue crisis to a combination of poor decision-making and external factors such as rising labor costs.

The surge in bankruptcies has raised concerns about the sustainability of private equity investments in the healthcare sector. The Private Equity Stakeholder Project (PESP) has warned that the heightened risk of bankruptcy threatens job security for workers, disrupts services for consumers, and creates ripple effects across local economies. The collapse of Genesis Healthcare, a private equity-owned firm, reflects a recurring pattern of financial fragility tied to private equity ownership.

Despite the challenges, there is no immediate reason to be optimistic about the financial future of the healthcare sector. Adrienne Sabety, economist and professor at Stanford University's School of Medicine, noted that the sector is facing unprecedented levels of budgetary pressure, exacerbated by recent legislative changes such as the One, Big Beautiful Bill Act signed by President Trump. This act is projected to strip hundreds of billions in funding from Medicaid and Medicare over the next decade, putting further pressure on healthcare organizations.

As financial pressures endure and bankruptcies spread through the industry, America's healthcare firms face the same uneasy reality as many of their patients: a system under strain with only costly cures in sight.

References:
[1] https://www.newsweek.com/bankruptcies-hitting-american-healthcare-giants-2117925
[2] https://www.thestreet.com/health/troubled-healthcare-company-chain-files-chapter-11-bankruptcy