Senior care bankruptcies, combined with pharmaceuticals, made up almost half of Chapter 11 bankruptcies in healthcare over the past three quarters, according to a report from Gibbins Investors published Wednesday.
The analysis examined skilled nursing facilities, independent living communities, assisted living communities and continuing care retirement / life plan communities, among other types of healthcare-related entities.
The analysis examined skilled nursing facilities, independent living communities, assisted living communities and continuing care retirement / life plan communities, among other types of healthcare-related entities.
Senior care has averaged three cases per quarter over the past five years, according to Gibbins. No bankruptcy cases were filed in the fourth quarter of 2023.
“The healthcare sector continues to face financial headwinds, with some subsectors under increasing pressure and some organizations better equipped to confront those challenges than others,” according to the Nashville, TN-based healthcare advisory firm.
The Gibbins analysis jibes with the latest Polsinelli-TrBK Distress Indices Report, which showed that for senior living and care settings, Chapter 11 bankruptcy filings have comprised approximately half of the distress in the healthcare data set for the past several years. The Polsinelli data show that the current level of Chapter 11 filings is almost 50% higher than healthcare distress at the height of the Great Recession in 2008-2009.
Jeremy R. Johnson, a restructuring attorney at Polsinelli, told McKnight’s Senior Living earlier this week that the problems in the long-term care industry are extensive, particularly in CCRCs. Those large communities did not all recover from the COVID-19 pandemic, he said. The biggest problems involve debt, with bond facilities outsized in comparison with the value and the cash flow generated by the underlying industry, as well as labor costs that are 30% to 40% higher than projected.
Gibbins Advisors Principal Ronald Winters said that “[t]he very large bankruptcy cases with liabilities over $500 million include sizable healthcare enterprises, so when you see six such cases filed year to date, that represents a much bigger number of healthcare facilities.”
Gibbins, he said, is “seeing elevated financial distress in nursing homes, senior living, pharmacy, physician practices and rural and standalone hospitals … strained by legacy debts, cash shortages and profitability challenges.”
According to Gibbins, of the 275 healthcare bankruptcies filed between the first quarter of 2019 and the second quarter of this year, 65 were filed by senior care companies. Pharmaceutical companies accounted for 65 bankruptcies.
