Chapter 11 bankruptcy filings in the healthcare industry, including those in long-term care, have trended upward in the third quarter, according to the Polsinelli-TrBK Distress Indices Report. Healthcare services filings represented 12.79% of all filings on a rolling four-quarter basis.
Three years after the pandemic, the senior living and care sector has suffered more than most, Polsinelli attorney Jeremy Johnson, co-author of the report, told the McKnight’s Business Daily.
“The government money staved off many filings, but that source of funds has dried up, and the industry hasn’t really had time to fully recover,” Johnson said. “This is largely consistent with our report from a few years ago that analyzed the factors causing distress in healthcare. That report obviously didn’t anticipate the pandemic, but labor costs and litigation pressure were among the biggest causes of financial distress in healthcare.”
According to Johnson, from the senior living and care perspective, the biggest bankruptcy filing was Nashville Senior Care, owned by the Toledo, OH-based Trousdale Foundation.
“The Trousdale debtors attributed the filing to the COVID-19 pandemic and its long-lasting impacts on census and revenue, combined with increased operating and labor costs and a high debt load,” Johnson said. “This is consistent with what we’ve seen across the board” in senior living and care, and even healthcare generally, he added.
Other long-term care bankruptcy filings in the third quarter — Epworth Villa in Oklahoma City; Shields Nursing Centers, based in Hercules, CA; and Windsor Terrace Healthcare, based in Van Nuys, CA — cited similar concerns, he said. Windsor Terrace, which operates a chain of 35 nursing homes, had “substantial litigation,” Johnson added.
“The Healthcare Index has never been this high, but it’s a combination of distress across the healthcare markets. For example, we’re starting to see more hospitals filing for bankruptcy, but there is still substantial distress” across the senior living and care sector, Johnson said. “Time will tell if out-of-court solutions can work, but we may see more bankruptcy filings” in long-term care.
Most (85.9%) of the Chapter 11 in healthcare, by far, were filed in the Southeast region of the United States, followed by the Southwest (7.69%) and the Midwest (4.36%). The non-continental United States and territories had 1.02% of the filings. The Northwest region of the contiguous United States had no Chapter 11 healthcare filings in the third quarter.
The Southeast has seen the largest increase in healthcare filings since the 2010 benchmark period, according to the report.
Chapter 11 Distress Research Index
Real estate filings represented 10.89% of all bankruptcy filings measured on a rolling four-quarter basis.
According to Polsinelli, the Real Estate Distress Research Index shows “significant volatility quarter on quarter.”
Since the benchmark period of the fourth quarter of 2010, filing numbers declined 23 times compared with the prior quarter, and climbed 28 times, according to the data.
As far as real estate bankruptcy filings, the Northeast region led the percentage of Chapter 11 filings in the third quarter at 34.94%, followed by the Southeast region at 26.21% and the Southwest at 21.08%. The Midwest accounted for 7.5% of the filings, and the Northwest made up 2.11%. The non-continental states and territories had the smallest percentage of real estate filings, at 1.81%.
The indices are published quarterly, generally within 45 days after the end of each calendar quarter, and are overseen by an advisory committee at Polsinelli.
“The indices reflect relevant Chapter 11 filings with assets more than $1 million, and exclude individual and involuntary cases,” per the report.
