Bankruptcy filings among healthcare companies more than tripled in 2017, according to Bloomberg, and there are signs that 2018 will bring more filings or debt restructuring from hospitals and other medical organizations.

Bloomberg reported several troubling signs which have created a “perfect storm” for the sector:

• Chapter 11 bankruptcy filings by companies with more than $1 million in assets have set records in four of the last six quarters.
• Bankruptcy activity in healthcare has increased by 123 percent since the end of 2010, compared to a 58 percent decline in all sectors.
• Healthcare junk bonds have dropped 1.4 percent in November.

The hardest hit facilities will be private, rural hospitals, according to David Neier, a partner in the New York office of law firm Winston & Strawn. Many have struggled in recent years as the increasing prevalence of high-deductible health plans resulted in more patients being unable to pay their bills, resulting in more bad debt.

What may put them over the edge, Neier said, is the Affordable Care Act’s long-delayed cuts to Disproportionate Share Hospital (DSH) payments going into effect, which may “single-handedly throw hospitals into immediate financial distress—many operate on less than one day’s cash.”

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