Hospitals experience 60% rise in bankruptcies, despite overall industry decline
Healthcare bankruptcies declined in 2025, even as the industry faces unprecedented cuts in government spending and growing “payment friction” between insurers and providers, a new analysis found.
Consultancy firm Gibbins Advisors limited its report to healthcare bankruptcy filings with liabilities of at least $10 million. From that starting point, based on a look through Chapter 11 filings from healthcare organizations dating back to 2019, the group found there were 45 filings in 2025, representing a 21% year-over-year decline.
The number also marks the second consecutive annual decrease—though filings rose from 2019 to 2023, when they peaked at 79.
Zooming in at 2025, Q1 saw the highest number of filings at 17, representing roughly 38% for the year. Looking at all four quarters, what Gibbins calls “mid-market” cases dominated—bankruptcies carrying $10 million to $100 million in debt represented two-thirds of all filings in 2025.
That’s up 60% since 2024, Gibbins Advisors added.
Further, the drop in Chapter 11 declarations was seen largely across the board, from physician practices to insurers. But, one major area saw a 60% rise from 2024—hospitals, where the total number jumped from five to eight.
Senior care was another subsector to see a bump, in this case of 18%, from 11 to 13 filings.
Of interest, financial turmoil amongst businesses tied to pharmaceuticals was down nearly 50% since 2023; yet they still represented nearly 25% of all healthcare bankruptcies in 2025.
“Continuing a consistent pattern, Senior Care and Pharmaceutical cases together comprised approximately half of healthcare bankruptcies in 2025,” Gibbins Advisors wrote in a statement, implying the two spaces may be linked.
Clare Moylan, principal at the consultancy firm, added that bankruptcies don’t happen overnight. Instead organizations “often file when liquidity runs out and options narrow.”
“The lower filing volumes seen in 2025 may indicate that distressed healthcare organizations are taking earlier action, which would be a positive development, rather than reflecting a reduction in underlying market stress,” she said.
In other words, the fate of many nursing homes, provider groups, hospitals, pharmacies, etc., is attached to the broader economy and the state of healthcare policy.
A reaction to economic forces
Gibbins Advisors named six factors impacting the health of groups in the patient care business, including:
- Medicaid cuts. “The so-called One Big Beautiful Bill Act (OBBBA), enacted in July 2025, represents the largest federal health spending reduction in history, including $964 billion in Medicaid cuts over ten years and 10 million people losing healthcare coverage,” the consultants wrote, adding that loss of the enhanced tax credits that made plans more affordable through subsidized government exchanges will “disproportionately impact hospitals, safety-net providers, and organizations with a high government payer mix.”
- Widening wealth gap. “Hospitals with stronger balance sheets and located in growth markets are better positioned to invest in resilience for the future, while providers at the low end face increasing strain.”
- Shifting care delivery patterns. Gibbins Advisors observed that patients are slowly moving toward home-based care models, supported by wearable and AI technology. That means hospitals are seeing less revenue.
“Strategic cost transformation and deploying AI and automation in meaningful ways to improve efficiency and patient care will position the healthcare organizations of the future in the face of expected ‘relentless pressure,’ they wrote. “Capital, talent and technology are needed for the transformation.”
- Payer and provider disputes. Insurers and provider/hospitals continue to battle over proper reimbursement rates, with insurers blaming increasing costs and risk for higher premiums and lower payouts.
- High interest rates. Less-lucrative credit markets are hindering investor confidence. Gibbins Advisors said rates of mergers and acquisitions “softened in 2025.” While there were 58 health system deals announced through Q3 2024, the same period through 2025 saw only 28 transactions.
- Rising costs of business. Both labor and non-labor expenses are spiking, with margin pressures in 2025 linked to high cost of prescription drugs. The consultant group also noted that President Donald Trump’s tariffs are messing with balance sheets, raising the cost of goods and services.
Gibbins Advisors also noted that patient care entities continue to struggle with staffing shortages—something that could get worse, their data shows 40% of nurses could retire over the next five years.
The full report is available here.
Chad is an award-winning writer and editor with over 15 years of experience working in media. He has a decade-long professional background in healthcare, working as a writer and in public relations.