Private equity linked to 23% of healthcare bankruptcies in 2024
A new report by industry watchdog the Private Equity Stakeholder Project (PESP) shows a continuing trend of bankruptcies among private equity-owned healthcare companies, with such organizations making up nearly a quarter of all bankruptcies in the space for 2024.
PESP’s research into healthcare bankruptcies for the first six months of the year showed nine private-equity owned organizations have filed for bankruptcy, accounting for 23% of all bankruptcy filings by large healthcare organizations.
In its report, PESP said private equity firms tend to invest or purchase healthcare companies that are at high-risk for bankruptcy due to extensive debts. In some cases, these companies are making heavy debt payments to their private equity owners.
“Private equity’s aggressive financial strategies increase the risk of bankruptcy and threaten the delivery of critical healthcare services,” Eileen O’Grady, Director of Programs at PESP, said in a statement sent to HealthExec. “The use of excessive debt by these firms can have significant ripple effects on the broader healthcare industry. This year might see a grim scenario of more healthcare bankruptcies if current trends persist.”
PESP also noted a key finding of its report is that some companies owned by private equity firms have avoided bankruptcy through debt exchanges, despite defaulting on payments they owe to investors, vendors and other companies.
The findings of this latest analysis are consistent with an April report from PESP that showed that private equity bankruptcies in healthcare have exploded 112% in 5 years. In 2023 alone, private equity firms were responsible for 21% of healthcare bankruptcy filings, PESP found.
“If private equity's current practices continue unchecked, 2024 could surpass 2023 in healthcare bankruptcies and distress, with severe consequences for the American healthcare infrastructure, “ O’Grady said.
The new research from PESP can be found 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.