Private equity bankruptcies in healthcare explode 112% in 5 years
According to the Private Equity Stakeholder Project, 21% of all healthcare bankruptcies in 2023 involved organizations owned by financial firms.
Last year set a record for bankruptcies in the healthcare sector, and 2024 could see another big wave, according to a report from the nonprofit advocacy group Private Equity Stakeholder Project (PESP).
In a new report, PESP warns that the largest bankruptcies seen in healthcare last year—Envision Healthcare, Air Methods, the Center for Autism and Related Disorders and more—were all owned by private-equity firms.
The number of private equity acquisitions in healthcare has risen dramatically in recent years, and the sector may now be paying the price. As detailed by PESP, in 2019 there were only eight private equity healthcare bankruptcies. By 2023, that number had increased 112.5%, standing at 17 last year.
In 2023 alone, private equity firms were responsible for 17 of 80 total healthcare bankruptcy filings (21%), according to PESP. The report also reveals that some firms have multiple bankruptcies on record in recent years, signaling a trend of financial instability.
“For example, private equity firm KKR (Kohlberg Kravis Roberts) owned two major healthcare companies that filed for bankruptcy in 2023: physician staffing giant Envision Healthcare … and oncology provider GenesisCare. In addition, KKR owns three other companies that are distressed and carry heightened risk for default: Covenant Physician Partners, Global Medical Response and One Call Corporation,” PESP wrote in its report.
In case studies on several of the largest healthcare bankruptcies in 2023, unmanageable debt from private equity emerges as a major factor. PESP suggests the aggressive strategy of short-term gains that private equity imposes on these organizations “threaten[s] the stability of critical healthcare resources across the country.”
Broader economic challenges persist
PESP paints a bleak picture of the broader economic landscape in healthcare. Major hurdles such as rising interest rates, labor costs and regulatory shifts—such as the passage of the No Surprise Act—exacerbate the challenges faced by healthcare companies, making it difficult to do business in the best of times.
While private equity buyouts and investments may not carry the blame for the state of the economy, PESP says the economic instability of the entire healthcare system is made worse by the short-term focused business models of financial firms.
“Private equity’s reliance on high debt leaves companies more vulnerable to changing market conditions, including high interest rates and rising labor costs,” PESP wrote.
To read the full report, “Private Equity Healthcare Bankruptcies are on the Rise,” click 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.