Healthcare Bankruptcy Filings Dip in Q2 2025, Yet Industry Braces for Turbulence
Chapter 11 filings are on pace to finish the year below 2024 totals, but the sector is not on solid ground, according to the latest Gibbins Advisors research report.
Gibbins Advisors, a leading healthcare restructuring advisory firm, has released its Interim 2025 Report analyzing healthcare sector Chapter 11 bankruptcy cases filed from January 1, 2019, through June 30, 2025, for companies with more than $10 million in liabilities (“Healthcare Bankruptcy Filings”).
The report shows Healthcare Bankruptcy Filings in 2025 are on pace to decline 16% year over year, with 48 expected by year-end compared to 57 in 2024. The drop is driven by a sharp Q2 slowdown—just seven cases, the lowest quarterly total in three years—after two quarters of elevated activity.
By size, the decline is concentrated in large bankruptcies (with over $100 million in liabilities), while middle-market cases ($10 million–$100 million in liabilities) are on pace to match 2024’s 34 total filings.
Across subsectors, Senior Care and Pharmaceuticals remain the most active, together accounting for nearly half of all filings. Pharmaceutical bankruptcies surged to their highest quarterly total in nearly two years in Q2, while hospital bankruptcies—after two quarters of steady filings—came to a halt, even as totals remain on pace to surpass 2024. In contrast, Clinics and Physician practices are seeing a sharp fall compared to 2024.
Financial Challenges Remain Despite Fewer Filings
While the recent slowdown in bankruptcy filings may appear positive, the report underscores that a challenging market persists and there are significant headwinds to come. Upcoming federal Medicaid cuts and expected healthcare coverage losses pose major risks for healthcare providers and investors. The Congressional Budget Office has estimated the health sector to lose $1.1 trillion and ~15 million people to become uninsured over the next 10 years.
Several forces continue to squeeze margins and drive distress:
Medicaid funding cuts and coverage losses: The July 2025 “One Big Beautiful Bill Act” (OBBBA) enacts the largest federal health spending reduction in history, with $964B in Medicaid cuts over 10 years and 10 million people expected to lose coverage. A further 5.1 million are expected to lose insurance coverage from the expiration of enhanced premium tax credits at the end of 2025, heightening uncompensated care risks, especially for safety-net providers. A new 5-year, $50B Rural Health Transformation Program intends to support rural providers, but it is not yet clear which hospitals will benefit from this fund.
Interest rate and funding cuts impacting M&A: Although interest rates are beginning to ease, hospital transactions this year to date have dampened due to ongoing market volatility and uncertainty, particularly in light of Medicaid funding cuts and tariffs.
Cost increases and labor shortages: Rising labor costs, persistent workforce shortages, and elevated supply expenses, amplified by tariff-driven inflation, continue to pressure healthcare margins, with rural and standalone providers facing the most acute challenges.
Pressure on, and pressure from payors: Health insurers are grappling with growing loss ratios due to higher spending on members in government programs, resulting in premium hikes of over 20%. To compensate insurers, CMS has offered record Medicare Advantage rate increases in 2026. However, pressure on providers remains, with payors denying claims and sluggish reimbursement growth continuing to squeeze margins and cash flow.
Widening gap between “haves” and “have nots”: Hospital systems on average are experiencing margin improvements in 2025; however, long-term pressures are widening the gap between stronger and weaker performers. The ability of hospitals to strategically pivot and manage funding impacts of OBBBA will exacerbate this shift.
Macroeconomic forces shifting care delivery: Care continues to move beyond traditional institutional settings, pressuring some providers while opening growth opportunities for others. Having capital for transformation is critical to positioning for sustainability.
What does Gibbins Advisors predict for the sector?
“The unprecedented funding cuts in the One Big Beautiful Bill Act are deeply troubling for the future of healthcare,” said Clare Moylan, Principal at Gibbins Advisors. “Hospitals serving vulnerable communities—especially those with high Medicaid populations and dependent on supplemental payments—face the greatest risk. Leadership teams must act now to assess the future impact and craft strategies to stay solvent.”
“We were surprised to see the number of healthcare bankruptcy filings dip in Q2 2025, after two quarters of elevated activity” said Ronald Winters, Principal at Gibbins Advisors “but unfortunately it is not a reason for optimism. The impacts of recent federal legislation will be felt from as early as 2026, and providers without strong balance sheets will quickly feel the pinch.”
For questions, comments or more information, contact Clare Moylan: cmoylan@gibbinsadvisors.com