Healthcare Bankruptcy Filings Decline for a Second Consecutive Year
Gibbins Advisors’ new report finds Chapter 11 filings declined in 2025, but providers face a prolonged period of pressure from Medicaid cuts, coverage losses, payor friction, and cost inflation.
Gibbins Advisors, a leading healthcare restructuring advisory firm, has released its Full-Year 2025 Healthcare Bankruptcy Report, analyzing Chapter 11 filings in the healthcare sector from January 1, 2019, through December 31, 2025, for companies with more than $10 million in liabilities (“Healthcare Bankruptcy Filings”).
The report shows that there were 45 healthcare sector Chapter 11 bankruptcy filings in 2025, representing a 21% year-over-year decline and a second consecutive annual decrease following the 2023 peak of 79 filings. Activity in 2025 was front-loaded, with 17 (~38%) of the year’s filings in Q1 2025.
By size, middle-market cases ($10 million–$100 million in liabilities) accounted for approximately two-thirds (67%) of healthcare bankruptcy filings in 2025, up from 60% in 2024.
By subsector, most areas saw declines in 2025 with two exceptions: Senior Care filings increased 18% year over year (from 11 to 13 filings), and Hospital bankruptcies rose 60% (from five to eight cases). Pharmaceutical bankruptcies in 2025 were approximately half the 2023 level, yet the subsector continued to represent roughly one quarter of total healthcare filings. Continuing a consistent pattern, Senior Care and Pharmaceutical cases together comprised approximately half of healthcare bankruptcies in 2025.
Lower Bankruptcy Volumes Don’t Tell the Full Story
While it is encouraging to see lower bankruptcy filings in 2025, the sector remains under significant pressure. The upcoming reimbursement headwinds mandate a strategic, rather than tactical response.
1. Medicaid funding cuts and coverage losses: 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 expiration of enhanced premium tax credits (if not extended) is expected to result in further coverage losses, increasing uncompensated care risk. These changes will disproportionately impact hospitals, safety-net providers, and organizations with a high government payor mix. The legislation also establishes a 5-year, $50 billion Rural Health Transformation Program beginning in 2026, though the distribution and application of the funding is not likely to fill the gap for most affected providers.
2. Widening gap between “haves” and “have nots”: Financial performance across hospitals continues to diverge. 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. Median operating margins in 2025 were stronger than prior years, but the market is increasingly polarized between weak and strong.
3. Macroeconomic forces shifting care delivery and operational transformation: Care delivery continues to shift away from traditional hospital and skilled nursing settings toward outpatient, community, and home-based models. 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”. Capital, talent and technology are needed for the transformation.
4. Pressure on and from payors: Claims and payment friction continues to intensify, with hospital claim denials increasing in 2025 alongside expanded audit activity. Insurers cite increasing costs and risks as the basis for approximately 18% national premium increases in 2026, which will influence the level of healthcare coverage in the market.
5. Interest rate and funding cuts impacting M&A: Healthcare M&A activity softened in 2025, with 28 hospital and health system deals announced year-to-date through Q3 2025, compared to 58 over the same period in 2024. Strategic transactions focused on resilience and market positioning will be an important consideration as organizations prepare for the impacts of the OBBBA.
6. Labor & Supply Cost Pressures: Non-labor costs drove hospital margin pressure in 2025, driven by increases in drug costs. Tariff-driven supply inflation continues to be a key concern. Workforce remains an ongoing issue, with a reported 40% of nurses intending to leave or retire within 5 years.
What does Gibbins Advisors predict for the sector?
“Many organizations don’t file for bankruptcy protection because conditions deteriorate overnight—they 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” – Clare Moylan, Principal
“From where we sit today, the impact of impending funding cuts is not theoretical. With effects beginning in 2026 and likely escalating over the next five years, providers that do not model these scenarios, plan ahead, and make disciplined decisions about strategy, priorities, and resource allocation risk being forced into reactive decisions” – Ronald Winters, Principal
For questions, comments or more information, contact Clare Moylan: cmoylan@gibbinsadvisors.com.