- More than 20 hospitals have filed for bankruptcy since 2016, three-fourths of them in rural areas, according to the latest Polsinelli-TrBK Distress Indices Report.
- Southwestern states were hardest hit, with a number of rural health facility closures.
- Chapter 11 bankruptcy filings across all industries have dropped 53% since 2010, when the Polsinelli law firm began tracking ups and downs in Chapter 11 filings. On the plus side, the real estate industry is experiencing 68% less distress than eight years ago. Healthcare industry distress, by contrast, has soared 305%.
The report adds to the general picture of shaky financial ground many hospitals are operating on, particularly in rural areas. According to a recent U.S. Government Accountability Office report, 64 rural hospitals closed between 2013 and 2017, due to declining volumes and reimbursement cuts. Since 2010, 89 rural hospitals have closed and 673 additional hospitals are operating at a loss and at risk of closing.
CMS Administrator Seema Verma unveiled a rural health strategy in May aimed at improving access and quality of care in rural areas. The game plan includes such efforts as expanding use of telemedicine and forging partnerships to advance rural health goals.
Some hospitals have turned to creative approaches to try and stay afloat. Oklahoma-based Pauls Valley Hospital Authority launched a GoFundMe campaign to help the rural hospital pay off millions it owes to an Austin, Texas, management firm. The hospital's closure, announced when the goal wasn't reached, could force patients to travel 30 minutes to get acute care.
Among the Southwestern casualties cited in the Polsinelli report is Neighbors Legacy Holdings in Houston. Despite closing more than 30 freestanding emergency centers located across Texas, increased competition, insurer pressures and overexpansion forced the company into bankruptcy this year.
To compile the index, the law firm uses Chapter 11 bankruptcy filings from companies with more than $1 million in assets. The overall distress level was 47.17 for the third quarter of 2018 — about two points lower than the previous quarter.
That wasn't the case in healthcare, where the distress index registered 405 for the third quarter, a 65-point leap from the prior quarter. The industry has seen record or near-record highs during each of the past eight quarters, according to the report. Compared with Q3 2017, the index has increased by 82 points.
Put another way, healthcare service filings currently made up 9.7% of all index-measured Chapter 11 filings, up from 1.13% in 2010.
"What is significant about our report is that it is based on a rolling four-quarter basis. It is not really a spike quarter-to-quarter, but it is measured over a year, so the bumps are more meaningful. Each quarter reflects an entire year’s worth of data," Jeremy Johnson, a bankruptcy and restructuring attorney at Polsinelli and editor of the report, said in a statement. "Because of this, the report is a proxy for actual distress, but this quarter, we believe the distress may be even more widespread because not all companies end up in bankruptcy."