Healthcare Bankruptcies on the Decline Despite Ongoing Pandemic

Healthcare bankruptcies made an unprecedented decline this past quarter despite ongoing operational and financial pressures from the ongoing COVID-19 pandemic, according to a new report.

What is normally a distressed industry experienced some improvements with the help of emergency funding from the federal government over the past year, the newest Polsinelli-TrBK Distress Indices Report from AM law 100 firm Polsinelli showed.

The Indices Report determines an industry’s distress level based on Chapter 11 filing data for bankruptcies with more than $1 million in assets. It specifically tracks the healthcare and real estate industries.

This report found that the Health Care Services Distress Index fell by more than 333 points during the second quarter of 2021. Additionally, the index fell below 100 points to just 63.33 points for the first time in over 13 quarters, the firm reported.

Two other indices tracked in the report also declined: Real Estate Distress Research Index by just over one point and Chapter 11 Distress Research Index by over 17 points. The indices now stand at 22.24 and 66.24, respectively.

“We’re seeing a truly remarkable change in the health care industry right now,” Jeremy Johnson, a bankruptcy and restructuring attorney at Polsinelli and co-author of the report, said in a press release. “This is the lowest rate of health care bankruptcy filings the Index has ever seen, and we’re seeing clear reasons for that. We think this drastic change is due to substantial and continued government support for the most vulnerable of health care industries during the pandemic.”

The healthcare industry undoubtedly felt the impact of the COVID-19 pandemic. Data from the early part of the pandemic in 2020 showed that, on average, physician revenue was cut in half. Hospitals also suffered losses of at least $323.1 billion in 2020 alone, according to estimates from the American Hospital Association.

To maintain access to care during this difficult time, the federal government passed several pandemic-related bills containing financial support for healthcare providers. From those bills turned laws came the Provider Relief Fund, a pool of $186.5 billion to be directly distributed to healthcare providers to offset COVID-19 losses and expenses. It also pays providers for treating COVID-19 in patients who are uninsured or underinsured.

The federal government has distributed nearly $119 billion of the total funds to providers, data from HHS shows.

Hospitals and other provider organizations are still waiting on tens of billions of dollars in Provider Relief Funds to “stave off financial hardship in the coronavirus pandemic,” The Washington Post recently reported.

“As many hospitals bulge again with [COVID-19] patients, a wide swath of the health-care industry is exasperated that federal health officials have not made available any more of the aid since President Biden took office. About $44 billion from a Provider Relief Fund created last year remains unspent, along with $8.5 billion Congress allotted in March for medical care in rural areas,” the national news source stated earlier this week.

New data from consulting firm Kaufman Hall does show that hospitals and physician practices are once again feeling financial pressure with the resurgence of COVID-19 because of the Delta variant. These organizations were previously showing signs of recovery, with volumes and revenues generally on an upward trend.

“Hospitals likely will face additional setbacks with continued spread of the Delta variant and concerns over diminishing protection from the COVID-19 vaccines,” Erik Swanson, a senior vice president of Data and Analytics with Kaufman Hall, said in a press release. “Not surprisingly, hospitals in the regions with the highest rates of the variant were most affected in July, and we expect those impacts to deepen in the months ahead.”