The United States spends nearly $5 trillion on medical care and health-related activities each year. Health expenditure consumes nearly 20% of gross domestic product (GDP). Yet, economists and business analysts claim the health care industry is hemorrhaging money, with bankruptcies on the rise year after year. The following is from Newsweek:
According to a recent report from Gibbins Advisors, the 79 health care bankruptcy filings in 2023 and 57 in 2024 surpassed the annual average of 42 for the previous four years. While senior care and hospital bankruptcies surged past typical levels in the first quarter, overall health care bankruptcies dropped markedly in the three months through July.
While the tally of filings in 2025 has remained on the worrying trend of the last few years, this year has stood out because of the scale of the companies failing to meet their financial obligations.
Three large firms with assets of more than $1 billion have declared bankruptcy in 2025. A major hospital system, Steward Health Care, filed for bankruptcy last year. It was the largest private, for-profit hospital system in the country. More from Newsweek:
“There’s a lot of wreckage out there along the highway of health care,” said Lawton Robert Burns, professor of health care management at the University of Pennsylvania’s Wharton School.
Experts claim bankruptcies of health care companies have been on the rise since 2010. Is it any coincidence that 2010 was the year Obamacare was passed? Purportedly, expenses are rising faster than revenue. But also keep in mind the diverse nature of health-related companies. These include hospitals, clinics, drugmakers, medical device makers, hospital suppliers. The reasons for financial stress are diverse and different from one type of firm to the next. One overriding reason is rising labor costs. Labor costs have shot up since covid. Nursing salaries have especially risen, and hospitals are labor intensive.
[University of Pennsylvania economics professor Mark] Pauly noted the limited supply of nurses and the “low overall unemployment rate” as factors that pushed up labor costs in recent years. Burns told Newsweek that the rush to recruit nurses during the COVID pandemic intensified competition for staff that drove up wages—an effect amplified by a surge in nursing practitioners who function as mid-level providers and command much higher wages.
Yet, there is a more sinister reason for the flood of health care bankruptcies: private equity. The demise of Steward Health Care (mentioned above) was but one example of a failed private equity investment. More from Newsweek:
David Himmelstein, a physician and professor of public health and health policy at the CUNY School of Public Health, said that the three health care bankruptcies cited by S&P Global involve private equity-owned or -backed firms.
“In two of those cases—Genesis and Prospect—it appears that the bankruptcy reflects the private equity strategy of loading acquisitions with debt while stripping them of assets in order to reward investors,” he told Newsweek.
Between 2021 and 2022 there was an 84% Increase of healthcare bankruptcies partly due to the No Surprises Act. In 2023 a private equity emergency medical staffing company, American Physician Partners, filed for bankruptcy as did private equity-backed Envision Healthcare Corp, earlier in 2023. Rising costs, labor shortages and higher interest rates were major reasons but so was the No Surprises Act (NSA) that went into effect in January 2022. The NSA put a stop to a business model predicated on ambushing consumers with surprise bills from out-of-network physicians whose services patients could not refuse. The following is from WorkersCompensation.com:
While the No Surprises Act has allowed providers to pursue payers for what they feel is a correct payment through arbitration via a federal IDR portal, the amount of disputes filed have been overwhelming to the point the program has had several deferments and adjustments, delaying provider reimbursement as a result.
Between the loss of revenue from out of network balances, as well as the increased cost of being compliant to the new regulations, the results are pushing some organizations out of business. Organizations that treat emergency and trauma patients for their initial care and even follow up have been the hardest hit.
Private equity-backed firms are sometimes accused of causing bankruptcies by stripping away valuable assets and loading up the remaining company with debt (referenced above by Dr. Himmelstein). In other cases, bankruptcy is simply a matter of too much leverage. However, another major factor is the No Surprises Act, which put a stop to an abusive business model.
Considering the soaring prices charged for medical care, it is hard to imagine the sector in trouble. The health sector needs a heavy dose of competition to weed out poor performers and better serve patients.
Read more at Newsweek: Bankruptcies Are Hitting America’s Health Care Giants
A lot of ER doctors, anesthesiologists, pathologistsm et al “went independent” in the years before the No Surprises Act. This enabled them to do price gouging on a large scale.
Now they can just rejoin the hospital staff or the Blue Cross-type network.
If their specialty billing equity group goes bankrupt, so what? the number of people doing actual medical care does not shrink.