Health care bankruptcies drop in 2025, but that doesn’t mean all is well for 2026

Health care bankruptcies fell 21% overall in 2025, but a two-year decline in bankruptcy filings does not necessarily indicate general financial strength of the sector, according to a new report.

Gibbins Advisors published “Healthcare Restructuring: Trends and Outlook — Analysis of Chapter 11 Healthcare Bankruptcies since 2019, Full Year 2025 Report,” noting last year had 45 cases. That was down from the 2023 peak of 79 bankruptcy filings among health care entities with at least $10 million in liabilities.

Activity was front-loaded: 17 of the year’s 45 filings (38%) occurred in the first quarter of 2025, there report said. Middle-market cases, those with $10 million to $100 million in liabilities, made up roughly two-thirds (67%) of filings in 2025, up from 60% in 2024 — signaling that financially distressed organizations still commonly fall into that middle tier rather than in the very largest restructuring matters.

“Many organizations don’t file for bankruptcy protection because conditions deteriorate overnight —they often file when liquidity runs out and options narrow,” Gibbins Advisor Principal Clare Moylan said in a news release. “The lower filing volumes seen in 2025 may indicate that distressed health care organizations are taking earlier action, which would be a positive development, rather than reflecting a reduction in underlying market stress.”

The Nashville, Tennessee-based consultant focuses on restructuring strategies for middle market organizations.

Federal cuts are happening

Moylan and Principal Ronald Winters noted at least a half dozen headwinds that could create financial stress for hospitals and health systems, starting at the federal level.

The One Big Beautiful Bill Act of July 2025 “represents the largest federal health spending reduction in history,” including $964 billion in Medicaid cuts over 10 years and an estimated 10 million people losing health care coverage, the report said.

The expiration of federal tax credits for Affordable Care Act health insurance also could lead to further coverage losses, increasing the amount of uncompensated care that health systems provide.

“These changes will disproportionately impact hospitals, safety-net providers, and organizations with a high government payor mix,” the news release said. The Rural Health Transformation Program has a five-year, $50 billion fund for state programs, “though the distribution and application of the funding is not likely to fill the gap for most affected providers,” the report said.

“From where we sit today, the impact of impending funding cuts is not theoretical,” Winters said. “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.”

Market conditions to watch

Moylan and Winters also pointed to other internal and external factors affecting hospitals, health systems, pharmaceuticals and senior care facilities.

• Health care “haves” and “have nots” — Overall median operating margins were stronger in 2025 than in prior years, “but the market is increasingly polarized between weak and strong.” Better balance sheets mean more ability to invest in resilence for the future, the report said.
• Shifts in care delivery — There is a clinical shift in care and operations, with hospital and skilled nursing settings generally losing patients to outpatient, community and home-based models.
• Payer pressure — Hospital claim denials and audits increased in 2025. “Insurers cite increasing costs and risks as the basis for approximately 18% national premium increases in 2026, which will influence the level of health care coverage in the market,” the report said.
• Mergers and acquisitions — There were 28 hospital and health system deals announced through the third quarter of 2025, compared with 58 during the same period of 2024. Interest rates and funding cuts affected transactions.
• Labor and supplies — Tariff-driven supply inflation remains a concern. In the workforce, an estimated 40% of nurses intend to leave or retire within five years, the report said.