Health care bankruptcies slow to a crawl, but change for the worse could be coming, analysts say

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Health care financial experts put the brakes on bankruptcies in the second quarter of 2025.

But finance leaders, physicians, other clinicians likely are bracing for changes starting next year due to the One Big Beautiful Bill Act (OBBBA), the national spending plan approved by Congress and endorsed by President Donald J. Trump, according to a new analysis.

The second quarter had seven new health care bankruptcy cases — the lowest quarterly total in three years, since the first quarter of 2022, according to “Healthcare Restructuring: Trends and Outlook,” the newest report by health care restructuring consultant Gibbins Advisors. The second quarter low put the company’s annual projection for bankruptcy filings at 48, or 16% lower than 57 bankruptcies filed in 2024.

Ronald Winters
_{© Gibbins Advisors}

“We were surprised to see the number of health care bankruptcy filings dip in Q2 2025, after two quarters of elevated activity,” Gibbins Advisors Principal Ronald Winters said in a news release. “But unfortunately it is not a reason for optimism. The impacts of recent federal legislation will be felt from as early as 2026, and providers without strong balance sheets will quickly feel the pinch.”

Specifically, the federal legislation made “unprecedented” cuts to Medicaid that “are deeply troubling for the future of health care,” said Gibbins Advisors Principal Clare Moylan.

Clare Moylan
_{© Gibbins Advisors}

“Hospitals serving vulnerable communities — especially those with high Medicaid populations and dependent on supplemental payments — face the greatest risk,” she said in the news release. “Leadership teams must act now to assess the future impact and craft strategies to stay solvent.”

By the numbers

By size, the decline was pronounced among large bankruptcies, or health care entities with $100 million or more in liabilities. Middle-market cases are on pace to match the 2024 pace of 34 filings; those involve health care organizations with liabilities ranging from $10 million to $100 million.

Within, health care the bankruptcy filings primarily involved senior care and pharmaceutical makers. The second-quarter filings were “heavily concentrated” in pharma firms, with five filings. Hospitals had “heightened activity” in Q4 2024 and Q1 2025, but filings dropped to zero in this year’s second quarter.

Clinics and physician practices filed five bankruptcies in the last quarter of 2024, but had just one in each of the last two quarters this year, the Gibbins Advisors report said.

Health care bankruptcies have been variable in recent years, ranging from a low of 25 in 2021 to a spike of 79 in 2023.

Market drivers

The Congressional Budget Office has estimated the health sector to lose $1.1 trillion and approximately 15 million people to become uninsured over the next 10 years. That is based on cuts to Medicare in OBBBA, along with the end of enhanced premium tax credits that covered insurance cost for patients who had coverage through the Affordable Care Act Marketplace plans. But those are not the only economic driver for health care in the second half of the year, according to Gibbins Advisors.

• The Federal Reserve is projecting a 0.5% cut in interest rates this year, targeting a rate of 3.75% to 4%.
• Hospital merger and acquisition activity is down.
• Health care sector unemployment remains low, 3.1% as of June, but health care workforce shortages persist and could get worse.
• Supply and drug costs have dragged health care finance. Tariffs have caused market uncertainty, and Medicare will overhaul U.S. drug pricing with negotiations allowed by the Inflation Reduction Act.
• OBBBA created a $50 billion Rural health Transformation Program, with states bidding for assistance by the end of this year.

The report noted financial effects particularly for hospitals. The median operating margin for hospitals in May was 3.3%, up from 2.1% in 2024. But financial challenges are splitting hospitals into stronger and weaker segments. Gibbins Advisors described it as a “widening gap between ‘haves’ and ‘have nots.’”

“The ability of hospitals to strategically pivot and manage funding impacts of OBBBA will exacerbate this shift,” the Gibbins Advisors news release said.