Physician practice bankruptcies on pace for their highest level since 2019

Health care bankruptcy filings settled back into their long-run pace in the first half of 2026. Physician practices did not.

Clinics and physician practices accounted for almost 30% of health care Chapter 11 filings involving more than $10 million in liabilities between January and June, according to the Interim 2026 Healthcare Bankruptcy Report that restructuring advisory firm Gibbins Advisors released July 20. Annualized, that puts the subsector on pace for 14 filings this year, up from six in 2025 and above its previous high of 10 in 2024. Gibbins describes activity across every other subsector it tracks as flat or declining.

Small cases are driving the increase

Twelve health care companies with more than $10 million in liabilities filed for Chapter 11 in the first quarter and 14 filed in the second, close to the roughly 12.5 quarterly average Gibbins has recorded since 2019. Hold that pace and 2026 closes with 52 filings, a 16% increase over 2025's 45.

Nearly all of that increase comes from the bottom of the size range. Cases with $10 million to $50 million in liabilities made up 18 of the 26 first-half filings, or 69%, up from roughly half in recent years. Annualized, that cohort finishes the year at 36 filings against 23 in 2025, a 57% jump. Filings above $50 million are trending flat or lower.

The shift toward practices is sharper than the headline percentage suggests. Across the full 2019 through mid-2026 record, clinics and physician practices account for 11.8% of the 374 health care bankruptcies Gibbins has counted, the second-smallest share of any subsector. This year they are running at close to triple that rate.

"The relative stability in health care bankruptcy filings is surprising considering the on-the-ground pressures we see operators facing every day," Ronald Winters, a principal at Gibbins Advisors, said in a statement. "There is a lot bubbling under the surface that will ultimately need to be resolved in some form of restructuring, though not all will be resolved in court."

What the $10 million floor leaves out

Gibbins counts only Chapter 11 cases carrying at least $10 million in liabilities, which excludes most independent practices outright. Bloomberg Law, reviewing the report's case list, reported that six of this year's clinic and physician practice filings carried liabilities between $10 million and $50 million and were filed in states including California, Texas and Virginia. The outlier was Georgia ProtonCare Center Inc., a proton therapy facility that filed in January with more than $500 million in liabilities and has since been acquired by Emory University.

Practices that close quietly, sell at a discount or hand the keys to a hospital system never appear in the data at all.

Wayne Winegarden, Ph.D., senior fellow in business and economics at the Pacific Research Institute and director of its Center for Medical Economics and Innovation, has been tracking that quieter attrition for years. In an interview with Medical Economics, he tied it to a long run of inflation-adjusted Medicare payment declines he put at roughly 30%. Each additional year of it, he said, "makes it harder and harder for independent physician practices to stay viable."

"There is the actual financial difficulties of managing that, and then there's the kind of psychological element of, is this ever going to get better?" Winegarden said. "The longer this drags out, the more likely more practices will shut down."

Costs, denials and staff pay

The underlying math is not complicated. Matthew Bates, a managing director at Kaufman Hall who leads the firm's work with physician enterprises and medical groups, laid it out on Medical Economics' and Physicians Practice’s Off the Chart: A Business of Medicine Podcast.

"What we're seeing is costs are rising faster than revenue," Bates said. Physicians are more productive than they have been, he said, seeing more patients and doing more work, but reimbursement per unit of that work has not kept up. "Docs are working harder, but what they're making per unit of work is actually going down."

Gibbins puts numbers on the expense side. Median health care staff pay rose 4.3% in 2025, up from 2.7% in 2024.

On the revenue side, the report cites a 12% increase in inpatient claim denials and a 14% increase in outpatient denials from 2024 to 2025, alongside a 2025 survey finding that 41% of providers now see denial rates above 10%. Insurers raised 2026 premiums by a median of 18% nationally, more than twice the increase they proposed for 2025.

How big does a practice need to be to stay independent?

Andy Colbert, senior managing director at Ziegler and head of the investment bank's physician advisory practice, has put a number on where independence stops penciling out.

"There's kind of a minimum size threshold that I think you need to really remain independent and successful in today's environment, and it's probably somewhere around 40 or 50 providers," Colbert said. Below that line, he said, a group struggles to carry a full back office, afford a CFO and a CEO, negotiate with managed care from a position of leverage, or invest in data systems and technology.

"Groups under 50 providers are in a really challenging situation right now, where they've got record rising staff costs and overhead," Colbert said. "They've got declining reimbursement, and they've got just an increasing burden of the complexity of running the practice from just an administrative headache." Getting claims processed and paid, he said, "is harder than ever."

He also flagged a structural habit that shows up in distressed groups. "A lot of these groups operate very much in the mindset of maximizing cash flow every year and thinking about the business more as a means to a salary, as opposed to building equity value like you would a traditional investment in a corporation," Colbert said.

Changing that is a hard sell inside a partnership. "Trying to convince them all, hey, let's forgo 10, 20, 30% of our salaries this year to reinvest in the business because it's the right thing to do. Those are hard decisions to have."

Medicaid work requirements are next

Gibbins frames policy as the defining pressure ahead. The One Big Beautiful Bill Act (officially Public Law 119-21 or H.R. 1), signed July 4, 2025, enacted what the report calls the largest federal health spending reduction in history.

Medicaid work requirements are next, with states required to comply by Jan. 1, 2027. Enhanced premium tax credits under the Patient Protection and Affordable Care Act have lapsed, HCA Healthcare has raised its full-year ACA exchange loss estimate to $1 billion to $1.2 billion, and insurers' initial 2027 exchange filings point to another year of double-digit rate increases, running as high as 22.4% in Washington.

"The period through COVID and its aftermath was defined by labor and workforce challenges," Clare Moylan, a principal at Gibbins Advisors, said in a statement. "While those issues remain, the next chapter for health care will be defined by the ability to get paid, and how much is paid, for services provided."

Winegarden does not think that finishes independent practice, at least not this decade. "I don't think within the next decade independent practice ends," he said. If it does, he said, the cause will be Medicare reimbursement and accumulated regulation. "Those are the things that are squeezing independent practices."

What should a practice be watching?

The report closes with what Gibbins tells boards and leaders to watch: a 12-month cash flow projection built by month, a 13-week projection by week when cash is tight, budget-versus-actual reporting on financials and KPIs, benchmarked revenue cycle metrics, and financial modeling that scenario-tests policy and reimbursement changes. The firm's blunter framing is that organizations should not leave it too late to seek professional help.

That tracks with what advisers tell physicians about transactions generally. Kevin Baker, director of corporate development at Emergency Care Partners, told Medical Economics that the worst outcomes come from decisions made under duress. "The best transactions are rarely reactive, but intentional, and begin years before transactions," he said, and physicians should not wait to think about succession planning until they actually need it.

Ask yourself whether you would make a rational decision when the furnace breaks in the middle of winter, Baker said. Probably not, and you pay a premium because you are in a bind.

Baker's first practical fix is the same one Gibbins recommends: books that can answer questions. "Many practices kind of skirt by with financials that allow them to file their taxes and just move on," he said. "What you really need is a set of financials that allows a prospective buyer to compare across time periods, compare KPIs for your business."

Colbert's version is a three- to five-year strategic plan written before anyone comes knocking. "The biggest mistake that a lot of physician groups make is someone knocks on the door and shows up with an offer or some sort of interesting proposal, and the group's just evaluating it in a vacuum," he said.

The Gibbins data counts the practices that made it to court. Winters' point was about the ones that won't.