The bankruptcy of Healthcare will decrease after reaching its peak in 2023.

Despite serious financial difficulties in the health care sector, Givens Advisors, a health care restructuring advisory firm, stated in a recent report that despite reaching a record high in the number of bankruptcy filings in the third quarter of 2023, the number has slowed down over the past 9 months.

In the mid-year report of 2024, Givens expects the number of bankruptcy filings in the health care sector this year to be 58 based on the filings in the first 6 months until June 30, indicating a 27% decrease from 79 filings in 2023.

Despite an economic slowdown, the Tennessee-based company noted that despite serious financial difficulties in the health care sector, the number of bankruptcy filings for major health care companies (with debts exceeding 0.5 billion dollars) remains high at the same level as last year.

Rite Aid, a drugstore chain struggling with billions of dollars in debt, including opioid-related liabilities, filed for Chapter 11 bankruptcy in October.

Steward Health Care, the largest tenant of Medical Properties Trust (MPW), the largest physician-led hospital management company in the USA, applied for Chapter 11 bankruptcy in May.

According to Mr. Gibbins, the bankruptcy filing rate for specific subsectors such as hospitals, clinics, and physician practices has been high this year, with the former group showing a 60% increase.

Over the past five years, bankruptcy filings from listed health care companies accounted for 24% of the total, with the pharmaceutical sector leading the way.

The health care sector continues to face headwinds such as macro challenges including labor constraints and pressure from capital markets. Mr. Gibbins points out the potential increase in bankruptcy filings as the year progresses.

Major health care benchmarks like iShares U.S. Health Care Providers ETF (IHF), SPDR S&P Health Care Services ETF (XHS), SPDR Biotech ETF (XBI), and SPDR S&P Pharmaceuticals ETF (XPH) have all lagged behind the S&P 500 (SP500) this year.

"The decreasing trend in bankruptcy filings does not align with the scale of financial distress we are witnessing in our office," said Claire Moylan, co-founder and principal partner at Gibbins.

"One possible reason is that financial restructuring is being done outside of the courtroom rather than through bankruptcy. It wouldn't be surprising if the number of litigations increases beyond the current level as the year progresses," she added.

In recent months, publicly traded physicians like Akumin (OTCPK:AKUMQ) and Cano Health (CANOQ) have filed for bankruptcy protection, while Invitae (OTCPK:NVTAQ) and DermTech (OTCPK:DMTKQ) were notable bankruptcies in the diagnostic field.

Invacare (IVCRQ), Allied Healthcare Products (OTC:AHPIQ), Surgalign Holdings (SRGAQ), ViewRay (OTC:VRAYQ), and SmileDirectClub (OTC:SDCCQ) sought bankruptcy protection as listed medical device manufacturers/suppliers.

Sorrento Therapeutics (otc:SRNE), Lucira Health (LHDXQ), Kodiak Biociences (CDAKQ), Humanigen (otc:HGENQ), Clovis Oncology (CLVSQ), Athersys (otc:ATHXQ), Gamida Cell (otc:GMDAQ) is one of the recently bankrupt biopharma companies.