Four Facts on Private Equity Bankruptcies in Healthcare [Infographic]

Private equity (PE) firms have become significant players in the healthcare sector, bringing with them both potential benefits and also inherent risks. A recent infographic by Health Leaders highlights the growing concern over four facts on private equity-driven bankruptcies within this sector. The data paints a concerning picture, particularly for healthcare companies under private equity ownership. Here are the four facts on private equity bankruptcies presented:

Rising Number of Bankruptcies

In 2023, out of 80 healthcare companies that filed for bankruptcy, 17 (21%) were owned by private equity firms. This statistic underscores the vulnerability of PE-owned healthcare companies to financial distress. The aggressive financial strategies and also high debt levels typical of private equity investments often contribute to these failures.

Future Projections

The trend of private equity-driven bankruptcies in healthcare is expected to continue into 2024. Analysts predict an increase in the number of healthcare companies filing for bankruptcy, driven largely by the financial pressures imposed by their private equity owners. This projection signals potential instability in the healthcare sector, which could have broader implications for patients and also healthcare providers.

High Distress Among PE-Owned Companies

Nearly all the most distressed healthcare companies in the US are under private equity ownership. This correlation suggests that the operational and financial strategies employed by private equity firms may not be sustainable in the long term. These firms often prioritize short-term financial gains over the stability and also longevity of the companies they acquire, leading to higher distress levels.

Significant Increase Over Five Years

The number of private equity healthcare bankruptcies has seen a dramatic increase over the past five years. In 2019, there were only 8 such bankruptcies. By 2023, this number had surged by 112.5%, indicating a troubling trend. This rise highlights the growing impact of private equity in the healthcare sector and also raises questions about the long-term viability of these investments.

Conclusion

The data from Health Leaders and the Private Equity Stakeholder Project brings to light the increasing frequency and risks of private equity-driven bankruptcies in the healthcare sector. With a significant portion of distressed healthcare companies under private equity ownership, and projections indicating a rise in such bankruptcies.