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Healthcare Industry Bankruptcies: What healthcare professionals and patients need to know?





The healthcare business is an indispensable component of today’s society since it delivers life-sustaining medical care and related services to millions of people on a daily basis. Nonetheless, despite the paramount importance of healthcare, a large number of healthcare providers and organisations are confronted with substantial financial issues, which may result in bankruptcy.

One recent illustration of this phenomenon is the insolvency of the significant healthcare provider known as the University of Pittsburgh Medical Center (UPMC) in 2020. The rising expenses of medical care, greater regulatory constraints, and shifting compensation methods are some of the factors that contribute to the complicated financial challenges that healthcare providers are currently experiencing. These difficulties have led to an increase in the number of bankruptcies in the healthcare business, particularly among organisations that provide healthcare on a smaller or medium-sized scale. Bankruptcy lawyers can help you navigate these complexities. 

In the healthcare industry, navigating the legal and financial hurdles of bankruptcy can be a difficult and painful process. But, with the correct legal and financial help, healthcare providers can emerge from bankruptcy stronger and more financially stable than they were before.

Gaining an Understanding of the Financial Pressures That Healthcare Providers Are Experiencing

Significant financial pressures are being exerted on the healthcare sector, including the ever-increasing costs of medical care, the ever-increasing regulatory burdens, and the ever-shifting reimbursement structures. These pressures have led to an increase in the frequency of bankruptcies within the healthcare business, notably within the industry’s small and medium-sized healthcare providers.

The Different Forms of Bankruptcy

Chapter 11 and Chapter 7 bankruptcy are two different types of bankruptcy under the United States Bankruptcy Code, which healthcare providers and organisations can use to address their financial difficulties.

Chapter 11 bankruptcy

Chapter 11 bankruptcy is also known as “reorganisation” bankruptcy, and it enables a healthcare organisation to restructure its operations as well as its debts so that it can continue to operate as a business and pay back its creditors over a period of time. The healthcare provider is able to continue business operations while a bankruptcy plan is formulated and carried out under Chapter 11 of the United States Code. A comprehensive reorganisation of the provider’s finances and operations is often a component of the plan. 

Moreover, the plan may call for adjustments to the provider’s management, staff, and contractual obligations. Larger healthcare companies, such as hospitals or medical groups, that have a stronger potential to repay their debts over time frequently turn to Chapter 11 bankruptcy as a solution to their financial woes. 

The Chapter 11 bankruptcy process enables healthcare providers to continue providing services while they formulate a strategy to repay their debts and reorganise their businesses in order to become more financially secure. This particular form of bankruptcy calls for a considerable amount of legal and financial forethought on the part of the debtor, and the process might take many years to finish.

Chapter 7 bankruptcy

Chapter 7 bankruptcy is often known as “liquidation” bankruptcy, and it entails the selling of a healthcare provider’s assets in order to clear their debts. This type of bankruptcy is more common. In a Chapter 7 bankruptcy, a trustee is appointed to be in charge of the liquidation of the provider’s assets, and the proceeds from this sale go towards repaying the creditors.

The healthcare provider is normally dissolved and ceases to exist following the completion of the sale of the assets and the reimbursement of the debts. Smaller healthcare providers who lack the necessary financial resources to continue functioning may frequently file for bankruptcy under Chapter 7 of the United States Code. When a healthcare practitioner files for bankruptcy under Chapter 7, their assets are often sold off to pay off their existing debts. This will, in almost all situations, result in the healthcare provider ceasing business activities.

The Role of Bankruptcy Attorneys in the Healthcare Sector 

When it comes to the process of filing for bankruptcy, having a bankruptcy attorney that specialises in bankruptcies of the healthcare business on your side can be extremely helpful. They are able to assist healthcare professionals in navigating the complexity of bankruptcy law, safeguarding their interests, and working towards a positive resolution. The direction and assistance that one receives from a bankruptcy lawyer can make a world of difference, not only for medical professionals but also for patients.

Some of the specific roles that bankruptcy lawyers can play in healthcare industry bankruptcies include:

Creating a Thorough Bankruptcy Plan

Developing a thorough bankruptcy plan with healthcare providers is one of a bankruptcy attorney’s most crucial tasks. This entails assessing the financial standing of the healthcare provider, creating a repayment strategy, and haggling with creditors to have the plan approved by all parties.

Making Sure Legal Obligations Are Obeyed

Healthcare providers must adhere to a number of legal criteria during the bankruptcy process due to the complexity of bankruptcy law. Healthcare providers can better grasp these standards with the aid of a bankruptcy attorney who focuses on cases involving the healthcare sector and can help them stay compliant at all times.

Protecting the Rights and Interests of Healthcare Professionals

Bankruptcy can be a stressful and uncertain time for healthcare professionals. A bankruptcy lawyer can help protect their rights and interests, including ensuring that their employment contracts and malpractice insurance are not affected by bankruptcy.

Negotiating With Creditors

Negotiating with creditors is an important part of the bankruptcy process for healthcare providers. When a healthcare provider files for bankruptcy, they typically owe money to a variety of creditors, including banks, vendors, landlords, and other parties. Negotiating with creditors is an important part of the bankruptcy process, as it can help to ensure that the healthcare provider is able to pay off their debts in a way that is manageable and sustainable.

Protecting the Rights and Interests of Patients

Patients are also affected by healthcare industry bankruptcies, and a bankruptcy lawyer can help protect their rights and interests. This includes ensuring that patients can continue to receive necessary medical care, advising patients on their legal options, and protecting patients from any adverse impacts of bankruptcy.

The Importance of Making a Financial Strategy for Your Future

In order to successfully navigate bankruptcy in the healthcare industry, healthcare providers require not only the advice of legal professionals but also engagement in extensive financial planning. This involves conducting an analysis of cash flow, creating a budget, and identifying options to boost revenue while simultaneously cutting costs. Healthcare providers can collaborate with a financial advisor who specialises in the bankruptcies that occur within the healthcare business to design a financial strategy that supports their objectives of filing for bankruptcy.


In conclusion, several financial stresses on healthcare providers and organisations are leading to an increase in the frequency with which healthcare businesses declare bankruptcy. Although filing for bankruptcy can be a stressful and upsetting experience, it can also present a unique opportunity for healthcare providers to reorganise their finances, operations, and contracts in a way that better positions them for future success.

Helping healthcare providers face the complex legal and financial obstacles of bankruptcy with confidence and emerge stronger and more financially stable than ever before is the specialty of bankruptcy lawyers and financial consultants who focus on the healthcare business.

Whether a healthcare practitioner should file for Chapter 11 or Chapter 7 bankruptcy will depend on their individual situation and objectives. A thorough bankruptcy plan that safeguards the rights and interests of healthcare providers and patients requires careful consideration of the advantages and disadvantages of each option. Healthcare providers should also participate in careful financial planning to guarantee they have access to the tools and expertise they need to succeed.