The healthcare sector was expected to complete 2024 with remarkable strength and 27% fewer bankruptcy filings than in 2023, based on healthcare restructuring advisory firm Gibbins Advisors' interim 2024 report that was released in August.
Whether that would hold up through the end of the year was uncertain as the final report has not been released, but several healthcare providers finished the year filing for Chapter 11 bankruptcy in November.
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CareMax Inc., an operator of clinical care centers providing a comprehensive range of medical services, filed for Chapter 11 bankruptcy protection seeking a sale of substantially all of its assets on Nov. 17.
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The Miami, Fla.-based debtor listed $390 million in assets and $639 million in debts in its petition that was filed in the U.S. Bankruptcy Court for the Northern District of Texas.
Wellpath Holdings, a leading healthcare provider for prisons and mental health facilities, and 38 affiliates on Nov. 11 filed for Chapter 11 protection in the U.S. Bankruptcy Court for the Southern District of Texas to reorganize its businesses and sell certain assets to an ad hoc group of its prepetition lenders.
The Nashville, Tenn., debtor blamed rising operating and labor costs, increased liability insurance expenses, underperforming contracts, and declining liquidity for causing its financial distress.
Hospitals and health center operator CarePoint Health Systems, a safety net for a large underprivileged community, on Nov. 4 filed for Chapter 11 protection in the U.S. Bankruptcy Court for the District of Delaware to reorganize its unsustainable debt.
The New Jersey-based debtor faced financial and liquidity challenges resulting from unreimbursed Covid-19 expenditures and inadequate state government funding to cover a disproportionately large number of uninsured and undocumented patients who are admitted through its emergency rooms.
And now, 2025 begins with another healthcare provider bankruptcy filing.
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Prospect Medical files for Chapter 11 bankruptcy
Huge healthcare provider Prospect Medical Holdings and 66 affiliates on Jan. 11 filed for Chapter 11 bankruptcy protection with plans to reorganize certain medical assets, sell two medical centers in Rhode Island, and divest from another in Pennsylvania through its case.
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The Culver City, Calif., hospital and medical center owner and operator listed $1 billion to $10 billion in assets and liabilities in its petition filed in the U.S. Bankruptcy Court for the Northern District of Texas.
Prospect Medical seeks $100 million DIP loan
Prospect Medical will seek approval of a $100 million term loan debtor-in-possession financing from JMB Capital Partners Lending to finance operations while its case proceeds, according to court papers.
The debtor, which employs about 12,600 workers, currently owns and operates 16 acute care and behavioral hospitals in California, Connecticut, Pennsylvania, and Rhode Island, providing a wide range of inpatient and outpatient services.
The debtor's non-debtor affiliates operate physician-related services, which are not included in the bankruptcy case, such as owned and managed medical groups, independent physician associations, managed services organizations, and risk-taking entities.
PHP Holdings, LLC and related subsidiaries, including Prospect Health Plan, Inc., Prospect Medical Systems, LLC, and its affiliated medical groups in California, Arizona, and Texas, Gateway Medical Center, and Foothill Regional Medical Center, are not parties to the Chapter 11 proceedings.
PHP Holdings and Astrana Health Inc. (ASTH) on Nov. 8, 2024, reached an agreement for Astrana's acquisition of certain Prospect Health System businesses and assets for $745 million, including California licensed health care service plan, Prospect Health Plan; medical groups in California, Texas, Arizona, and Rhode Island; its management service organization Prospect Medical Systems; pharmacy RightRx; and Foothill Regional Medical Center, a 177-bed fully accredited acute care hospital.
The acquisition is expected to close in mid-2025, subject to regulatory approval and customary closing conditions, according to a statement at the time of the transaction.
Prospect was expected to generate about $1.2 billion in revenue with expected adjusted Ebitda of about $81 million for the year ending Dec. 31, 2024, according to an Astrana statement.
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