Health Care Bankruptcies Rise During Pandemic

Chicago was hit last week by the bankruptcy of a major hospital system, underscoring the growing distress in the healthcare industry.

The Mercy Hospital and Medical Center filed for bankruptcy on February 10 after its owner tried to shut down the facility, but was rejected by the Illinois Health Review Board. The hospital takes care of sicker patients, many of whom do not have private insurance that reimburses at higher rates, according to court documents. She has been in financial trouble since the 1990s.

The hardships are spreading through the U.S. healthcare system, with costs of treating patients with covid-19 rising as more cost-effective procedures are limited. A total of 22 large healthcare-related companies filed for bankruptcy in 2020, according to data compiled by Bloomberg.

Hospital records will increase from a year ago without more relaxed CARES (Coronavirus Aid, Relief, and Economic Security) regulation and access to other grants, said Perry Mandarino of B. Riley Financial Inc. in an interview. Health care is “fundamentally challenged because costs are increasing every year, but reimbursements and insurance revenues are not increasing,” he said.

Still, some states will step in to support hospitals with high volumes to avoid deposits, Mandarino said. Some systems will have “so much influence on the community that it will mean that state departments will have no choice but to help them succeed.”

Mercy’s bankruptcy brings the number of large healthcare deposits to five since early December and two since the start of the year.

Four companies with at least $ 50 million in liabilities filed for bankruptcy in the United States last week – the same number filed the week before, but more than the one-week rate seen at the start of the year. The pace of filings could accelerate in the second and third quarters of the year, according to Michael Sirota of law firm Cole Schotz.

“Now that lenders and the courts are getting less likable, I think you’re going to see in various industries – including healthcare – the need to seek protection,” Sirota said. “Everyone had to do the right thing during this unprecedented time. But now the business parties – owners, lenders and counterparties – are feeling the pain and will start pushing all the buttons.”

Distress in the leisure and entertainment industries, hit hard by lost revenue from the pandemic, continues to grow. The default rate on US institutional leveraged loans in the leisure and entertainment sector could approach 30% in 2021, down from just 9.9% last year, according to Fitch Ratings.

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