While healthcare bankruptcy filings overall have leveled off in the first half of 2026, smaller practices and clinics drove the bankruptcies that were reported, according to a report published by Gibbins Advisors July 20.
The firm’s Interim 2026 Healthcare Bankruptcy Report tracks Chapter 11 filings in the healthcare sector from January 2019 through June 2026 for companies with more than $10 million in liabilities.
Here are eight takeaways from the report:
1. The pace of filings held near its long-term average. Healthcare saw 12 bankruptcy filings in the first quarter of 2026 and 14 in the second, in line with the roughly 12.5 filings per quarter recorded since 2019. Filing activity in the past four quarters clustered around that long-term average, following a period of greater volatility in 2024 and 2025.
“The relative stability in healthcare bankruptcy filings is surprising considering the on-the-ground pressures we see operators facing every day. There is a lot bubbling under the surface that will ultimately need to be resolved in some form of restructuring, though not all will be resolved in court,” said Ronald Winters, principal at Gibbins Advisors.
2. Smaller companies are driving the growth in filings. Bankruptcies among companies with $10 million to $50 million in liabilities are on pace to finish 2026 up 57% from 2025 — 36 filings projected, compared with 23 last year. Filing activity among companies with $50 million or more in liabilities is trending flat or lower than 2025.
3. Clinics and physician practices are leading the subsector shift. The subsector accounted for almost 30% of healthcare bankruptcy filings in the first half of 2026 and is on pace for its highest annual filing total since 2019. Other subsectors trended flat or down: Pharmaceutical filings are on pace with 2025, hospital filings are tracking roughly on par with 2025 after a Chapter 9 hospital bankruptcy, and medical equipment and supplies recorded no filings in the first half of the year. Senior care and pharmaceutical companies together still account for nearly half of all healthcare bankruptcy filings since 2019.
4. A widening gap separates stronger and weaker health systems. Median hospital operating margins climbed to 2.5% year to date through April 2026, but the gains were uneven. S&P has described healthcare financial performance as increasingly polarized, with stronger organizations pulling further ahead while weaker providers remain vulnerable.
“The period through COVID and its aftermath was defined by labor and workforce challenges. While those issues remain, the next chapter for healthcare will be defined by the ability to get paid, and how much is paid, for services provided,” said Clare Moylan, principal at Gibbins Advisors.
5. Medicaid cuts and coverage losses are compounding. The One Big Beautiful Bill Act (Public Law 119-21), signed into law July 4, 2025, enacted the largest federal health spending reduction in history, hitting safety-net providers with high government payer mix the hardest. The lapse of enhanced ACA premium tax credits is already driving coverage losses: HCA Healthcare has raised its full-year ACA exchange loss estimate to $1 billion to $1.2 billion, and initial 2027 insurer filings point to another year of double-digit premium increases. New Medicaid work requirements taking effect in 2027 are expected to compound the strain.
6. Payers are adding to the pressure. Hospital claim denials rose 12% for inpatient care and 14% for outpatient care from 2024 to 2025, and a 2025 survey found 41% of providers now see denial rates above 10%. Insurers, citing rising costs and risk, raised 2026 premiums by a median of 18% nationally — more than twice the increase proposed for 2025.
7. Labor and supply costs remain elevated. Total hospital expense per adjusted discharge rose 5% year to date through April 2026 compared with 2025, led by an 8% increase in non-labor expense and drug costs, while labor expense per adjusted discharge stayed roughly flat. Median healthcare staff pay rose 4.3% in 2025, up from 2.7% in 2024, and 82% of healthcare leaders expect supply costs to rise by at least 15%.
8. M&A activity is rebounding as systems reposition. Hospital and health system M&A rebounded sharply in the first quarter of 2026, with 22 transactions — the highest first-quarter total since 2020 — signaling strategic portfolio rationalization ahead of upcoming policy and reimbursement pressures. Continued shifts toward outpatient, community and home-based care, along with cost transformation and the adoption of AI and automation, are expected to be critical as organizations navigate the period ahead.
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