The rise of hospitals filing for Chapter 11 bankruptcy has shaped the U.S. economic distress in the third quarter of 2018, which is detailed in the latest Polsinelli-TrBK Distress Indices Report.

The report, which was released today by Am Law 100 firm Polsinelli, shows how health care has decoupled from the general U.S. economy. As the economy – specifically Chapter 11 bankruptcies and the real estate industry – has remained stable over the last several quarters, health care has shown consistent high levels of distress – eight of the past 11 quarters have registered a jump in the industry’s economic distress.

The Polsinelli-TrBK Distress Indices are the backbone of a quarterly research report series that uses Chapter 11 filing data as a proxy for measuring financial distress in the overall U.S. economy and breakdowns of distress specifically in the real estate and the health care services sectors.

What is significant about our report is that it is based on a rolling four-quarter basis. It is not really a spike quarter-to-quarter, but it is measured over a year, so the bumps are more meaningful. Each quarter reflects an entire year’s worth of data, said Jeremy Johnson, a bankruptcy and restructuring attorney at Polsinelli and the editor of the report. Because of this, the report is a proxy for actual distress, but this quarter, we believe the distress may be even more widespread because not all companies end up in bankruptcy.

More specifically, the Indices – which are based on Chapter 11 bankruptcy filings with more than $1 million in assets – detail that more than 20 hospitals have filed bankruptcy since 2016, and 75 percent of them are in rural areas where reimbursement rates are falling and the uninsured population is growing.

The southwestern states are being hit the hardest with a significant number of rural health care facilities closing and additional Medicare expansion troubles. As an example, Houston-based Neighbors Legacy Holdings had more than 30 freestanding emergency centers throughout Texas, but increased competition, insurance payer pressure and overexpansion forced the company the file for Chapter 11 in 2018.

Looking at the Indices, it is notable that general Chapter 11 bankruptcies are down 53 percent from the benchmark in 2010; in the same period, distress in the real estate industry is down 68 percent. In contrast, health care industry distress increasedby 305 percent. Other significant updates in the report include:

The Chapter 11 Distress Research Index was 47.17 for the third quarter of 2018. The Chapter 11 Index decreased approximately two points since the last quarter and has decreased the past two quarters. Compared with the same period one year ago, the index has increased approximately five points, and compared with the benchmark period of the fourth quarter of 2010, it is down more than 53 points.

The Real Estate Distress Research Index was 31.67 for the third quarter of 2018. The Real Estate Index decreased by almost one point since the last quarter and has increased three of the past two quarters. Compared with the same period one year ago, the index has increased more than
six points, and compared with the benchmark period, it is down approximately 68 percent. This is the third highest the real estate index has measured since 2014.

The Health Care Services Distress Research Index was 405 for the third quarter of 2018. The Health Care Index increased 65 points from last quarter. The index has experienced record or near-record highs in each of the past eight quarters. Compared with the same period one year ago, the index has increased approximately 82 points. Compared with the benchmark period of the fourth quarter of 2010, the index is up approximately 305 percent.

On a trailing four-quarter average, the percentage of real estate filings among all index-measured Chapter 11 filings has decreased from 19.98 percent in 2010 to 13.41 percent now, increasing slightly since the last quarter. Health Care services filings have increased from 1.13 percent in 2010 to 9.70 percent, an increase of almost 2.0 points from last quarter.

The Polsinelli-TrBK Distress Indices track the increase or decrease in all Chapter 11 filings with more than $1 million in assets since the fourth quarter of 2010. Unlike the public markets, the Polsinelli-TrBK Distress Indices include both public and private companies, creating a broader economic view and one that may show developing trends on Main Street before they appear on Wall Street.

To access the full report, included graphs and all past analysis, visit

About Polsinelli
Polsinelli is an Am Law 100 firm with more than 825 attorneys in 21 cities coast to coast. Ranked #24 for Client Service Excellence1 and #10 for best client relationships2 among 650 U.S. law firms, Polsinelli is also named among the top 30 best-known firms in the nation3 for the second consecutive year. The firm’s attorneys provide value through practical legal counsel infused with business insight, and focus on health care, financial services, real estate, intellectual property, midmarket corporate, labor and employment, and business litigation. 1 2018 BTI Client Service A Team Report 2 2017 BTI Industry Power Rankings 3 2018 BTI Brand Elite