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Is U.S healthcare system on brink of collapse as two hospital chains go bust in a year

Is U.S healthcare system on brink of collapse as two hospital chains go bust in a year

The late 2024 killing of UnitedHealthcare (NYSE: UNH) CEO Brian Thompson brought the state of medicine in the U.S. into focus.

Though the successes of the system are undeniable, it has become impossible to ignore its many deficiencies, which are, according to multiple commentators and experts, an extreme focus on ‘profits over patients’ and a severe inefficiency, particularly in terms of caring for the most disadvantaged.

Indeed, Democratic Senator Bernie Sanders has, for a long time, been comparing the per-patient costs of American healthcare with the substantially lower expenditure in other developed nations, such as Germany.

While less discussed than the UnitedHealthcare case, cracks in the system have been becoming ever more evident in dramatic news of a somewhat different variety: the bankruptcies of major hospital chains.

Two U.S. hospitals collapse in less than 12 months

Though the May Chapter 11 filing of Steward Health Care proved a dire turn of events as the firm was one of the largest employers and the largest hospital chain in the Commonwealth of Massachusetts, a more recent bankruptcy may be even more concerning.

Specifically, Prospect Medical Group, the owner of 16 hospitals in California, Connecticut, Pennsylvania, and Rhode Island, filed for protection in Texas on Saturday, January 11.

The decision is especially dire as it demonstrates the potential danger of recent efforts by private equity firms to squeeze as much profit out of the healthcare system as possible. 

U.S. Congress used Prospect Medical Group in January when it was discussing the aforementioned trend of businesses prioritizing ‘profits over patients.’

Why U.S. Hospital chains are failing

Prospect’s bankruptcy was caused by a so-called ‘sale-leaseback agreement,’ a tactic that, in a nutshell, involves companies who own hospitals selling the property for a profit before renting the space back from its new owners. This system causes significant financial strain as debt is frequently used to finance such agreements and continue providing profits for shareholders.

The gravity of the situation is further exemplified by an October lawsuit filed by Pennsylvania’s attorney general against Prospect, which alleged severe mismanagement of hospitals that led to the shutting down of two facilities and diverting $450 million to private investors. 

According to the lawsuit, the action also increased the rent burden of said hospitals by approximately $35 million per annum via the sale and subsequent lease.

Featured image via Shutterstock

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