A continued increase in distress within the health care industry has shaped overall U.S. economic distress in the fourth quarter of 2019 – a trend that is detailed in the newest Polsinelli-TrBK Distress Indices Report.
The report, released today by Am Law 100 firm Polsinelli, shows how the health care industry has decoupled from the general economy since 2015, as the health care index continues to retain high levels of distress while real estate and general Chapter 11 bankruptcies remain more consistent. This is especially true over the past few quarters as the economy became less distressed as a whole.
In 2019’s final quarter, health care distress was driven primarily by hospital bankruptcy filings across the country in Washington, Texas and New York.
“We’ve known for a few years that health care distress was influencing overall U.S. economic distress, but in 2019, we really saw trends emerge in senior living bankruptcies and rural locations,” said Polsinelli Shareholder Jeremy Johnson, a bankruptcy and restructuring attorney and co-author of the report. “What’s important to understand about our report is that it’s based on a rolling four-quarter basis. So the distress you are seeing isn’t really a quarter by quarter look, it incorporates the past, so the bumps are significant.”
In addition to the health care update, the Q4 report also highlights a spike in general Chapter 11 bankruptcy filings. In 2019, three consecutive quarters experienced distress over 50 points; for comparison, 2018 didn’t see any quarters with more than 50 points. The current data shows the highest sustained run since 2014. By contrast, the amount of economic distress in the real estate industry is continuing to decline, and is now showing relatively low distress overall.
The Polsinelli-TrBK Distress Indices are the backbone of a quarterly research report series that uses Chapter 11 filing data – bankruptcies with more than $1 million in assets – as a proxy for measuring financial distress in the overall U.S. economy and breakdowns of distress specifically in the real estate and health care services sectors. It is the only current measurement that tracks both Main Street and Wall Street statistics.
The Distress Indices Report notes that general Chapter 11 bankruptcies are down 50 percent since 2010; in the same period, distress in the real estate industry is down 73 percent. In contrast, health care industry distress has increased 125 percent.
Other significant updates in the report include:
- The Chapter 11 Distress Research Index was 50.24 for the fourth quarter of 2019. The Chapter 11 Index decreased four points since the last quarter. Compared with the same period one year ago, the index has increased two points and compared with the benchmark period of the fourth quarter of 2010, it is down approximately 50 percent.
- The Real Estate Distress Research Index was 27.05 for the fourth quarter of 2019. The Real Estate Index increased nearly two points since the last quarter. Compared with the same period one year ago, the index has increased two points and compared with the benchmark period, it is down approximately 73 percent.
- The Health Care Services Distress Research Index was 225.00 for the fourth quarter of 2019. The Health Care Index decreased 156 points from last quarter, but has experienced eight straight quarters of high distress – at least 100 points. Compared with the same period one year ago, the index has decreased more than 225 points, but compared with the benchmark period of the fourth quarter of 2010, the index is up approximately 125 percent.
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, graphs and all past analysis, visit www.distressindex.com.
Polsinelli is an Am Law 100 firm with 900 attorneys in 21 offices nationwide. Recognized by legal research firm BTI Consulting as one of the top firms for excellent client service and client relationships, 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, middle-market corporate, labor and employment and business litigation. Polsinelli PC, Polsinelli LLP in California.