The Polsinelli-TrBK Distress Indices also highlight busiest second quarter in more than a year
The steady rate of bankruptcy filings from rural health care facilities has shaped the U.S. economic distress in the second quarter of 2019, which is detailed in the newest Polsinelli-TrBK Distress Indices Report.
The report, released today by Am Law 100 firm Polsinelli, explains that the health care industry is still decoupled from the general economy, as the health care index continues to retain high levels of distress, while real estate and general Chapter 11 bankruptcies remain more consistent.
Health care services filings continue to show a significant distribution shift toward the country’s southeast region since the benchmark period of 2010. In fact, the southeast has experienced the largest volume of health care services filings this quarter, with more than half of health care services filings since the first quarter of 2019.
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 success.
“What’s significant about our report is that it’s based on a rolling four-quarter basis. It's not really a spike quarter to quarter, but it's measured over a year, so the bumps are significant. Each quarter reflects an entire year's worth of data,” said Polsinelli Shareholder Jeremy Johnson, a bankruptcy and restructuring attorney and one of the authors of the report. “For the past few years, we have seen distress in the health care industry continue to jump up to 400 and 500 points, while real estate and Chapter 11 have remained under 75. This rapid change is one of the reasons why health care is so far removed from the country’s general economic distress, and why it’s so important to track.”
This irregularity originates from a variety of sources, not the least from issues surrounding tort liability, government reimbursement programs, payment delays, management issues and expansion. In addition, the Indices show that the first six months of 2019 have been the most active in the past three years.
The Distress Indices Report notes that general Chapter 11 bankruptcies are down 49 percent from the benchmark in 2010; in the same period, distress in the real estate industry is down 76 percent. In contrast, health care industry distress has increased 325 percent.
Other significant updates in the report include:
- The Chapter 11 Distress Research Index was 50.97 for the second quarter of 2019. The Chapter 11 Index has increased four points since the last quarter and has increased two of the last four quarters. Compared with the same period one year ago, the index has only increased one point, and compared with the benchmark period of the fourth quarter of 2010, it has decreased 49 percent. The second quarter of 2019 marks only the second time the Chapter 11 Index has been more than 50 points in the past two years.
- The Real Estate Distress Research Index was 23.56 for the second quarter of 2019. The Real Estate Index increased less than one point since the last quarter and has decreased four of the last five quarters. Compared with the same period one year ago, the index has decreased almost nine points, and compared with the benchmark period, it is down 76 percent. The last two quarters have been the lowest since the benchmark period.
- The Health Care Services Distress Research Index was 425 for the second quarter of 2019. The Health Care Index increased more than 53 points since last quarter. The index has increased three of the last four quarters. Compared with the same period one year ago, the index has increased 85 points, and compared with the benchmark period of the fourth quarter of 2010, the index is up 325 percent. After the first quarter of 2017, each of the last nine quarters has measured at more than double the benchmark.
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 https://www.distressindex.com.
Polsinelli is an Am Law 100 firm with more than 875 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.