A groundbreaking study by Stanford Health Policy Economist Adrienne Sabety found that if a patient receives care from a facility that recently filed for bankruptcy, their chances of being hospitalized increases by 1.44 percentage points. These bankruptcies also increase the use of physical restraints and bedsores by 77% and 14% of the mean, respectively. One in-three nursing homes patients on Medicare experience harm or death as a result of low-quality care.
STANFORD, Calif., May 13, 2025 /PRNewswire-PRWeb/ -- U.S. healthcare organizations are filing for bankruptcy at record rates as they increasingly rely on risky debt, leading to increases in staff turnover and harm to patients—particularly elderly ones living in nursing homes.
A new study by heath economist Adrienne Sabety indicates the residents of those bankrupt long-term care facilities are more likely to be hospitalized 30 days after having been admitted to the home, and are more likely to have been physically constrained and to have suffered from bedsores due to less experienced nurses and staff.
"New workers are less familiar with the patients and facility, which adversely impacts patient outcomes," said Sabety.
Sabety and her fellow researchers provide what they believe is the first empirical examination of healthcare provider bankruptcies and how these defaults impact patient care. They chose to concentrate on nursing homes because they are the most important part of senior living, which accounts for one-fourth of all healthcare bankruptcies in the United States.
"We focused on the $200 billion nursing home industry for its size, heavy reliance on public financing through Medicare and Medicaid—and the vulnerability of its patients," said Sabety, an assistant professor of health policy and faculty fellow at the Stanford Institute for Economic Policy Research (SIEPR.)
She added that nursing home regulators—the federal Centers for Medicare & Medicaid Services and corresponding state agencies—gather extensive data on the industry. This includes payroll records for every worker and health assessments for nearly every patient, providing them with a rich source of data. There are more than 15,000 skilled nursing facilities in the United States, employing some 1.4 million staff who serve more than 1.3 million residents each day.
"Residents are highly vulnerable, older, and suffer from physical ailments and cognitive impairments," said Sabety, a faculty research fellow at the National Bureau of Economic Research, which published the study. "Quality is shockingly low: one in-three nursing homes patients on Medicare experience harm or death as a result of low-quality care."
The other authors of the study are Samuel Antill and Jessica Bai of Harvard University and Ashvin Ghandi of UCLA.
Bankruptcies Exacerbate Nursing Home Harms:
The researchers noted that the total debt in the U.S. healthcare sector doubled between 2019 and 2024.
"As their debts grow, many healthcare firms struggle to keep up with their debt obligations," they wrote. "As a result, Moody's rates 80% of debt issued by healthcare firms as speculative grade."
Through several Freedom of Information Act (FOIA) requests, the researchers used three linked administrative datasets from the Centers for Medicare & Medicaid Services. They also used a randomized survey of current and former nursing home staff to confirm that bankruptcy filings increase voluntary departures of those staff, and that those replacement workers cause more harm to patients than their more seasoned predecessors. They found that if a patient receives care from a facility that recently filed for bankruptcy, their chances of being hospitalized increases by 1.44 percentage points. And these bankruptcies increase the use of physical restraints and bedsores by 77% and 14% of the mean, respectively.
Implications for Regulators and Policymakers:
The research team recommended that Medicare and other healthcare regulators reduce or eliminate subsidies for healthcare debt to make debt financing less appealing.
"Our findings suggest that regulators should closely monitor all healthcare provider bankruptcies, not only liquidations and closures," Sabey said. "Regulators also have several means to reduce the frequency of bankruptcies, like cutting existing debt subsidies and excluding interest payments from consideration in determining reimbursement rates."
In the extreme, she said, regulators could temporarily take control of bankrupt providers, like the FDIC does for failed banks.
Media Contact
Beth Duff-Brown, Stanford Health Policy, (650) 391-3135, [email protected], https://healthpolicy.fsi.stanford.edu/
SOURCE Stanford Health Policy
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