Hospitals are under pressure — from labor costs to ransomware, margin squeezes to misgovernance. This post explores the growing wave of financial distress among US healthcare providers in recent years. It unpacks what went wrong at several providers and draws from my own experience in the $7 billion restructuring of NMC Health. I share practical guidance for finance leaders and reveal how financial governance failures can quickly erode investor value.
Labor inflation, payer pressure, digital disruption, and regulatory scrutiny have exposed structural vulnerabilities in the US healthcare system. In this environment, the role of finance professionals at healthcare companies becomes pivotal — not just in crisis containment but in institutional renewal. Financial missteps can ripple into service closures, job losses, and deteriorated patient outcomes. Done correctly, however, strategic financial leadership can stabilize operations, preserve access to care, and rebuild long-term value for stakeholders. These outcomes also carry direct implications for investors, as governance failures in healthcare can trigger portfolio losses, credit downgrades, and forced asset sales across institutional holdings.
Restructuring healthcare systems requires a fundamentally different approach than traditional corporate turnarounds. Finance leaders must strike a unique balance: sustaining clinical service delivery, maintaining workforce and community trust, and complying with strict regulatory and funding requirements. A failure to do so not only erodes enterprise value but can directly compromise patient health outcomes. This dual mission, clinical and financial, demands a level of urgency, transparency, and coordination rarely seen in other industries. The reputational and societal stakes are simply higher.
Lessons from the Field: Four Case Studies
Steward Health Care (2023–2024)
Steward Health Care grew rapidly to become the largest private for-profit hospital system in the United States, leveraging sale-leaseback transactions to unlock capital. Much of the freed-up cash, however, was redirected into expansion and operational shortfalls rather than infrastructure or care delivery. Without centralized treasury oversight, lease obligations ballooned, and financial control weakened. By 2024, burdened by more than $9 billion in liabilities and mounting vendor disputes, Steward filed for bankruptcy. [4]
A more disciplined approach to capital investment like applying a minimum 12% ROI threshold might have filtered out underperforming expansion plans. Centralizing cash flow visibility could have flagged liquidity risks earlier, while stress testing for REIT exposure would have revealed unsustainable lease commitments. These tools are standard in many capital-intensive sectors but were underutilized here.
Pipeline Health (2022–2023)
Pipeline Health operated safety-net hospitals in underserved urban areas, heavily reliant on post-COVID funding. As elective volumes dropped and labor costs spiked, its financial model became unsustainable. A lack of rolling forecasts and flexible labor cost structures prevented the organization from adapting to the new reality. Eventually, delays in engaging turnaround advisors and the absence of an escalation protocol led to a Chapter 11 filing. [5]
In Pipeline’s case, a centralized liquidity control tower with 13-week rolling forecasts could have identified cash shortfalls weeks in advance, buying time for vendor renegotiations. Had Pipeline implemented a dynamic labor model tied to volume shifts, it could have better aligned staffing with demand. Even a simple 10-day payment lag might have brought executive attention before the crisis deepened.
Prospect Medical Holdings
Prospect Medical was exposed by a US Senate report for prioritizing shareholder dividends while underinvesting in hospital infrastructure. Over several years, related-party transactions and opaque financial governance eroded internal trust and attracted regulatory scrutiny. In particular, behavioral health units saw declining care quality as capital projects were repeatedly deferred. [6]
Strategic finance could have played a watchdog role. Requiring a capex-to-revenue ratio of 5% as a dividend precondition would have ensured reinvestment. A three-year rolling capital plan vetted by the board could have aligned strategic investments with operational needs. Transparent cash and reinvestment dashboards shared across departments might have empowered internal stakeholders to raise flags earlier.
UnitedHealth Group (2024–2025)
In a striking dual crisis, UnitedHealth Group first saw its Change Healthcare unit paralyzed by a ransomware attack, freezing pharmacy transactions and claims processing. Shortly after, the US Department of Justice opened a probe into Medicare Advantage fraud, alleging manipulation of patient risk scores for financial gain. These issues spotlighted the fragile operational core of even the most sophisticated payer-provider. [7]
More proactive and risk-aware financial oversight could have helped identify vulnerabilities earlier and reduced the overall impact. Escrow reserves or redundant payment platforms could have protected provider payments during outages. Periodic audits of revenue risk scoring models might have flagged compliance gaps. Investment in cyber redundancy, while not a financial control per se, is increasingly a CFO mandate to mitigate operational risk.
A Gameplan for Financial Leaders
Here is how finance leaders can build muscle across liquidity, capital structure, and governance:
- Liquidity: Prioritize disbursement and daily dashboards and use 13-week rolling forecasts.
- Capital Structure: Incorporate sale-leaseback sensitivity analysis to determine the correct mix of fixed vs. floating debt.
- Governance: Implement real-time key performance indicators (KPIs) tied to decision rights, board-level crisis reporting, and whistleblower frameworks.
These capabilities, when developed early and exercised often, become lifelines during distress.
The Finance Toolkit in Action
Here is how specific interventions could have changed the outcomes of healthcare companies in the case studies discussed earlier:
- In Steward’s case, real-time cash control could have exposed vendor bottlenecks before litigation risk materialized.
- At Pipeline, an early-warning signal tied to payroll risk might have launched executive action six weeks earlier.
- At Prospect, a quarterly dashboard could have exposed behavioral health underfunding trends, enabling board pushback.
- For UnitedHealth, regular audit of risk scoring logic could have ensured regulatory alignment before the DOJ’s intervention.
When integrated into planning and operations, these tools empower finance teams to function as partners in care continuity.
A Playbook for Financial Restructuring
The following playbook summarizes seven financial levers that consistently surfaced across the case studies. These are not theoretical tools — they’re practical interventions that distinguish collapse from recovery when deployed with urgency and precision. Finance leaders can use this as a diagnostic checklist and guide for strategic action.
The Cost of Inaction: Investor Impact
These financial levers are not only operational lifelines; they’re also essential safeguards for those who depend on institutional capital. For institutional investors with healthcare exposure, financial misgovernance can erode value swiftly. Downgrades triggered by margin compression or unanticipated liabilities often lead to forced sales, widening spreads, and diminished long-term returns. For private equity and long-only equity funds, robust financial oversight in healthcare is more than best practice, it’s a fiduciary safeguard.
Key Takeaway
Financial distress in healthcare is not just a balance sheet event, it is a systemic threat with wide-reaching consequences for patients, employees, and investors alike. In this environment, finance leaders are not back-office operators, they are strategic stewards of trust, continuity, and capital. Finance leaders have become critical to the success of cross-border healthcare deals and with the right tools, the right timing, and the right mindset, they can also turn distress into discipline, and discipline into long-term institutional resilience. In healthcare, financial leadership is a public good.
References
- PwC – Healthcare’s Big Squeeze and the way out: https://www.pwc.com/us/en/industries/health-industries/health-research-institute/next-in-health-podcast/2024-outlook-healthcares-big-squeeze-and-the-way-out.html
- KPMG – Resilience in Healthcare Finance: https://assets.kpmg.com/content/dam/kpmg/ie/pdf/2024/02/ie-healthcare-horizons-cge-health-2.pdf
- Fitch Ratings – Not-for-Profit Hospital Outlook: https://www.fitchratings.com/research/us-public-finance/us-not-for-profit-hospitals-health-systems-outlook-2025-09-12-2024#:~:text=Fitch%20Ratings%20Sector%20Outlook%20for,margin%20compression%20in%202022%2D2023
- Steward Bankruptcy – PE Stakeholder: https://pestakeholder.org/news/steward-health-cares-bankruptcy-one-year-later/
- Pipeline Bankruptcy – Chief Healthcare Executive: https://www.chiefhealthcareexecutive.com/view/pipeline-health-files-for-bankruptcy-protection-aims-to-reorganize
- Prospect Medical Investigation – CT Mirror: https://ctmirror.org/2025/01/14/us-senate-investigation-prospect-medical/
- UnitedHealth DOJ Probe – WSJ: https://www.wsj.com/us-news/unitedhealth-medicare-fraud-investigation-df80667f
- Change Healthcare Cyberattack – Fierce Healthcare: https://www.fiercehealthcare.com/payers/unitedhealth-estimates-190m-people-impacted-change-healthcare-cyberattack”
