63-year-old hospital system defaults into Chapter 11 bankruptcy
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Fewer health care providers have faced financial distress so far this year than last year, as the industry has incurred a bankruptcy filing rate about 16% lower than 2024 levels in the first three quarters of the year, Gibbins Advisors reported in its Third Quarter 2025 Healthcare Bankruptcy Report.The fourth quarter could still bring a modest increase in activity consistent with historic trends, the report said, and recent Chapter 11 filings in November and December seem to support that theory.Economic challenges that many have dealt with this year include increased insurance liability premiums, a decline in reimbursement rates and ongoing Medicaid reductions, rising labor, product, and operating costs, and rising interest rates.Fewer health care providers file for bankruptcy in 2025At least 25 hospitals, health systems, and healthcare organizations have filed for bankruptcy protection this year so far, according to a review of data from Becker’s Hospital Review and TheStreet articles. Several health care companies that filed for bankruptcy in recent TheStreet articles were not listed in Becker’s data.Health care companies reported 57 filings for the year in 2024 and 79 cases in 2023. This year's number is also fewer than the annual filing average of 42 each year from 2019 through 2022, according to healthcare restructuring firm Gibbins Advisors.Financial difficulties, however, have prompted a regional hospital and clinics system this week to file for Chapter 11 protection to continue operating. Oroville Hospital files for Chapter 11 protection, seeking a sale of its assets. Health care provider Orohealth files for bankruptcy63-year-old hospital system Orohealth Corporation filed for Chapter 11 bankruptcy protection to seek a sale of its assets after defaulting on a $5 million payment on about $208 million owed on revenue bonds issued by the City of Oroville.The Oroville, Calif.-based debtor filed its petition in the U.S. Bankruptcy Court for the Eastern District of California on Dec. 8, two months after its bond trustee declared a default for non-payment on Oct. 1 and swept the healthcare provider's hospital tower account of $27.1 million. The money in the account was held in a fund earmarked for a hospital tower development and a debt service reserve fund, however the debtor was caught off guard by the sweep as it was negotiating to make a payment, according to a declaration by the hospital system's CEO Robert J. Wentz.Hospital system reaches settlement with state, fedsThe bankruptcy filing comes almost one year after affiliate Oroville Hospital reached a $10.25 million settlement with the California state and federal governments and two private plaintiffs to resolve false claims act cases and a corporate integrity agreement with the Office of the Inspector General of the U.S. Department of Health and Human Services, according to a hospital statement.The settlement resolves allegations dating back to 2014, concerning improper coding, unnecessary services, and financial relationships with physicians that allegedly violated the Anti-Kickback Statute and Stark Law.The debtor's largest unsecured creditors include California Department of Health Services, owed over $26.7 million; Modern-Sunot, owed over $16.8 million; Change Healthcare, owed over $15.4 million; U.S. Department of Justice, owed over $9.5 million; Cardinal Health, owed over $2.4 million; Phoenix Settlement Administration, owed $1.25 million; Medline Industries, owed over $1 million; and Ohpac Partners LLC, owed over $1 million.Orohealth's largest unsecured creditorsCalifornia Department of Health Services, owed over $26.7 millionModern-Sunot, owed over $16.8 millionChange Healthcare, owed over $15.4 millionU.S. Department of Justice, owed over $9.5 millionCardinal Health, owed over $2.4 millionPhoenix Settlement Administration, owed $1.25 millionMedline Industries, owed over $1 millionOhpac Partners LLC, owed over $1 millionThe non-profit healthcare system consists of 133 general acute care beds, a 24-hour-a-day active emergency room, 14 flex beds, 126 skilled nursing facility beds, and 33 specialty services at 31 clinics that include 10 rural health clinics, located in Oroville, Yuba City, and Chico, Calif.The system also provides laboratory services through Valley Clinical Laboratory with 23 outpatient laboratory draw stations in Oroville, Yuba City, Chico, Grass Valley, Orland, and Redding.More bankruptcy:64-year-old furniture store franchisee files Chapter 11 bankruptcyGolf legend’s iconic brand files for Chapter 11 bankruptcyMajor health services provider files for Chapter 11 bankruptcyThe debtor is developing a debtor-in-possession financing package with proposed DIP lender Rosemawr Management LLC, which has not yet been filed in the bankruptcy case.Orohealth is also seeking a stalking-horse bidder to purchase the company in a bankruptcy auction, according to the declaration.Orohealth's hospital and clinic amenities133 general acute care beds.24-hour-a-day active emergency room.14 flex beds.126 skilled nursing facility beds.33 specialty services at 31 clinics.Valley Clinical Laboratory with 23 outpatient laboratory draw stations.Related: Major national health care provider files Chapter 11 bankruptcy