This article is part of the HHCN+ membership
From contract losses to financial declines in certain segments, Modivcare Inc. (NASDAQ: MODV) leaders have not avoided detailing the various headwinds that have negatively affected the company in recent years.
Then, in August, Modivcare revealed that it had filed for Chapter 11 bankruptcy.
Over the years, the healthcare sector has seen a surge in bankruptcy filings, but the impact on home care has not always been clear.
In 2023, I reported that the industry appears to be insulated from the rise in applications being made across the wider healthcare spectrum. There was no much filing on the care side of the home-based care side, but experts told me this didn't mean the industry was doing it completely unharmed.
Other home care companies, such as Intrepid USA and Charter Healthcare, have filed for Chapter 7 bankruptcy in recent years.
It's worth asking what happens when a home care company goes bankrupt after submitting Modivcare. This week I spoke with the experts about a typical course of such an application and understood what we could expect. We also looked into what this development means for the broader home care industry. Modivcare's bankruptcy does not necessarily refer to a wave of future filings, but it highlights the pressure cooker environment run by home-based care providers.
This week's exclusive member-only HHCN+ update will take a closer look at the bankruptcy records of the home-based care industry and offer important takeaways such as:
– Factors that lead to bankruptcy in home care
– What Modivcare's future holds now that the company is focusing on “comprehensive restructuring”
– When bankruptcy filings at companies such as Modivcare, Intrepid USA, Charter Healthcare and others portray continuing financial distress in the home care sector
In and out of bankruptcy filings
The main types of bankruptcy filings I saw from home care companies are chapters 7 and 11. It is important to remember the differences between these types of filing. The former is essentially liquidation, and the company will pay creditors and then close the business, Roger Strode, a partner at law firm Foley & Lardner LLP and healthcare M&A lawyer, said this week.
Meanwhile, similar to what Modivcare filed, Chapter 11 bankruptcy is considered an orderly restructuring of a company that is in financial distress.
“The companies are coming in and trying to restructure their businesses,” Strode said. “They try to negotiate with lenders, they try to negotiate with stockholders, and their creditors. They have to try to reorganize themselves. They may sell some assets. They may sell their business.
During this process, creditors may be prevented from pursuing their debtor for a while.
Strode said he saw Chapter 11 bankruptcy turn into what he called “liquidation.”
“I think there was a restructuring of the business back then,” he said. “They may sell some business lines, some territory, some facilities, but they come out of bankruptcy. And by the time you get through the whole process, the bankruptcy company has sold everything and they have settled everything.
In our conversation, Strode confirmed that healthcare bankruptcies have become more common in recent years. Several factors contribute to this.
Amid the Covid-19 pandemic, the home care industry has seen cash flow inflows through payroll protection programs (PPPs). The sector benefited from financial relief through the CARES Act. As cash flows from these relief efforts drained, experts began to see an increase in bankruptcy filings.
On the home care side, these businesses often rely heavily on Medicare and Medicaid reimbursements. A significant proportion of instability was observed in these reimbursement environments.
Additionally, home care providers experience labor shortages, which challenge them to compete for top talent and costly.
In my view, all of these ongoing issues have been creating a pressure cooker for home-based care.
The future of Modivcare and more
When Modivcare announced it had filed for Chapter 11 bankruptcy last month, CEO Heath Sampson expressed confidence in the company's ability to make a comeback, highlighting its own model of care delivery.
“This recapitalization will strengthen our balance sheet and help Modivcare accelerate our investment in innovation by combining technology, data and high-touch member engagement,” Sampson said in a statement to the media. “As a connector to care for, our seamlessly connected platform improves access, quality and costs for payers, providers and facilities, ensuring we lead the future of coordinated care.”
The company's goal is to cut its debt of $1.1 billion from its balance sheet. For now, Modivcare does not share plans to shut down its service line.
In the first quarter, service revenues decreased due to a decrease in the volume of the personal care segment. In the past, Modivcare's contract losses have often overturned its profits.
Still, this does not mean there was no profit. Last year, Modivcare received significant interest rate increases in some states operated by the company.
Through my conversation with Strode, I learned that the survival rate of a healthcare company after filing for bankruptcy depends on several factors: the underlying business of the organization, how much actual brand equity the company has, and how deeply debts the company is.
“There's not much chance of getting out of bankruptcy if you have a lender who says, 'We've run out of strings with you, so we have to be paid,'” Strode said.
What we can say for now is that Modivcare's future will be strongly dependent on the agreements with lenders and the factors mentioned above. The company has a restructuring assistance agreement (RSA) with more than 90% of first lien lenders and more than 70% of second lien lenders.
Modivcare has caught up with most of the headlines these days, but companies like Intrepid USA and Charter Healthcare have also recently filed for bankruptcy.
It is worth asking if this is the beginning of an unfortunate trend in home-based care spaces.
The latest report from Gibbins Advisors found a “surprising” dip in the healthcare bankruptcy filing for the second quarter of 2025. The filing was 16% below the 2024 level. Overall, senior care accounted for 23.9% of healthcare bankruptcies.
I don't think the industry will see a big influx in home care bankruptcy anytime soon, but I believe we can expect to see some companies that can't handle the pressure cooker environment mentioned above. For some of these companies, this may mean placing an organization in the market to acquire or limit access to care.
For others, this unfortunately means bankruptcy.
For home care companies that ultimately submit to Chapter 11, some are in a better position to survive than others.
“Home health providers suffering from legacy debt, such as litigation and regulatory exposure, are financially sound and may find a viable path to buying and reorganizing time in Chapter 11.” “Cases like this are likely to involve large organizations with size and resources to support reorganization efforts.”
