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From contract losses to financial decline in certain segments, the leaders at Modivcare Inc. (Nasdaq: MODV) haven’t shied away from detailing the various headwinds negatively impacting the company in recent years.
Then, in August, Modivcare revealed that it filed for Chapter 11 bankruptcy.
Over the years, the health care sector has seen a spike in bankruptcy filings, but the effect on home-based care hasn’t always been obvious..
In 2023, I reported that the industry was seemingly insulated from the increase in filings taking place across broader health care. While there weren’t many filings on the home-based care side, an expert told me that this didn’t mean the industry had gone completely unscathed.
Other home-based care companies, such as Intrepid USA and Charter Healthcare, filed for Chapter 7 bankruptcy in recent years.
In the wake of Modivcare’s filing, it’s worth asking what happens when a home-based care company goes bankrupt. This week, I spoke with experts about the typical course of such filings to get a sense of what we can expect. I also examined what this development could mean for the broader at-home care industry. While Modivcare’s bankruptcy doesn’t necessarily point to a wave of future filings, it does underscore the pressure-cooker environment in which home-based care providers are operating.
In this week’s exclusive members-only HHCN+ Update, I take a closer look at the home-based care industry’s record of bankruptcies and offer key takeaways, including:
— The factors that lead to home-based care bankruptcies
— What the future holds for Modivcare now that the company is focused on its “comprehensive restructuring”
— If the bankruptcy filings at companies like Modivcare, Intrepid USA and Charter Healthcare are a harbinger for continued financial distress in the home-based care sector
The ins and outs of bankruptcy filings
The main types of bankruptcy filings I’ve seen from home-based care companies are Chapter 7 and 11. It’s important to keep in mind the differences between these types of filings. The former is essentially a liquidation, in which companies pay creditors and then close the business, Roger Strode, a partner and health care M&A lawyer at law firm Foley & Lardner LLP, told me this week.
Meanwhile, Chapter 11 bankruptcies, like the one filed by Modivcare, are considered an orderly reorganization of a company in financial distress.
“Companies go in and they try to reorganize their business,” Strode said. “They try to negotiate with lenders, negotiate with equity holders, negotiate with any creditors. They have to try to get themselves reorganized. They may sell some assets. They may sell businesses. It’s for a [company] that feels like they have a decent business, but that business needs to be reorganized. ‘I need the bankruptcy laws to protect me against creditors who might come in and take everything from me.’”
During this process, creditors could be prevented from pursuing the debtor for a period of time.
Strode told me that he’s seen Chapter 11 bankruptcy turn into what some lawyers call “liquidating elevens.”
“We think, at the time, there’s going to be a reorganization of the business,” he said. “They may sell some lines of business, they may sell some territories, they may sell some facilities, etc. But they’re going to come out of the bankruptcy, and then by the time you get through the whole process, the bankrupt company has sold everything, and they’ve just liquidated everything. They turned everything they have into cash in an attempt to pay off their creditors.”
During our conversation, Strode confirmed that health care bankruptcies have become more common in recent years. Several factors contribute to this.
Amid the COVID-19 pandemic, the home-based care industry saw an influx of cash flow via the Paycheck Protection Program (PPP). The sector also benefited from financial relief through the CARES Act. When the cash flow from these relief efforts dried up, experts began to see an increase in bankruptcy filings.
On the home-based care side, these businesses often rely heavily on Medicare and Medicaid reimbursement. These reimbursement environments have seen their fair share of instability.
Home-based care providers are also experiencing labor scarcity, which makes competing for top talent challenging and costly.
In my view, all of these ongoing pain points have created a pressure cooker for home-based care.
The future of Modivcare and more
When Modivcare announced that it had filed for Chapter 11 bankruptcy last month, CEO Heath Sampson expressed his confidence in the company’s ability to make a comeback, while emphasizing its unique care delivery model.
“This recapitalization strengthens our balance sheet and allows Modivcare to accelerate our investment in innovation by combining technology and data with high-touch member engagement,” Sampson said in a statement to the press. “As the connector to care, our seamlessly connected platform improves access, quality and cost for payors, providers and facilities, while positioning us to lead the future of coordinated care.”
The company’s goal is to reduce $1.1 billion in debt from its balance sheet. For now, Modivcare hasn’t shared plans to shut down any service lines.
During Q1, the company experienced a decrease in service revenue due to lower personal care segment volumes. In the past, Modivcare’s contract losses have often eclipsed its gains.
Still, this doesn’t mean there haven’t been gains. Last year, Modivcare received notable rate increases in some of the states in which the company operates.
I learned through my conversations with Strode that any health care company’s survival rate after filing for bankruptcy depends on a few factors: the organization’s underlying business, how much real brand equity the company has and how deeply in debt the company is.
“If you’ve got lenders that are basically saying, ‘We’ve run out our string with you people, we need to be paid,’ your chances of getting out of the bankruptcy aren’t great,” Strode said.
All I can say for now is that Modivcare’s future will strongly depend on its agreement with its lenders, as well as the factors I’ve outlined above. The company has a Restructuring Support Agreement (RSA) with more than 90% of first lien lenders and over 70% of second lien lenders.
While Modivcare has grabbed most of the recent headlines, companies like Intrepid USA and Charter Healthcare have also recently filed for bankruptcy.
It’s worth asking if this is the start of an unfortunate trend in the home-based care space.
The latest Gibbins Advisors report found a “surprising” dip in health care bankruptcy filings in Q2 2025. Filings were 16% below 2024 levels. Overall, senior care represented 23.9% of health care bankruptcies.
While I don’t believe the industry will soon see a major influx in home-based care bankruptcies, I do believe we can expect to see some companies that are unable to handle the pressure cooker environment I described above. For some of these companies, this might mean placing the organization on the market for acquisition or limiting access to care.
For others, this will unfortunately mean bankruptcy.
For home-based care companies that ultimately file for Chapter 11, some are better positioned to survive than others.
“Home health providers burdened by legacy liabilities – such as litigation or regulatory exposure – but otherwise financially sound, may still find Chapter 11 a viable path to buy time and reorganize,” Ronald M. Winters, principal at Gibbins Advisors LLC, told me in an email. “Such cases are more likely to involve larger organizations with scale and resources to support a restructuring effort.”
