Clinic Bankruptcies Surge 1.8x Year-on

News Highlights

In 2021, 33 medical institutions went bankrupt, with a particularly sharp 1.8-fold increase in bankruptcies of “clinics.” This is thought to be influenced by the prolonged COVID-19 pandemic, rising prices, and increasing labor costs. The news highlights suggest business succession issues such as early consultation with experts, negotiation for the release of personal guarantees, and consideration for regional medical care.

M&A Medical Editorial Department’s Perspective

The figure of a 1.8-fold year-on-year increase in clinic bankruptcies in 2021 highlights the severe management challenges faced by medical institutions, especially small and medium-sized clinics. As the effects of pandemic subsidies wane and rising prices and labor costs put pressure on operations, clinics that have been barely surviving are finally reaching their limits. This situation suggests not only the classic problem of “lack of successors” but also that a decline in overall financial strength is raising the hurdles for business succession. For example, if the current ratio deteriorates, it can become a problem during due diligence by a potential acquirer in an M&A, not only leading to unfavorable price negotiations but also making succession itself difficult. Considering “business succession through M&A” in a sound financial state at an early stage is key to achieving a succession with better terms, such as the release of the clinic director’s personal guarantees and the maintenance of employment for patients and staff.

Points Indicated by This News

• The 1.8-fold increase in clinic bankruptcies year-on-year is a significant sign of declining financial strength post-COVID-19.
• Rising prices and labor costs may be pushing the management of clinics that have been enduring to their limits.
• Deterioration of indicators like the current ratio directly impacts the price and succession terms in M&A negotiations.
• Negotiating the release of personal guarantees requires consideration of M&A at a financially sound stage to proceed favorably.

Practical Questions Arising from This News

• Will my clinic also go bankrupt if things continue like this?
• What specific management indicators, when they deteriorate, signal a dangerous time to consider M&A?
• What specific negotiations are necessary to proceed with M&A while releasing personal guarantees?

If You Feel “Should I Consult Too?”

If your clinic cannot expect improved revenue from recent medical fee revisions, continues to face increased costs due to rising prices and labor expenses, or feels anxious about future management, we recommend consulting with an expert. By objectively analyzing your financial situation early on and exploring the possibility of business succession through M&A, you may open a path to avoid closure and carry forward your contributions to patients, staff, and regional medical care into the future.

M&A Medical (CentralMedience Inc.) supports the business succession of medical corporations, hospitals, and clinics as a certified M&A support institution by the Small and Medium Enterprise Agency, with a complete success fee basis. We handle consultations with strict confidentiality. Free consultations here