Dive Temporary:
- Medical transportation agency ModivCare filed for chapter within the the southern district of Texas final week, following a monthslong effort to financially course appropriate within the face of mounting headwinds.
- Underneath the restructuring deal, ModivCare expects to obtain $100 million via debtor-in-possession financing and to slash its debt ranges by roughly 80%, or $1.1 billion. The settlement can even switch the vast majority of possession to a consortium of ModivCare’s buyers.
- MotivCare obtained a delisting discover from the Nasdaq following its chapter submitting. Buying and selling of the corporate’s widespread inventory will probably be paused starting Aug. 28, and ModivCare may very well be delisted shortly after, the corporate mentioned Friday.
Dive Perception:
Chapter filings have been elevated throughout the healthcare trade over the previous two years, in accordance with analysis by Gibbins Advisors. In 2023 and 2024, workforce shortages, excessive labor prices and strain from payers strained operators’ backside traces.
Though 2025 has introduced fewer filings, the restructuring agency warned this month that the reprieve may very well be brief lived, as operators brace for looming impacts of modifications to federal healthcare packages, together with cuts to Medicaid.
In first day courtroom filings, ModivCare’s chief restructuring officer mentioned trade headwinds had plagued the medical transportation agency.
ModivCare delivers in-home and on-site healthcare companies, distant affected person monitoring and transportation for non-emergency appointments. Its portfolio serves tens of millions yearly throughout 48 states and Washington, D.C., and employs over 23,600 staff, in accordance with courtroom paperwork.
Nevertheless, a big portion of ModivCare’s companies contain supporting low-income sufferers on Medicaid.
ModivCare mentioned it has already skilled monetary pressures associated to declining state reimbursements for Medicaid and predicts the monetary pressure will worsen subsequent yr as cuts from Republicans’ One Huge Stunning Invoice Act start.
The corporate mentioned that many, “if not all,” of its most vital clients are not less than contemplating price range cuts in response to the federal healthcare cuts, darkening ModivCare’s expectations for income in 2026.
In the meantime, ModivCare has additionally been impacted by broader challenges, together with labor value inflation, mounting competitors for purchasers and Medicare Benefit plan design modifications, which the corporate says have decreased protection for supplemental advantages, like its companies.
Final yr, ModivCare’s monetary place deteriorated. The operator reported a internet lack of $201.3 million for the fiscal yr, regardless of producing roughly $2.8 billion in service income. ModivCare mentioned it’s been weighed down by debt, together with $1.4 billion in funded debt.
ModivCare mentioned restructuring is its solely possibility. Its revolving credit score facility is absolutely drawn and ModivCare may have a $75 million cost due firstly of subsequent yr. Attorneys referred to as the present leverage ratio “unsustainable.”
ModivCare’s restructuring is supposed to streamline the portfolio and assist it concentrate on its key initiatives — together with know-how adoption. Companies are anticipated to proceed with out interruption in the course of the chapter proceedings.
“This recapitalization strengthens our stability sheet and permits Modivcare to speed up our funding in innovation by combining know-how and information with high-touch member engagement,” mentioned Heath Sampson, CEO and president of ModivCare, in a press release.
ModivCare will probably be guided via the chapter proceedings by its chief transformation officer, Chad Shandler, who has additionally suggested within the high-profile restructurings of Steward Well being Care, Prospect Medical Holdings and Beverly Neighborhood Hospital, in accordance with the primary day filings.
The corporate’s inventory value plummeted 70% following its chapter announcement.
