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Actuaries to the Rescue: Recovery from Bankruptcy

Bankruptcies are on the rise for healthcare companies backed by private equity and venture capital[1]. A recent study discovered that PE-backed bankruptcies in 2023 were more than double compared to prior years. Combined, PE and VC comprised approximately 35% of all healthcare bankruptcies. Private equity’s foray into healthcare has unfolded over many years, but the loose monetary policy and low interest rates spurned by the pandemic in 2020 introduced a flood of investment into healthcare. Although PE activity has come down since the peak in 2021, transaction levels remain elevated relative to pre-pandemic levels. Despite economic difficulties over the past year, it seems that PE remains bullish on healthcare as an investment thesis. For existing healthcare investment platforms, executives would benefit from integrating actuarial science with the practice of medicine to stabilize and improve cash flow and profitability.

PE Activity in Healthcare Services[2]

For some in the healthcare industry, the bankruptcies of 2023 are unsurprising based on the preceding macroeconomic events and trends within healthcare[3]. As the “engineers” of healthcare economics, actuaries offer many skillsets that can help investors navigate out of this financial turbulence. A few of these include forecasting utilization and expenses, reserving, reimbursement strategy, and benchmarking. All of these can promote cash flow stability and improve profitability for healthcare investments.

Bankruptcies of PE-owned Healthcare Companies

 Forecasting Utilization and Expenses

Actuaries can help stabilize cash flow by providing insights into future financial obligations and revenue streams for health systems and providers. Through sophisticated predictive modeling techniques, actuaries analyze historical data, demographic trends, and healthcare utilization patterns to anticipate future healthcare costs and patient demand. One of the most insightful types of report is an actuarial cost model, which shows the unit costs, utilization, and total costs for various types of service and sites of care. This enables organizations to allocate resources effectively and budget accordingly, thus minimizing cash flow volatility. Additionally, by forecasting patient volumes and service utilization, actuaries help health systems and providers optimize staffing levels, capacity planning, and inventory management, ensuring that they can meet patient needs and improve quality metrics. Overall, the strategic use of forecasting by actuaries allows healthcare organizations to proactively manage cash flow, mitigate financial risks, and sustain long-term financial health.


Actuaries utilize reserving techniques to establish provisions for future liabilities and contingencies, which stabilize cash flow for healthcare providers. Through rigorous analysis of historical claims data, actuaries can estimate the expected costs of outstanding claims or financial settlements from at-risk contracts. By setting aside reserves based on these assessments, healthcare providers can ensure that they have sufficient funds to cover future financial obligations, thereby smoothing cash flow fluctuations and minimizing the impact of unexpected expenses on liquidity. It also minimizes surprise expenses and allows healthcare companies to budget appropriately throughout the year. Lastly, reserving techniques enable providers to demonstrate financial stability to stakeholders such as investors, creditors, and regulatory agencies, enhancing trust and confidence in the organization’s ability to manage financial risks effectively.

Reimbursement Strategy

Actuaries play a pivotal role in designing and negotiating reimbursement contracts between payers and providers by employing their analytical expertise to ensure fair and sustainable payment arrangements. By conducting comprehensive analyses of healthcare costs, utilization patterns, and market dynamics, actuaries can accurately assess the financial implications of various reimbursement models. They leverage this insight to develop innovative payment structures that incentivize quality care delivery while aligning with the financial interests of both payers and providers. Additionally, actuaries facilitate negotiations by providing data-driven recommendations, conducting scenario analyses, and evaluating the potential impact of different contract terms on cash flow, profitability, and patient outcomes. Through their strategic guidance and quantitative analysis, actuaries help foster collaborative relationships between payers and providers, ultimately leading to more equitable and mutually beneficial reimbursement agreements.


Actuaries harness claims data to craft optimal utilization benchmarks for diverse healthcare services. By scrutinizing patterns within claims data, such as frequency of procedures, patient demographics, and regional variations, actuaries identify trends and establish benchmarks that reflect the appropriate utilization levels for a specific healthcare company. These benchmarks serve as valuable reference points for providers, enabling them to gauge their performance, identify areas for improvement, and optimize resource expenditure. Actuaries continually refine these benchmarks based on evolving healthcare practices, regulatory changes, and advancements in medical technology, thereby promoting evidence-based decision-making and enhancing the quality and efficiency of healthcare delivery.


Unfortunately, the stubbornness of high inflation and subsequent hesitancy by the Federal Reserve to lower interest rates means that financial struggles are likely to persist. Actuaries are instrumental in safeguarding the financial health of healthcare organizations by offering comprehensive risk management solutions, strategic financial planning, and regulatory compliance expertise. As evidenced by the increase in bankruptcies among private equity-backed healthcare companies, effective risk management is essential for sustaining profitability and avoiding financial distress. By harnessing the analytical capabilities of actuaries, healthcare organizations can optimize financial performance, enhance operational resilience, and achieve long-term sustainability in a dynamic and challenging healthcare environment.


[1] https://www.fiercehealthcare.com/finance/bankruptcies-among-pe-backed-healthcare-companies-spiked-2023-report-finds

[2] VMG Healthcare M&A Report 2024

[3] https://axenehp.com/paying-piper-2020-make-2023-even-tougher-value-based-care-providers/

About the Author

Ryan BiltonConsulting Actuary
Ryan Bilton, FSA, CERA, MAAA is a Consulting Actuary with Axene Health Partners, LLC.

Any views or opinions presented in this article are solely those of the author and do not necessarily represent those of the company. AHP accepts no liability for the content of this article, or for the consequences of any actions taken on the basis of the information provided unless that information is subsequently confirmed in writing.


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