Distress in Healthcare Sector Remains High

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For Q4 2016, the Polsinelli|TrBK Healthcare Services Distress Research Index remained high, at 150, following record highs in the previous three quarters. Although the index declined by a little more than 13 points over the previous quarter, it was nearly 30 points higher than a year ago. The Healthcare Index remains much higher than both the Chapter 11 Index, representing the broader U.S. economy, and the Real Estate Index.

The Chapter 11 Distress Research Index was 48.01 for Q4 2016, an increase of less than a point from the previous quarter and nearly four points from a year ago. Although the Chapter 11 Distress Index has declined significantly from the 2010 benchmark, it has increased in five of the last six quarters and appears to indicate increasing distress in the U.S. economy. The index hit its low of 37.81 in Q2 2015 and has increased by almost 27 percent since that time.

The Real Estate Distress Research Index appears to be relatively flat. The index has remained in a three-point range over the last five quarters, but the percentage of real estate filings to total filings has remained relatively stable when the total number of filings in the Chapter 11 Index has increased, suggesting real estate distress is stable, relative to overall distress.

The Polsinelli|TrBK Distress Indices are based on Chapter 11 bankruptcy filing data collected and provided by the TrollerBK.com bankruptcy service. Polsinelli is a law firm with 20 offices throughout the United States. The Chapter 11 Distress Research Index serves as the primary index and is based on filings by entities with assets scheduled at greater than $1 million as represented on initial Chapter 11 petitions. Individuals and involuntary filings are excluded from the calculation. 

The indices are likely to be contrarian indicators of economic performance, so that a low index value is likely to occur in a strong economy, and a higher index value is likely to occur when financial distress is escalating. They are intended to reflect the level of economic distress in the U.S. economy by tracking the increase or decrease in comparative Chapter 11 filings for prior quarters and years, based on a rolling four-quarter average. Calculated from 2010 through the present, they are benchmarked based on filing numbers in 2010 using a rolling four-quarter average. The latest quarterly report is available at distressindex.com.

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