Restructuring in healthcare is no longer niche but a strategic reality. As market pressures intensify, clients need to understand the dynamics to mitigate risk and anticipate change. In this latest blog, we explore legal strategies for staying ahead of disruption.

Specialists are noticing key market trends with specific impacts for legal teams in the healthcare sector. In this blog post we outline a range of strategies for navigating the complexities of the legal terrain.

State Intervention: Stability or Uncertainty?

Governments have been known to step in to support healthcare providers deemed essential to public welfare. This can unlock restructuring pathways, as seen in the Middle East example with the UAE’s rapid development of a restructuring regime to support NMC Healthcare’s $7.6bn turnaround.

The care home operator Orpea (now Emeis) was restructured in France through a combination of assistance by a sovereign fund overseen by the French parliament, conversion of debt to equity and new money from bank lenders, though the restructuring faced pushback from minority creditors.

These interventions reflect a challenge for stakeholders: healthcare providers may be perceived by stakeholders or end users as “too key to fail,” but that does not mean investors or creditors are shielded from losses.

Legal teams should be alert to how political priorities and fiscal constraints may reshape capital structures, even if this means diverging from original deal terms.

Regulatory Complexity: A Restructuring Risk Multiplier

Healthcare is one of the most regulated sectors globally. In distressed scenarios, compliance obligations do not pause. Pharmaceutical products often require re-registration if manufacturing or supply chains change, and any delays are concerning due to potential disruption to patient access and revenue streams.

Further, requirements for regulatory inspections and enforcement actions can complicate M&A or restructuring timelines.

Restructuring plans must account for ongoing regulatory obligations, and compliance teams must be integrated into strategic decision-making early.

PFI Structures: Legacy Contracts Under Pressure

In the UK, many hospitals operate under Private Finance Initiative (PFI) contracts. As these contracts near their end-of-term handbacks to the public sector, defects and performance issues are coming under scrutiny. The Consort Healthcare (Tameside) plc restructuring plan, proposed by the company following an adjudication resulted in an award against it, highlights the stress these structures are under. The company settled with the Trust avoiding the need to continue with its restructuring plan.

Legal teams should review legacy PFI arrangements and prepare for active contract management and renegotiation. Lenders and sponsors may face increased pressure to resolve issues ahead of handback deadlines.

Supply Chain Fragility: Legal Exposure Beyond Borders

Healthcare supply chains are global and interdependent, especially in the case of pharmaceuticals and medical devices. Disruption in one link can cascade across the chain. A recent example involved the insolvency of Babylon Health, where a critical supplier had to renegotiate terms with the acquiring entity.

Mapping supply chain dependencies and ensuring contracts include robust risk mitigation clauses are key tools for legal teams managing issues of this kind. In distressed scenarios, early engagement with suppliers and purchasers can prevent operational breakdowns.

Liquidity Constraints: A Silent Threat

Liquidity challenges are often underestimated. Long payment cycles, delayed reimbursements, and slow tender processes can create acute cash flow issues. An increasing number of a biotech firms have entered into US Chapter 11 bankruptcy proceedings due to liquidity stress, requiring complex negotiations with finance providers.

Legal teams will need to work closely with financial advisers to monitor liquidity risks closely and ensure financing arrangements are resilient. This includes stress-testing payment terms and exploring alternative funding structures.

Data and Tech: The Next Frontier of Restructuring Risk

The bankruptcy of 23andMe in March 2025 after a major data breach raised alarms about the handling of sensitive patient data. The sale of its genetic database to a non-profit has prompted calls for tighter regulation.

For legal teams, this is a wake-up call. As wellness-tech and digital health startups proliferate, data governance and cybersecurity must be central to legal strategy. Bankruptcy or M&A scenarios involving sensitive data will require heightened scrutiny and possibly new regulatory frameworks.

Conclusion

Healthcare restructuring is evolving rapidly, and legal teams must evolve with it. The sector’s complexity demands a proactive, cross-functional approach. Legal teams should stay close to developments in policy, regulation, and market behavior—and be ready to act when the next challenge emerges.

We are known for providing strategic guidance to stakeholders at every stage of the restructuring and insolvency process. Our deep sector knowledge, cutting edge restructuring and cross-border capabilities ensure that clients receive innovative, pragmatic solutions tailored to the unique demands of the healthcare industry.