Genesis bankruptcy exposes PE liability gap

Genesis Healthcare bankruptcy shows why joint liability is needed to hold private equity accountable

Private equity increasingly uses bankruptcy courts to walk away from harm—not just Genesis

The Genesis Healthcare bankruptcy has again prompted the Private Equity Stakeholder Project (PESP) to call on policymakers to adopt joint and several liability that extends to the corporate owners of healthcare facilities and providers. The high-profile bankruptcy is not simply a business failure; it highlights the use of the Chapter 11 process to erase liabilities from personal injury and wrongful death claims while preserving control for private equity investors. By allowing ownership to remain intact while shedding legal responsibility, the current system rewards financial maneuvering over care and could leave families with little recourse.

Genesis, once the largest skilled nursing operator in the United States, entered bankruptcy after more than a decade of private equity–driven financial engineering. Through leveraged buyouts, debt layering, and real estate monetization, investors extracted value while the company’s facilities faced persistent care failures and regulatory violations. Now, the company is using the bankruptcy court to sharply reduce or discharge liabilities, including litigation claims—up to  $1.57 billion—while an insider bid linked to its existing private equity ownership allows those same investors to keep control of the business.

“Bankruptcy has become a pressure-release valve for private equity,” said Michael Fenne, Senior Policy Coordinator at PESP. “Firms take out value up front and leave patients, workers, and taxpayers to absorb the later fallout. Genesis isn’t an exception. It’s the predictable outcome of a private equity playbook.”

This model has appeared repeatedly across healthcare. YesCare/Corizon’s “Texas Two-Step” split liabilities into a separate entity that was then sent into bankruptcy, pausing lawsuits from families alleging medical neglect, wrongful death, and constitutional violations. In nursing homes, LaVie/Consulate and other private equity-backed chains have entered bankruptcy only after investors had already extracted value from real estate or management fees, leaving residents and regulators to confront deteriorating conditions.

Genesis is simply the latest reminder that the current system rewards financial maneuvering, not care. The company joins a string of high-profile private equity-backed healthcare bankruptcies. Last year alone, seven of the eight largest healthcare bankruptcies were private equity-backed. And as Genesis shows, when the legal entity holding liability collapses, the financial sponsors can remain untouched.

PESP calls on policymakers to close this escape hatch. Joint and several liability should be extended to the corporate owners and investors of healthcare providers, so that when a facility is sued for statutory violations, a right of action automatically exists against the private equity firms and other financial actors who shaped the business model and benefitted from it. Without this reform, the cycle of extraction, collapse, and unaccountable bankruptcy could continue.