What if the next device you trust with a patient’s life turns out to be defective and the manufacturer avoids legal liability through a bankruptcy provision? That’s not a hypothetical; it’s exactly what happened when a Florida-based company called Exactech, a major orthopedic implant manufacturer – a private firm –  filed for bankruptcy just as lawsuits over its recalled devices were set to go to trial.

This isn’t just a story about one company. It’s a growing pattern in private equity–backed healthcare, where financial tactics like bankruptcy can override patient safety, and practice leaders like you are left managing the consequences.

When Implants Fail: The Case of Gene Davis

Gene Davis, a firefighter from Connecticut, underwent his first knee replacement in 2019. The implant, manufactured by Florida-based Exactech, was supposed to restore his mobility. Instead, he experienced repeated pain, swelling, infection, and three surgeries that left him permanently disabled. In 2022, Davis received a recall notice from his surgeon, confirming what had gone wrong—Exactech implants had defective packaging that exposed components to oxidation, causing them to fragment.

His story is not unique. By 2024, Exactech had recalled over 650,000 orthopedic implants, and more than 2,500 personal injury lawsuits had been filed against the company.

The Role of Private Equity in Healthcare

In 2018, Exactech was acquired by TPG Capital, one of the world’s largest private equity firms, managing $251 billion in assets. Court documents show that TPG installed its own advisors onto Exactech’s board and appointed one of them, Jeffrey Binder, as CEO.

Following signs of product failure as early as 2005, and formal warnings from surgeons in 2019, questions arose about whether TPG had knowledge of these risks. By 2021, Exactech initiated a product recall, but the damage was already done. Court filings from the Unsecured Creditors Committee (UCC) allege the firm prioritized investor returns at the expense of patient safety

Strategic Bankruptcy: An Accountability Loophole

In October 2024, just before trials were scheduled, Exactech filed for Chapter 11 bankruptcy. Under U.S. bankruptcy law, this move halted ongoing lawsuits. Legal experts say this is part of a growing trend:

Healthcare PE-Backed Bankruptcies

Source: S&P Global and Federal Court Records (via The Guardian)

Such bankruptcies freeze litigation, limit liability, and reduce potential compensation for affected patients – limiting the legal options available to affected patients.

Why This Matters to Healthcare Leaders

As a healthcare provider or administrator, you’re responsible for selecting trusted devices and safeguarding your practice against legal exposure. This case signals several critical risks:

1. Product Reliability: Devices from firms focused on cost-cutting may carry unreported risks.
2. Delayed Accountability: Legal safeguards can be bypassed when firms use bankruptcy strategically.
3. Reputational Risk: Association with failed products can damage patient trust.

Regulatory and Legal Challenges

The FDA recall notice described Exactech implants as having an “increased risk of revision surgeries and bone loss.” Annual reports from the Australian Orthopaedic Association National Joint Replacement Registry between 2011-2018 noted that some Exactech models had revision rates over four times higher than the industry average.

Despite this, TPG maintains it had no knowledge of the packaging issue until 2021.

According to the UCC’s filing, “TPG’s motivation was apparent: to protect the TPG investment at all costs… all at the expense of the ultimate victims of such a scheme.”

If a proposed $10 million settlement is approved by the bankruptcy court, TPG may be absolved of further liability. Meanwhile, injured patients could receive nothing.

Key Takeaways for Your Practice

1. Scrutinize Vendor Partnerships

• Audit suppliers for transparency and recall history.
• Favor vendors with strong compliance records and open reporting practices.

2. Legal Preparedness

• Review contract language around liability and indemnification.
• Consider insurance coverage that addresses device-related litigation.

3. Join Industry Advocacy

• Support initiatives for stronger FDA oversight.
• Monitor trends in private equity ownership in your supply chain.

Looking Ahead

The Exactech-TPG saga exemplifies how financial structures can obstruct accountability in healthcare. For practice leaders, it underscores the importance of thoroughly vetting vendors beyond marketing claims. While you can’t always predict how an implant will perform, you can control how diligently you vet your suppliers.

The stakes are high. Because when profit motives override patient outcomes, the consequences don’t just affect individuals like Gene Davis—they reverberate through every practice that trusted the product.

FAQ

1. What happened with Exactech’s recalled implants?

Exactech, an orthopedic device company, recalled over 650,000 knee, ankle, and hip implants after discovering packaging defects that caused oxidation and implant breakdown. Patients experienced severe complications like swelling, pain, infection, and required revision surgeries.

2. Why are lawsuits being filed against Exactech?

More than 2,500 personal injury lawsuits were filed against Exactech because their defective implants caused serious health issues. The lawsuits claim that the company ignored early warnings and failed to protect patient safety.

3. How did Exactech use bankruptcy to avoid lawsuits?

Exactech filed for Chapter 11 bankruptcy in October 2024—just before trial proceedings began. Under U.S. bankruptcy law, this halted all lawsuits, limiting compensation for victims and shielding the company from further liability.

4. What role did private equity play in the Exactech case?

Private equity firm TPG Capital acquired Exactech in 2018 and installed its own leadership. Legal documents allege that TPG prioritized investor profits over patient safety, delaying recalls and disclosures about the defective implants.

5. Is this type of bankruptcy abuse common in healthcare?

Yes, the use of strategic bankruptcy is rising, especially among private equity–backed healthcare firms. From 2010–2022, there were around 20 such filings; by 2024, that number jumped to over 25 in just two years.

6. How does this affect healthcare providers and administrators?

Healthcare leaders face increased risk when medical device manufacturers hide product failures. Providers can suffer reputational damage, legal exposure, and patient trust erosion if they unknowingly use recalled or defective products.

7. What steps can practices take to reduce vendor-related risks?

• Audit vendors for recall history and transparency.
• Review contracts for liability clauses and indemnification.
• Diversify vendors and consider scalable solutions like medical virtual assistants for operational support.
• Monitor ownership changes, especially involving private equity acquisitions.

8. Are there insurance options for device-related litigation?

Yes, specialized liability insurance can help cover legal costs related to faulty medical devices. It’s essential to review policy details to ensure coverage for third-party product risks.

9. Can virtual assistants help reduce operational risks from device failures?

Absolutely. Medical virtual assistants handle non-clinical workflows, offering stability during supply chain disruptions and reducing reliance on high-risk vendors. They also improve practice efficiency and patient experience.

10. What does this mean for the future of healthcare accountability?

The Exactech case underscores the need for stronger FDA oversight, transparent vendor vetting, and legal reforms to close bankruptcy loopholes. Providers must stay proactive in protecting patient safety and practice integrity.