Clare Moylan is a co-founder of Gibbins Advisors in Nashville, Tenn. She is a health care professional with a broad base of experience that includes operations management, turnaround and restructuring, bankruptcy, strategic planning, business analysis, performance improvement consulting and litigation support. Ms. Moylan’s experience covers the public, private and nonprofit sectors across the health care continuum, particularly primary care, acute care hospitals, nursing homes, hospice, specialty practice clinics, assisted living and home health care.
Good morning, Clare, and thank you for taking the time to talk to me. I want to start for a minute about how I first learned about your firm, Gibbins Advisors. Your firm produced great analysis of health care bankruptcy trends coming out of COVID-19, and I was wondering whether you could start by telling me about the value of doing that sort of big picture analysis. (Report linked here.)
Sure. Just to introduce myself, I’m a principal with Gibbins Advisors. I co-founded the firm with my partner, Ronald Winters, in 2019. We provide restructuring, consulting and interim-management services working almost exclusively in the middle-market health care sector. We’re headquartered in Nashville, Tenn., but we have people across the country.
Thanks for asking about our report. We started doing analysis of health care bankruptcies because health care restructuring is the focus of our firm. It started as an internal project, and when we were talking about it with our network, we realized that others were interested too, so we started to publish the findings.
The research looks at health care sector chapter 11 bankruptcies where the liabilities are more than $10 million, so we’re looking at cases that are of a reasonable size where professionals tend to get involved. From the data and our knowledge of what’s going on in the market, we then draw out industry trends and develop a perspective of the future outlook.
One of the things that I valued out of your report was the opportunity to step back and get the big-picture ideas.
To expand on that, there is high value in understanding industry trends because when we’re doing an assessment of an individual company’s performance, we always need to be mindful of its performance in relation to its market. For example, we know from data that approximately half of U.S. hospitals finished 2022 with a negative margin, so if we were to look at the performance of a hospital that broke even last year, you might at first think that the result was no good, but for last year, break-even was something to celebrate.
The other reason why we really need to keep on top of the industry is to think about the best and most achievable solution for a distressed business. You need to understand strategically in the market who’s expanding, who’s a potential buyer, who are the key players and how you are going to optimize the outcome. Without staying on top of industry trends, you might not be aware of what could be the best outcome for your client.
Something that struck me in your report was that in 2022, there were only two major hospital bankruptcies. I had been involved in some restructurings in 2021, and I’m involved in some in 2023, but it didn’t hop out to me until I saw your report that practically nothing happened in 2022. Do you have any ideas as to why?
I do. Our hypothesis is that it’s partially due to bankruptcies being quite a long-lag indicator of distress, and that COVID-19 funding provided much more liquidity for distressed hospitals than they’d ever seen before. Hospitals started to burn through that cash in 2022, and I think this year and next year we’ll really start to see that distress materialize in bankruptcy filings. In fact, it’s already happening.
Another issue is that there are cases where hospitals have just closed without filing a chapter 11 bankruptcy, so in some situations bankruptcy is not really the right tool; it’s expensive, and it really depends on there being a solution that bankruptcy helps to achieve. So, if a hospital is just not viable and there are no potential buyers or financial backers, it might just go through an out-of-court closure and wind down its affairs. Chapter 11 bankruptcy is useful if you want to facilitate a transaction or reorganization that otherwise wouldn’t happen outside of bankruptcy.
Another theme that came up in your presentation was pharmaceutical restructurings. Those seem very different to me than hospitals, which have their fixed assets. By comparison, pharmaceuticals are very high-tech and very development-heavy. What’s different between those two types of restructurings?
In health care services businesses where you’re providing patient care, there are caregivers, physicians, patients and regulators, and sometimes the public at large is involved because there is a community interest. So, the stakes are high, and there are a lot of stakeholders and risks to manage.
Where pharmaceutical companies have filed bankruptcy, it’s a very different scenario. Many are in a pre-revenue stage of the business where there has been significant equity investment in the research and development for intellectual property (IP). The outcome really depends on the quality of the IP and how marketable it is, and whether the debtor can find a buyer. There is an indirect community interest there that needs to be considered, but it’s not the same as having active patient operations like a health care services provider.
Is there a piece of media, like a book or an article, that you found helpful or something that you read regularly that you would recommend that other practitioners look at?
Sure. There’s a book by Malcolm Gladwell called Blink. It’s an easy read, because his style is very enjoyable. It doesn’t sound like a research book, and it doesn’t sound like a self-help book. As an individual, I think Malcolm Gladwell is very curious and always brings different perspectives. You think you know something, then he shines a different light on it. His book Blink is about how our snap judgments can compare to rational well-thought-out decisions. It’s worth considering in our work how much information we need going into a crisis situation in order to make good decisions. When liquidity is tight and time is of the essence, we need to trust our gut to some extent because you don’t have the luxury of time. So, I recommend that one.
EDITOR’S NOTE: Clare Moylan recently joined the ABI Health Care Committee. This interview has been edited for length and clarity.