Podcast - Assessing the State of Healthcare Restructurings

Morgan Ribeiro: Welcome to Counsel That Cares. This is Morgan Ribeiro, the host of the podcast and a director in the firm's healthcare practice. Today, we're diving into a topic that remains about whether for the industry's health, bankruptcy trends. Joining me are three experts who have lived and breathed these numbers for years. First, we've got Clare Moylan and Ron Winters, who are principals and co-founders of Gibbins Advisors, and my colleague Tyler Layne, a partner in our restructuring and insolvency practice. Clare, Ron and Tyler, it is great to have you all back on the show.

Ron Winters: Thank you very much.

Clare Moylan: Thanks for having us.

Tyler Layne: Always a pleasure.

Morgan Ribeiro: Before we launch into our discussion today, I want to hear from each of you, just for our audience's benefit, a brief introduction. And Clare, I would love to also hear just a little bit of background on Gibbins Advisors.

Clare Moylan: Ron and I founded Gibbins Advisors, that's G-I-B-B I-N-S for everyone who always spells it wrong but understandably so. We founded the firm in 2019, and we saw a gap in the market to focus on healthcare's middle market in restructuring. There are a lot of providers out there who have financial challenge, and they don't have the skill set within the management team to be able to handle some of those, especially balance sheet issues. And some of the really large firms who we really enjoy working with as well are just tailored for bigger-sized organizations. We started the firm to focus on community hospitals, rural providers and smaller groups of healthcare facilities. And also working with lenders, creditors and other stakeholders, all dealing with the same types of issues that I think we'll cover today, which is around some of the challenges that healthcare is facing on a macro level and then we see it materialize down to the company.

Morgan Ribeiro: Excellent. Thanks. Well, thanks for being here. And Ron, anything you'd add to that?

Ron Winters: No, Clare hit it pretty much on the head. I've been in the restructuring business for 25 years, having been a secure lender and workout guy before that. And as Clare said, what we do is we're able to handle engagements that have a bit of complexity but perhaps don't have the heft that the very large firms need to support.

Morgan Ribeiro: Tyler, as I mentioned in the intro, you're a partner here at the firm. You want to provide just a brief overview of your practice and the work that you do as it relates to today's topic?

Tyler Layne: Sure. As Morgan, you said, I'm a partner in our restructuring group and work predominantly in the healthcare industry on the provider side, so hospitals and health systems, senior care, physician practice management and the like. I work with company sponsors and lenders who are navigating liquidity issues or going through out-of-court restructurings or Chapter 11 or other types of in-court restructuring, including buying and selling assets out of those proceedings.

Morgan Ribeiro: Awesome, well thank you for that. As I mentioned in my introduction, Gibbins Advisors puts out an annual report on healthcare bankruptcies. And Clare, I'd like to start just with the headline. The latest report for the full year of 2025 shows that healthcare bankruptcies actually fell a little over 20 percent compared to 2024. Can you tell us what's behind the numbers at a high level?

Clare Moylan: We started tracking pre-COVID to understand what was happening in healthcare in terms of Chapter 11 bankruptcies by subsector. We didn't see anyone else doing that in the market. For our own purpose, we thought, well, let's look at it. It turns out that a lot of people across the country find the information really useful. We provide the report for free. People can go onto our website and find it. We only look at the companies that file bankruptcy where they have over $10 million in liabilities. It doesn't include a lot of really small company bankruptcies. It's just where you've got over $10 million of liabilities, and it's only Chapter 11 bankruptcies. Where you might have Chapter 7, you might not include it in the numbers. What we've seen over the past several years was through COVID there were much fewer bankruptcies because of the influx of government support funds that provided struggling providers with more cash than they'd seen in a long time, which was terrific to really help weather the storm of a pandemic. That's what you want. We saw fewer bankruptcies through that period. Post-COVID in 2023 there was what we now see is a bit of a spike in the data. There were 79 cases in 2023. That fell in 2024 to 57 cases. Interestingly, in 2025 we were surprised, honestly, that it fell again to 45 cases. It's surprising to us because we feel a lot of distress in the healthcare sector and we're seeing a lot of distress. Maybe we can talk in a minute about some of the reasons why the numbers might be going down. I will also mention just a technical thing that the way that we count the cases is that one enterprise that files bankruptcy is counted as one. They may have 100 subsidiaries that also file bankruptcy. That's not counted as 100. That's counted as just one case.

Morgan Ribeiro: Great. That's helpful to better understand the data behind those numbers. Ron, I'd like to turn to you. I mean, this all sounds like really great news, but your report suggests that we shouldn't get comfortable with that. Why is that?

Ron Winters: It's hard to look at one quarter as being really reflective of anything. In the six weeks of this year that have transpired so far, there have been nine filings, which suggests a bit of an upward trend. I think some of this is based upon things in availability of credit and things you see in the credit markets that maybe go beyond just the financial health of the healthcare companies, the providers themselves. Another thing you need to keep in mind is that a good amount of workouts that we see, again, as Clare said, we're only tracking hospitals and other healthcare providers that are in bankruptcy with liabilities of $10 million or more. In this country, there are a lot of much smaller bankruptcies. There are no Subchapter V bankruptcies in there because it doesn't meet the debt requirements. A lot of the cases that we see, particularly in senior living, particularly maybe nursing homes, are done in receivership state court proceedings as opposed to bankruptcy court. That kind of a business is conducive to a receivership: fewer creditors — basically a secured lender or a landlord — much easier and cheaper to do than a bankruptcy. A lot of the things that we see is that things only, as we said, actually before we started to hit the record button, a lot of things really happen very quickly sometimes. A liquidity crisis can pop up out of nowhere, and it causes a need to go into bankruptcy. As I said at the beginning of my remarks just now, issues in the credit markets and the drying up of availability of credit for our clients, for healthcare providers, can precipitate problems even if the thought is that there really has been no fundamental change in the healthcare company itself.

Clare Moylan: Especially the bankruptcy counts don't necessarily show the whole picture because there are also out-of-court negotiated workouts, and I'm hopeful that the data is actually showing that people are getting more proactive in dealing with things earlier and not waiting until they're out of... That's probably not the case. But out of court is a growing sector of the market. Is that what you're seeing as well, Tyler?

Tyler Layne: Definitely. More broadly within the restructuring market, the trend is to do as much out of court as possible. But I think you're seeing a couple of things. There are, as Ron said, certain subindustries within healthcare like nursing homes, like behavioral or any type of senior living that lend themselves to receiverships, which tend to be faster and cheaper than a Chapter 11 would be. Even in behavioral, there's the possibility to evict the provider and change the provider that way rather than going through some sort of proceeding. Then you have physician practice management, for instance, where the goal is to always stay out of bankruptcy and sort of do that behind the scenes because you risk losing your revenue generators in a bankruptcy if they get spooked by the prospect of a long, expensive public process. To take a less optimistic view of it, I don't know that it's necessarily that people are addressing more problems out of court more than it is there's a lot of indecision in the marketplace as a result of the cost of bankruptcy. A lot of companies that might benefit from a bankruptcy, no one really wants to write the check. There is a lot of indecision among the stakeholders, and we're still seeing a lot of kicking the can down the road, as you have been the past couple of years, and just avoiding addressing the root problems and dealing with almost a series of emergencies as they arise. I do think that while the healthcare industry, like every other industry, is getting wise to the fact that there are alternatives other than filing a company for Chapter 11 and seeing what happens, I worry that we haven't seen the magnitude of distress that we're going to see because of that indecision that is directly cost-related.

Morgan Ribeiro: Interesting. We've got a little Clare's glass is half full. Tyler might be a little bit more of glass half empty. If the bankruptcy filings don't really tell us the full story, what are you seeing, Clare, in the market that gives us indicators of distress in healthcare?

Clare Moylan: I do agree with Tyler, and I don't disagree at all, actually, but the outlook for the amount of distress that we expect to see is concerning. I'll borrow from Fitch. They had a nice way of describing the market of nonprofit hospitals recently, and they're saying a trifurcation in the market. Splitting into three segments where you've got the top 20 percent with strong balance sheets and located in growth markets — they're pretty good, the top 20 — the middle 65 stagnating and the bottom 15 percent deteriorating. This widening of the gap between hospitals that are in pretty good shape and the have-nots. The have-nots that we see are more concentrated in standalone and rural providers where they just don't have the cash reserves, they're building up liabilities on their balance to vendors and secured parties, and they just don't have the cash to withstand some of the headwinds. Margins, profit margins, Kaufman Hall does a nice job of reporting on hospital profit margins every month. They reported that last year, at the end of the year, November year-to-date profit margin was 2 percent for hospitals. You're not looking at strong margins that give you enough to build up reserves of cash or really cover CapEx. But that's also the median. If you think about this widening gap of the haves and have-nots, you've got people that are higher than 2 percent but you have a lot of people that are lower than 2 percent that would be going into negative territory. Even if the bottom 15 percent are distressed, when you have several thousand, I think it's over 6,000 hospitals in the country, having 15 percent that are deteriorating is a lot. We think the outlook is very challenging and there are some policy headwinds coming that will make the situation even harder.

Morgan Ribeiro: Definitely, and we can dive into those policy issues here in just a bit. Tyler, from a legal and restructuring perspective, what's driving some of that polarization?

Tyler Layne: It's really a difficult combination of unsustainable balance sheets and a lack of reliable revenue. Healthcare is an inherently middle-market industry, and a lot of these providers are carrying debt loads, even if they've been through some sort of restructuring, that aren't sustainable, particularly given where interest rates are and where it appears interest rates will continue to be for some time. On the revenue side of the spectrum, you're seeing a rise in payer denials, and from a balance sheet perspective, costs continuing to rise faster than reimbursement rates, which has been the case for some time. That leads to unsustainable margins that compound over time. Without cash, which a lot of these providers don't have other than the largest, most well-heeled providers, you're stuck between a rock and a hard place of covering those losses and servicing your debt. Eventually, the liquidity dries up. It is more acute among the smaller providers or smaller systems and in certain industries like senior living where reimbursement rates have been a problem for some time.

Morgan Ribeiro: Yep, that makes sense. And Clare, you mentioned, going back to what we just discussed, the report specifically calls out 2026 as a potential pinch point due in large part to the new federal legislation. Do you want to talk a little about what providers should be bracing for due to the federal legislation?

Clare Moylan: Sure, the legislation I'm talking about is the so-called One Big Beautiful Bill Act. Most people who are probably listening in are familiar with the substance of what's coming, a trillion dollars in Medicaid cuts over the next decade. Starting in '26, it's already starting to have an impact on providers. For example, where you have supplemental payments, having federal CMS approval for each state's supplemental payments program, some states have got approvals already, but others are stalling. That will impact how much in supplemental payments those hospitals can expect to get. Some of them really live or die on those supplemental payments, especially where you have a high Medicaid population. There is an escalation of the impacts of the One Big Beautiful Bill Act over the next few years as it really hits healthcare coverage. Increasing requirements for Medicaid beneficiaries to qualify more frequently will result in fewer people with Medicaid coverage, and that will put pressure on hospitals that continue to need to treat patients who don't have that insurance. They may fall off. Additionally, there are Affordable Care premium health tax credits that are currently expired, but it is a hot issue at the moment, and the House has passed a three-year extension request and it's still, as I understand at the moment here in February, in debate at the Senate. The impact of those credits expiring is that people are falling off private health insurance that they were getting through the state exchanges. For example, I saw something the other day that California enrollments were down, I think 20 to 30 percent on 2025 levels. That's enormous as an impact. When providers look at their business and say, well, what's the impact of this as it continues to be implemented, what's the impact of the legislation as it's implemented over the next several years and how will that impact our revenue streams and costs, it's a significant impact, particularly on safety net hospitals, which are the hospitals that are called a safety net because they serve a disadvantaged population. Any provider that has a high government pay mix will be.

Morgan Ribeiro: When I think, Clare, to your point, there are still so many unknowns and it's hard for some of these organizations to plan for that unknown future just as it relates to the ACA credits, for example. Ron and Tyler, that's a big topic, or Clare, if you have anything else to add to that.

Clare Moylan: I was going to say that with the uncertainty, I would suggest for providers to look at conserving capital, not knowing what's to come and planning for the worst. Modeling out that impact and making sure that the way that you prioritize capital you are building up some reserves just in case.

Morgan Ribeiro: I mean, One Big Beautiful [Bill] Act is getting a lot of attention, and the Medicaid component of that was noteworthy. There are a number of other things happening at a federal level as it relates to reimbursement that are impacting these providers and can impact what we see in 2026 and beyond.

Great, all right, I want to jump into some of the subsectors that you all highlighted in the report. One that we've touched on already is the senior care space, which seems to be struggling more than most. Ron, do you want to jump in here and share with us what you're seeing in the senior care sector?

Ron Winters: No, Morgan, that's exactly right. I would probably expand beyond just senior living or senior care to post-acute generally, although we don't isolate that in our report. Post-acute might, for example, include LTACs, long-term acute care hospitals, which for a long time have been the subject of Medicare and payer controversy. We are seeing a good amount of activity and distress in that area. With respect to senior care particularly, we saw about an 18 percent increase in 2025 over the prior year in terms of number of bankruptcies. For the first time since we started doing a report, there were more senior care bankruptcies than pharmaceutical bankruptcies. For a number of other factors, we had seen quite a few bankruptcies in the earlier years. Talking about senior living specifically, particularly with respect to assisted living and independent living, one of the things you're seeing now is the flip side of some of the general economic dynamics. Because construction costs have increased so much over recent years, we're seeing fewer new entrants in the markets, which can help some of the weaker players in senior housing. One of the things that we frequently saw is facilities that became uncompetitive as they aged. Because they're less regulated than, say, hospitals or nursing homes, investors could construct new ones without much in the way of barriers except getting the money. Now that the costs are much higher, fewer of them are being built, and I think that's going to help some of the weaker players. Nursing homes always have problems. I think people are aging in place more and more. When they go to nursing homes, it's later in life for shorter periods before they, for the most part, sadly pass away. The nursing home business is more regulated and has more costs than, say, an assisted living business. As a result, you have to have pretty high occupancy to make it.

As a general matter, one of the things that we're seeing is that it's difficult in a big country like the United States to talk about a trend. The national trend does not necessarily reflect what we're seeing locally. In every market you could see one market doing quite well, and a nearby market in a less affluent place, or where the demographics are changing or the population shifts are occurring, might do far worse. There was one other factor that I should have mentioned before. One of the things that particularly the nursing home business suffered from, particularly coming into COVID and coming out of COVID, was much higher labor costs as they relied on agency or traveling nurses and techs. We've seen that come off quite a bit in recent years. At the same time, a recent survey showed that a lot of nurses may be burning out. I think a recent AHA survey indicated that a good amount of our nursing population intends to retire in the coming five years.

Morgan Ribeiro: Great, well, both of our firms do a lot of work in the hospital and health systems sector, and that was another area highlighted in the report. Beyond what we've already covered, Clare, what does the data in your report signal about bankruptcies in the hospital sector?

Clare Moylan: For hospitals, we did see an increase in the number of bankruptcies that were filed in 2025 compared to 2024. Remember the headline was that the bankruptcies came down. Across senior care they went up slightly, and across hospitals they went from five to eight. I'll note that it was not the number of hospitals, it's the number of hospital sector enterprises. Firms like Prospect Health with many hospitals were counted in our data as one. When you look at the outlook for hospitals, in line with what we've been talking about today, there are challenges on all fronts between the cost increases, reimbursement declines, pay denials and cash flow pressures. I expect that the distress will continue. It may come up in the bankruptcy filings, but we may also not see it in the data count here and it'll be dealt with out of court or in other forums, but I don't see an end to the pressures. It puts a challenge to management teams to say, look at what you're dealing with. It has been challenging for a long time. I think the industry is resilient and adaptable and creative solutions might come out of these challenges. I think there's a lot of talent in the country and we'll see how people grapple with these headwinds. I do expect the distress situation to continue, and not every hospital will make it, unfortunately.

Morgan Ribeiro: Are you seeing anything with the One Big Beautiful Bill we talked about earlier, and of course a component of that is the rural transformation dollars? Do you see that impacting? In particular, it's these smaller, standalone, often rural facilities that are being hit hardest. It feels like a band-aid on a larger issue. Does that solve the larger issues we're seeing here?

Clare Moylan: From what I've read about it, the intent is to put dollars toward transformation and that's what everybody needs to do, so it sounds good. The way that it gets allocated is interesting. It's not based on a rural population, for example, so some states get much higher dollars of the funding per rural resident than others. For some it's meaningful. For some states it's not much relative to the size of their rural population. Also, the way that the funding is channeled is at the moment to go through states and then the states allocate the funding out. There isn't, as far as I can see at the moment, transparency as to how it actually gets to the providers and who gets the money and who doesn't. We don't know and we can't rely on that channel of funding at the moment as a solution for all rural hospitals. The quantum of the funding is reportedly far lower than the hole that's created by the funding gap elsewhere. I think it has a nice intent around transformation, but it won't be a silver bullet solution, and it won't necessarily help all rural hospitals.

Tyler Layne: We talked a lot about haves and have-nots within the hospital industry in the sense of cash. Another thing you see a lot is haves and have-nots in the sense of technology and innovation. It's becoming table stakes to be the most technology-forward, innovative hospital in order to make it. I think a lot of the rural health transformation project is meant to bring a lot of these hospitals that have deferred capital expenditures in technology and innovation to the point where a lot of the larger, more financially stable facilities are. The problem is that if you can't make payroll in two weeks, it doesn't matter. Without fixing the underlying cash flow problems, you're never going to see these facilities survive to the point where that transformation can take effect. It's a little like putting a V8 in an '86 Corolla. It's great. You can go fast for a couple of days and then it's all going to fall apart. That's my main worry, in addition to what Clare said, which is the quantum isn't nearly sufficient to make up for the Medicaid cuts.

Clare Moylan: I'll add to that too, Tyler. The funding has a cap on the amount that can be used for patient care. If you talk about hospitals that are losing money and need a cash injection for patient care, it's not for that purpose. At least 85 percent of the funding is not for that purpose. I agree with Tyler that the challenges for some of these hospitals, the intent is good, but the practicality is a different thing.

Morgan Ribeiro: That's an excellent point. Tyler, you've mentioned some of this, but you do a lot of work with clients that are struggling both in the senior care and hospital sectors. Are there any other particular operational or financial issues that you have not already discussed that are causing this strain?

Tyler Layne: As Ron mentioned, for hospitals in particular, the labor costs have stabilized. They've stabilized at a much higher level than they used to be, but at least they're not skyrocketing. Other things like pharmacy spend have skyrocketed in its place. When you combine that with the higher denial rates and payers tightening their belts a little in this environment, that's going to be a dangerous combination for hospitals. The denials themselves are a cost because you have to pay a team to work that AR, and that's an expense in and of itself. In senior care, it's still staffing, staffing, staffing. There was a panic over the federal minimum staffing rule that came into effect, that was repealed. You're seeing a very Medicaid-heavy industry get reimbursement rates slashed where the facilities are already having trouble staffing to an acceptable level. As a stakeholder in those types of facilities and hospitals, you need to figure out how you can generate free cash flow and how you minimize expenses that aren't necessary in the near term, which unfortunately can compound some of the problems we're talking about on technology and innovation.

Morgan Ribeiro: Ron and Clare, I want to go back to you. In the report, you focus on strategic transactions and how that's allowing for resilience and market positioning. That's an important consideration as these organizations prepare for what's happening with reimbursement and the regulatory environment, and in particular, the impacts of the One Big Beautiful Bill Act. Can you elaborate on that?

Clare Moylan: What we saw in hospital and health system M&As in 2025 was a surprising reduction. I think at the beginning of last year we were thinking that there would be an increase in the amount of transaction activity, but with the One Big Beautiful Bill Act being proposed early in the year and then the middle of the year being passed, that uncertainty led to a cooling of some of the transactions. For example, I'm quoting a Kaufman Hall report. They reported announced transactions in 2024 of 72, and by 2025 that fell to 46. Also, the number of financially distressed transactions has increased. The question we're seeing is around financial distress in buyers. How many people are interested in these distressed providers at a time when the strategic buyers are also facing these headwinds? With certainty comes better understanding about what to expect, and that means people can price risk into a transaction. There may be more activity in 2026 around distressed providers that actually close. Outside of that there are opportunities in the transformation that is required in hospitals. Where we've seen the shift from inpatient and institutional settings to an outpatient setting, we're seeing a lot of private equity dollars flow toward those types of businesses in healthcare. Technology will continue to be important, automation and the implementation of AI. All of these affiliates or healthcare affiliate businesses that will enable the transformation that has to happen for providers to continue to be sustainable and succeed in the future of healthcare, there continue to be opportunities for transactions and investment in those areas.

Morgan Ribeiro: I want to look to everyone on this next question, just final thoughts from the group. You all touched on this earlier around maybe we're starting to see more organizations be proactive and not waiting for things to get to the point where they need to file for bankruptcy. We talk a lot to leadership teams about how they should be thinking through these issues and things they can be doing now versus in those critical moments. I'd love to know from each of you what's one thing that leadership teams should be doing right now in this current environment.

Tyler Layne: From my perspective, not waiting until you're in a liquidity crisis, which is just going to minimize the number of options you have. These funding cuts are real. Any leadership team in the healthcare industry needs to take a pause, take a moment to figure out what 2026 looks like for them in the best case and what it looks like in the worst case. Making those hard decisions based on that critical modeling at this point means that you're going to be making decisions from a position of strength and not one where you're having to make a decision in the middle of an emergency that may lead you to a suboptimal outcome.

Clare Moylan: Do you want me to go next? If I had to say what's the one thing is, I would agree with Tyler but probably extend it to not just look at this year but also the next few years as the implementation of the Medicaid changes come into effect. The strategic transformation needed to respond to the scale of the impact is not something you can necessarily tweak with performance improvement initiatives over a few months or even a year. Some of these things will take multiple years to execute on a strategic transformation. I'm talking about transactions and refining your portfolio of services as some of the options but also looking at implementing technology solutions. I know your audience here has a lot of strong-performing hospitals that have capital and capability to transform with technology. That will be a big component of it. I can't believe how fast AI is developing. From one month to the next there are improvements that are very material. It's hard for us to anticipate what the next five years will look like in terms of technology. It will be a part of healthcare of the future and being able to be sustainable. I'd encourage leadership teams to model the next few years of impact, quantify the gap that you'll potentially have and think creatively about the strategic ways that you can position the business to be sustainable in that new framework.

Ron Winters: My answer on a closing thought, Morgan, will be a little more gritty. We did a little research for one of our clients about what kind of liquidity hospitals like to have. The research I did earlier today on ChatGPT said about 150 days of cash probably puts you at the low end of the investment grade. The clients that we typically deal with in a topic of a podcast like this don't have that. We sometimes laughingly characterize the amount of liquidity they have not in days but hours. Hopefully they have enough to get to lunch. The things we see are a little different than the really rich, large hospitals. In 1926, Ernest Hemingway wrote The Sun Also Rises. A famous quote from that book was, how does bankruptcy happen? He said, "It happens slowly and then all at once." That's what we often see. One thing I would leave the group with is being sensitive to your vendor relationships because they can turn on you quickly and can cause a situation to unravel on an unannounced basis. Most hospitals and other healthcare providers are dealing with some large companies and some smaller companies as well, smaller local companies, maybe regional companies. The larger companies are selling to you and they're selling to everybody in the market. They know what you're buying. They know your consumption rates. They know what everybody's doing, and they know if you have public bonds, they're following your financial reports. You shouldn't take for granted that you can continue to push them or stretch them in order to make the next payroll. They're watching you. At some point they will start to restrict your terms. At some point they may require you to pay COD. At some point they may put you on a payment program where they make you pay for two orders for them to ship you one order. When that happens, when your cash consumption rate is greater than your actual losses, you're in trouble. You need to be mindful of the way your vendors think and put that into your cash flow and liquidity thinking. With respect to smaller vendors, many of them might be financing themselves on an asset-based line, ABL lending. Their ABL lenders are watching. They're watching the receivables of your vendor. When the receivable from you stretches too far, that asset will no longer be an eligible asset for your vendor to borrow against. It becomes very expensive to continue to sell you on terms. At that point, they're going to restrict you further. It can happen quickly. You need to integrate planning with your vendors and your cash flow and be continuously refining it.

Morgan Ribeiro: Great. I did not anticipate an Ernest Hemingway quote there at the end. Thanks for bringing it home for us. Thank you to all of you for joining me and breaking down these critical insights. For our listeners, I want to remind everyone that you can download the full report at Gibbins Advisors website. That's gibbinsadvisors.com. Thank you all for joining me.