From private equity to bankruptcy: Envision's last 5 years

Nashville, Tenn.-based Envision Healthcare, a physician services company and ambulatory surgery center operator, has filed for bankruptcy almost five years after a private equity firm acquired it for $9.9 billion and took the company private.

Under the restructuring plan, all of Envision's debt — excluding a revolving credit facility for working capital — will be equitized or cancelled, deleveraging about $5.6 billion. Envision said it will continue to operate as usual throughout the restructuring process. 

Fifteen things to know:

1. In October 2018, KKR & Co., a New York City-based private equity firm, acquired Envision in an all-cash transaction for about $9.9 billion, including the assumption of debt. Envision stockholders received $46 per share of common stock in cash and Envision's stock stopped trading on the New York Stock Exchange before opening on Oct. 11.

2. In September 2018, UnitedHealthcare sent letters to more than 250 hospitals warning them it may drop Envision from its network in 2019. More than 1 million UnitedHealthcare members would have been affected by the contract termination. Negotiations between UnitedHealthcare and Envision — the country's largest provider of emergency room physicians — reached an impasse after about a year of discussions. Each side blamed the other for the breakdown.

3. UnitedHealthcare and Envision later agreed to extend their contract for 2019 despite legal battles over arbitration and disagreements about surprise billing. Under the agreement, UnitedHealthcare members had in-network access to hospital-based services provided by Envision physicians. Former Envision CEO Chris Holden saw it as "an opportunity for clinicians and payers to work together to make progress toward a more effective healthcare system."

4. However, the legal battle continued, and UnitedHealthcare removed Envision from its provider networks, effective Jan. 1, 2021. At the time, UnitedHealthcare told Becker's the move affected physician groups in 44 states and the District of Columbia. Most of the physicians affected provided emergency room and anesthesiology services. Envision physicians also provide radiology, neonatology, hospitalist, primary care and specialty care services. 

5. Envision said UnitedHealthcare made the decision to cut ties and argued that the insurer is cutting physician reimbursement rates. According to Envision, UnitedHealthcare characterized reimbursement rates for Envision physicians as three times higher than their median rate. The company alleged that if this was the case, "United has cut reimbursement rates for emergency room doctors [across] the country by 50 percent." UnitedHealthcare denied these allegations. 

6. Before it was ousted from UnitedHealthcare's network, Envision alleged that the payer denied about 18 percent of the commercial claims submitted by the company. "That number spiked in November 2021 to approximately 48 percent of all submitted claims,” Envision said in a Sept. 9 news release. "For the highest-acuity care claims, United callously and automatically denied approximately 60 percent of commercial claims." 

7. UnitedHealthcare framed the decision differently, arguing that Envision's costs did not reflect fair market rates. A spokesperson for the insurer alleged that Envision is "driving up the cost of care" for the customers it serves and "expects to be paid nearly double the median rate we pay other anesthesiologists and more than triple the median rate we pay other ER physicians." UnitedHealthcare outlined one example in Florida, alleging that 90 minutes of anesthesia services for knee surgery would cost more than twice as much if an Envision physician administered it compared to an anesthesiologist reimbursed at a median rate.  

8. Envision had been on thebrink of bankruptcy for months as its profitability declined and operating performance deteriorated due to rising interest rates and labor pressures, according to a Sept. 21 Moody's report. The No Surprises Act legislation that went into effect in 2021 and going out-of-network with UnitedHealthcare further challenged the company's business model. The credit rating agency downgraded Envision's debt to "C", indicating the debt is "typically in default, with little prospect for recovery of principal or interest." 

9. The downgrade came weeks after Bloomberg reported Envision had a $26 million loss for second quarter EBITDA in 2022, down from a $221 million gain the prior year. KKR & Co. also had a tough 2022. The private equity firm reported $5.7 billion in total revenue, down from $16.2 billion the year prior, while losses hit $910 million, compared with a gain of $4.5 billion in 2021.

10. Envision Physical Services is laying off administrative workers in New York and Pennsylvania. The layoffs in Conshohocken, Pa., affect 162 administrative workers and 167 employees will be laid off in New York due to the loss of a contract with a "hospital-based physicians group." 

11. In May, Arbitrators sided with Envision in its dispute with UnitedHealthcare over allegations the payer breached their contract by reducing reimbursement rates. UnitedHealthcare was ordered to pay $91 million in damages to Envision, but the insurer filed its own suit against Envision, alleging it overcharged the insurer by billing for unnecessarily complex care during what should have been routine visits. 

12. A group of emergency medicine physicians said they will not drop their federal lawsuit against Envision. The American Academy of Emergency Medicine Physician Group sued Evision in December 2021, claiming the company is violating a California law that bans corporations from practicing medicine. Instead of seeking monetary damages, the plaintiffs want a court to rule that Envision's alleged use of shell business structures to retain de facto ownership of ED staffing groups is illegal. The trial was set to begin in January 2024, though that date has been delayed. 

13. Envision eventually filed for bankruptcy May 15. The filing comes as the company revealed debt of $7.7 billion, 60 percent of which was approved for bankruptcy by creditors. Envision said the Chapter 11 filing will allow it to carry out its restructuring plan and facilitate long-term growth opportunities. During the restructuring process, the company plans to use cash generated by operations to fund expenses, including supplier expenses and employee compensation.

14. As part of the restructuring plan, Envision Physician Services and AmSurg — which owns and operates ASCs, will operate as two separate entities. AmSurg will acquire the ASCs held by Envision for $300 million plus a waiver of intercompany loans held by AmSurg. 

15. Ultimately, there were various factors that led to the bankruptcy filing, including declining patient volumes, payers excluding Envision clinicians from their networks and not providing adequate reimbursement for care, the implementation of the No Surprises Act, rising inflation and the national clinician shortage, according to Envision.

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