Physician staffing groups succumb to financial pressures

Financial headwinds and macroeconomic pressures continue to hit physician staffing firms hard with one group filing for bankruptcy in May and another shutting down at the end of July. Both companies were backed by private equity firms.

Nashville, Tenn.-based Envision Healthcare, a physician services company and ASC operator, filed for Chapter 11 bankruptcy May 15, five years after New York City-based KKR & Co. acquired the company in a $9.8 billion deal.

Envision said various challenges contributed to the bankruptcy filing, including declining patient volumes, payers excluding its 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. 

Under a 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 continued to operate as usual throughout the restructuring process. 

As part of the restructuring, Envision Physician Services and AmSurg, which owns and operates ASCs, will operate as two separate entities. AmSurg is acquiring ASCs held by Envision for $300 million plus a waiver of intercompany loans held by AmSurg. Envision also laid off administrative workers in New York and Pennsylvania.

Earlier this month, another staffing company — Brentwood, Tenn.-based American Physician Partners — announced that it is winding down its operations plans to transition its hospital contracts as of July 31, according to Bloomberg.

Founded in 2015, the company provided emergency medicine and hospital medicine management services to more than 150 hospitals and health systems across 18 states, according to its website. It is a portfolio company of Brown Brothers Harriman Capital Partners. 

Just two years ago, American Physician Partners was the sixth-fastest growing private business in its area after its annual revenue rose from $249 million in 2018 to $633 million in 2021 — a 154.2 percent spike, according to the Nashville Business Journal.

In December 2021, S&P Global Ratings downgraded the company to a "CCC-" rating after its planned $520 million refinancing deal collapsed amid investor concerns around the effects of the No Surprises Act, which established new federal protections against surprise bills for emergency services and out-of-network care, according to Bloomberg

At the time, S&P said the downgrade "reflects our view that near-term default risk is high" with about $472 million in debt due in one week. After the downgrade, all ratings were withdrawn since the proposed debt did not close.

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