Physician staffing company Envision Healthcare filed for Chapter 11 bankruptcy protection Monday, and said it reached agreements with certain of its key lenders.
Nashville, Tennessee-based Envision said it entered into a restructuring support agreement for about $7.7 billion in debt. Amsurg, its ambulatory surgery unit, and Envision Physician Services will be owned separately. Envision will sell its surgery centers to Amsurg for $300 million plus a waiver of intercompany loans held by Amsurg, according to court filings.
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In its filing, made in the Southern District of Texas, Envision listed both estimated assets and liabilities of between $1 billion and $10 billion. Envision's debt, except for a revolving credit facility, will be canceled, deleveraging $5.6 billion. The company said it will operate as usual through the restructuring. With court approval, Envision plans to use cash collateral generated by ongoing operations to cover expenses, including employees' salaries and wages.
The bankruptcy filing follows months of financial turmoil at Envision amid skyrocketing labor costs and ongoing legal disputes with UnitedHealth Group after the insurer removed Envision from its provider networks in 2021. Additional hurdles came with the No Surprises Act, which cut into Envision’s profits from out-of-network bills and led to hundreds of millions of dollars in alleged underpayments and delayed payments.
Healthcare staffing firms have struggled during the COVID-19 pandemic to find workers to keep up with patient demand, especially in a highly competitive market for contract labor.
A group of California emergency physicians hope to continue a federal lawsuit against Envision, alleging the company violates the state's ban on corporate control of medical practices. The physicians, who need a judge's approval to proceed with the suit, are asking the court to declare illegal Envision's tactic of using shell businesses to essentially keep ownership of ER staffing groups. A trial scheduled for January in San Francisco has been delayed.
Private equity firm KKR then bought Envision in 2018 in a deal valued at nearly $10 billion. The bankruptcy will likely wipe out its investment. KKR has $504 billion in assets under management across 17 countries, with more than 125 portfolio companies in its funds that generated about $293 billion in annual revenues as of Sept. 30.
Envision's top unsecured creditors are Wilmington Trust, followed by the Trammel family, according to the filing.
Envision went public in 2013 with a $966 million initial public offering at $23 per share. From the IPO, share prices roughly doubled over the next five years. Envision merged with Amsurg in 2016 to create an organization valued at $15 billion, in which Envision shareholders would own 53%. KKR bought Envision in 2018. Since that acquisition, Envision installed a new senior management team, most of whom were hired in 2020 and 2021.
Separately, Envision will soon lay off employees in New York and Pennsylvania, according to Worker Adjustment and Retraining Notification Act notices filed in March and May. The company will lay off 167 emergency medicine physicians and advanced practice providers across six facilities in the Albany, N.Y., region starting in mid-June. It will also lay off 162 clinical support employees in Conshohocken, Pa., in two rounds in July and September.
Moody’s Investor Services downgraded Envision to a “C” rating in September, describing the company’s capital structure as unsustainable with little chance of recovery on debt.