Envision achieves financial restructuring, slashes 70% of debt

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Nashville-based medical group Envision Healthcare, which filed for Chapter 11 bankruptcy in May, has completed and emerged from its restructuring process with a markedly strengthened capital structure and is ready to grow, the company announced.

Envision's now effective Plan of Reorganization, supported by its key creditor groups and confirmed by the Bankruptcy Court on October 11, has reduced the company's debt by more than 70%, it said.

In connection with the emergence, Envision Healthcare and AMSURG separated into two stand-alone entities with separate leadership teams and owner groups.

WHAT'S THE IMPACT?

Envision is a national medical group that delivers physician and advanced practice provider services, primarily in the areas of emergency and hospitalist medicine, anesthesiology, radiology/teleradiology and neonatology.

Under the terms of the Restructuring Support Agreement (RSA) established in May, the AMSURG and Envision Physician Services subsidiary businesses were to be separately owned by certain of their respective lenders. AMSURG purchased the surgery centers held by Envision for $300 million plus a waiver of intercompany loans. All of Envision's debt, with the exception of a revolving credit facility for working capital, will be equitized or canceled, deleveraging about $5.6 billion.

According to Envision, a series of events in recent years has put significant pressure on the company's finances since its 2018 acquisition by KKR & Co. First among them, of course, was the COVID-19 pandemic. Emergency medicine and anesthesiology clinicians experienced sharp surges of coronavirus patients, while in other areas of care the company lost 65% to 70% of patients for several months during shelter-in-place policies, which led to financial instability.

The organization also pinned part of the blame on health insurers excluding Envision clinicians from their networks and not providing appropriate reimbursement for care. Increased claims denials for emergency care from Envision's largest health insurance payer have resulted in denied or delayed payments, the company said.

In addition, Envision pointed to what it called the "flawed implementation" of the No Surprises Act. While the company said it supports the NSA's patient protections and has a policy prohibiting balance billing, it said the law's implementation "deviates from the legislation's intent" and enables health insurers to significantly delay and unilaterally reduce or deny payments. It said only a small fraction of the eligible claims Envision has submitted through the independent dispute resolution process has been resolved. It said that, of those that were resolved, many remain unpaid by health insurers – resulting in hundreds of millions of dollars in underpayments and delayed payments.

Lastly, the company cited the national clinician shortage and simultaneous spike in inflation, which has caused labor and other costs to increase by "hundreds of millions of dollars" since 2019.

THE LARGER TREND

Moody's had predicted bankruptcy for Envision back in September 2022, calling the company's capital structure "unsustainable." Moody's expected operating performance would continue to deteriorate due to ongoing labor pressures within the industry, as well as rising interest rates that caused interest expense to nearly double.

Earlier that month, Envision filed a lawsuit against UnitedHealthcare over the insurer's denied claims, sparking a countersuit from UHC, which claimed Envision fraudulently upcoded claims for services provided to UHC members.

Envision was awarded more than $91 million by an independent arbitration panel on March 30 in the UnitedHealthcare suit. Envision has other lawsuits against UHC that are still pending.

UHC removed Envision from its network in 2021, claiming the firm's costs did not reflect fair market rates. According to a lawsuit that Envision filed last fall, UHC denied about 18% of submitted commercial claims – a number that swelled to 48% of all claims after Envision's removal from UHC networks, the firm said.

And for the highest-acuity claims, Envision accused UHC of denying 60% of those claims. In a statement at the time, Envision alleged that UHC "puts profits above all else, including patients and the physicians and advanced practice providers who provide life-saving care in emergency rooms across the country."

UHC claimed it had approached Envision with evidence of upcoding, and accused the firm of hurriedly filing a lawsuit to beat UHC to the courthouse.
 

Twitter: @JELagasse
Email the writer: Jeff.Lagasse@himssmedia.com