Physician Staffing Firm Envision Healthcare Files for Bankruptcy
Envision Healthcare officially filed for bankruptcy after the WSJ reported the physician staffing firm had over $7B in outstanding debt and labor woes.
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By - Envision Healthcare Corporation has officially filed for bankruptcy following reports last week that the physician staffing firm has $7 billion in outstanding debt.
The firm announced yesterday it filed voluntary petitions for reorganization under Chapter 11 of the US Bankruptcy Code and entered into a restructuring support agreement (RSA) with key stakeholders that is supported by over 60 percent of its $7.7 billion in debt.
As part of the RSA, Envision plans to separate itself and AMSURG, which specializes in operating ambulatory surgical centers. AMSURG will buy surgery centers held by Envision for $300 million plus a waiver of intercompany loans held by AMSURG.
Envision will continue to operate its business as usual throughout the bankruptcy process, according to the announcement.
“Envision’s teams play a critical role in the functioning of the [US] healthcare system,” said Jim Rechtin, CEO of Envision Healthcare, who joined Envision in February 2020. “We are grateful to the Envision clinicians, physician partners and clinical support teammates for their continued commitment to caring for patients when they need it most.”
The Wall Street Journal (WSJ) reported earlier this month that the private equity-backed physician staffing firm would file for chapter 11 bankruptcy following billions of dollars in outstanding debt and labor shortage problems. The newspaper said the filing would wipe out the investment of KKR, which took Envision private in a $5.5 billion buyout in 2018.
According to the WSJ, Envision failed to report its financials before March 31st and did not make a payment on its interest in April, which triggered a 30-day period after which investors could force the firm into bankruptcy.
Envision said in the announcement that it has faced significant financial pressures since 2018, including a steep decline in patient volumes at the start of the COVID-19 pandemic and the impact of the No Surprises Act, which prohibits most instances of balance billing.
Payers have excluded Envision clinicians from their networks, which has led to lackluster reimbursement and increased claim denials, the firm stated.
National clinician shortages and rising inflation also contributed to the firm’s financial troubles, according to the announcement.
“Envision has continued to work with its hospital partners to ensure patients receive high-quality care and has increased clinician wages to a competitive level in line with the post-COVID-19 ‘new normal,’” the announcement stated. “With the simultaneous shortage and spike in inflation, Envision’s labor and other costs have increased by hundreds of millions of dollars since 2019. While overall inflationary pressures have eased somewhat, the market for clinician services continues to be extremely competitive.”
All of its debt, with the exception of a revolving credit facility for working capital, will be equitized or canceled, deleveraging approximately $5.6 billion, Envision reported. The firm also plans to use cash collateral generated by ongoing operations to fund operating expenses, including employee wages and salaries during the restructuring process.
On the heels of Envision’s bankruptcy, medical staffing firms Jackson Healthcare and LRS Healthcare signed a definitive agreement to merge by the second half of this year.
LRS Healthcare connects nursing and allied healthcare professionals to provider organizations all over the country. The medical staffing firm is also Joint Commission Healthcare Staffing Services certified and has received numerous ClearlyRated Best of Staffing honors.
“We are delighted to share the news about LRS Healthcare joining the Jackson Healthcare family of companies. LRS has a proven track record of success in the market, is led by an impressive management team and powered by talented professionals across the business,” Shane Jackson, president of Jackson Healthcare, said in an announcement. “As part of the Jackson Healthcare organization, LRS will continue to do what it has done best since its inception: serve customers and healthcare professionals with excellence.”
